Investing in real estate no longer requires forking over tens of thousands of dollars and going through a long regulatory process.
Recent advancements in technology and real estate crowdfunding platforms make it possible to start with less money and less risk.
Groundfloor is a leading real estate wealth tech platform. The company, based in Atlanta, Georgia, is quickly rising in popularity among young investors.
If you’re thinking about investing in real estate, Groundfloor is an option you’ll want to keep on your radar.
Keep reading to learn more about how Groundfloor works so you can determine whether it makes sense for your investment strategy.
What is Groundfloor?
Groundfloor provides short-term financing to fund property renovations and real estate investments.
As an individual investor, when you invest with Groundfloor, you buy high-yield real estate debt investments called limited recourse obligations (LROs). If you’re new to the term, recourse debt is debt with collateral backing.
Here’s how it works: Homebuyers take out short-term home loans through Groundfloor, and Groundfloor users buy shares that promise higher-than-average returns.
Most of Groundfloor’s options have six to 12-month terms, so you don’t have to worry about locking up your money for very long periods of time.
In other words, it’s a more flexible way to invest in residential real estate compared to buying an actual property.
Groundfloor Features
High-Yield Returns for Lenders
Investors often turn to Groundfloor because of the company’s attractive high-yield returns.
According to its website, the Groundfloor platform offers an average of a 10% return on investments.
Diversification
When investing through Groundfloor, you have the option to diversify your funds among various loan grades. Interest rates for borrowers run from 5.5% for grade A loans to 25.5% for grade G loans, and those funds are passed on directly to lenders. To date, the site has paid out nearly $12.7 million in interest.
Grade A loans typically have lower returns. But they tend to be more secure, so you’re less likely to lose with them. Grade G loans, on the other hand, tend to have higher returns. But borrowers are more likely to default on repayment, making them riskier.
You know your financial situation better than anyone else. Only take on the level of risk that you’re comfortable with.
Affordable Investing Through Crowdfunding
Groundfloor offers a low minimum investment of just $10. Suffice it to say that you don’t need to have a lot of money to start.
Thanks to the company’s low-cost model, it’s possible for anyone to invest, regardless of their unique financial situation.
Investment Transparency
After you open a Groundfloor account, you can browse multiple properties. Each property has a picture along with the rate, term, and loan to after repair value (ARV) percentage.
In other words, you have visibility into where your investment dollars go when using Groundfloor.
IRA Investment Options
Groundfloor allows customers to start a self-directed individual retirement account (IRA). As a result, the platform enables you to access tax-advantaged real estate investing.
The self-directed IRA is a great way to accumulate wealth over time and minimize what you pay in taxes.
Nationwide Coverage
Groundfloor offers nationwide coverage. The app runs from Maine to Southern California, and everywhere in between. So, if you’re looking to get started as a real estate investor, it doesn’t matter where you live in the country.
That said, borrowers will have to make sure they live in a state Groundfloor services.
Non-Accredited Investing
All investors, including accredited investors and non-accredited ones, can use Groundfloor.
The company has a low $10 minimum amount to start using its platform, with no certification requirements. This is great news for folks just starting out their real estate investing journey, as many real estate investment opportunities have typically only been available to accredited investors.
Loan Vetting
One of the nice parts about investing through Groundfloor is the company thoroughly vets all loans.
All investing is risky, but this system makes it a bit more trustworthy.
It’s also worth noting that the company removes loans after 45 days if they fail to reach full funding.
Flexible loans
Groundfloor offers short-term financing to fund property renovations, with six-, nine-, and 12-month terms. This makes the company ideal for those who are looking to fund fix-and-flip projects and capitalize on foreclosures.
House flippers can access Groundfloor loan amounts ranging from $75,000 to $750,000. The platform offers up to 100% loan-to-cost depending on experience, and up to 75% loan-to-after repair value.
Fees
Groundfloor is free to sign up for and use. In addition, Groundfloor doesn’t charge any investor commissions.
The combination of a $10 minimum investment, plus its no-fee policy, makes Groundfloor very attractive from a pricing standpoint. It’s one of the more affordable ways to start investing in real estate.
When buying physical real estate, $10 will barely even pay for the ink on a loan application fee. So, Groundfloor can be a great way to get started as a real estate investor without needing to fork over tons of cash upfront.
Getting Started
To sign up for Groundfloor, you need to hand over personal and contact information. Luckily, the process is brief, and you won’t have to endure a lengthy approval process.
Once you’re in the system, you’ll have to add your bank account. The company uses a third-party service called Plaid for secure transfers between accounts, so your boxes are checked from a security point of view.
After that, fund your account and wait for the transfer to clear. You should be up and running and ready to invest within a few days.
You can transfer money to and from your account online. Groundfloor notes that transactions can take three to five days.
Bonuses
Groundfloor occasionally offers great promotions, so keep your eyes open if you’re thinking about using the service.
If you have a friend who may benefit from Groundfloor, check out the platform’s referral program. You and your contact can both receive $10 if they sign up as an investor and fund their account.
If you’re an influencer among your group, you could be able to bring in some decent cash this way.
Security
From a financial perspective, there aren’t any guarantees when using a service like Groundfloor. Borrowers can potentially default on loans, meaning you could lose your entire investment.
That being the case, you have to prepare to lose everything before putting any money into Groundfloor. To avoid making a decision you come to regret, analyze your portfolio and financial situation before funding your account.
As for digital security, the company uses multiple physical, operational, and electronic security measures to protect data.
For example, Groundfloor uses Secure Socket Layer (SSL) technology to safeguard its website. In addition, the company uses a 128-bit browser for transactions and logins.
If you’re comfortable using online or mobile banking in general, you shouldn’t have any issues trusting Groundfloor’s cybersecurity.
Customer Support
Groundfloor offers both phone and email support, Monday through Friday, from 9 a.m. to 5 p.m. EST. There are three customer support divisions, as follows:
Investor Support
Borrower Services
Asset Management
Pros and Cons
Pros
- Low minimum investment of $10
- Open to accredited and non-accredited investors
- Short-term investments
- Easy-to-use platform
- No fees for investors
Cons
- Zero liquidity
- No commercial real estate; residential only
- Loan defaults can happen
- Limited customer support and guidance
- No monthly distributions
Alternatives to Groundfloor
Before deciding whether Gloundfloor makes sense for you, consider some of the alternative investments on the market.
Fundrise
Fundrise is an online platform for real estate investing. The company offers a great user dashboard and real-time reporting to make account management easy.
Unlike Groundfloor, it charges a small management fee.
Yieldstreet
Yieldstreet is a platform that lets you invest in alternative assets. For example, you can use Yieldstreet to invest in things like aviation, art, and real estate.
Yieldstreet offers reasonable fees for most offerings, and it’s open to all investors.
Fund That Flip
Fund That Flip is a real estate investing platform that lets you invest in vetted real estate loans. Fund That Flip’s performance is head-to-head with Groundfloor. The company offers an annual yield of up to 10.5%.
AcreTrader
AcreTrader is an app specifically designed for investing in U.S. farmland. Since everyone needs to eat, farmland can be a great long-term investment.
AcreTrader makes it easy to invest in farmland. You make money through the land’s increase in value and rent payments from farmers.
Streitwise
Streitwise is a solution that’s designed to help investors generate passive real estate income. It’s available to both non-accredited and accredited investors.
Very simply, Streitwise lets you invest in commercial real estate properties using a real estate investment trust (REIT).
Since REITs are required to pay out 90% of their taxable earnings as dividends, you should be able to enjoy a decent return, assuming the REIT doesn’t go belly up.
Frequently Asked Questions
Is Groundfloor a legit way to make money?
Groundfloor is a perfectly safe and trustworthy organization. In fact, Groundfloor is one of the more widely used real estate investing platforms on the market. Smart investing through Groundfloor can lead to a steady cash flow and strong returns over time.
That said, this is a newer approach to real estate investing, and it may take some getting used to. However, it’s a much easier and less intensive way to invest in real estate. Investors of all types use Groundfloor to make money.
Is Groundfloor a good investment?
When you make a Groundfloor investment, your money goes into individual property loans. You’re essentially profiting off of debt, and banking on the fact that the borrower — meaning the ultimate property owner — will pay their loan and give you a return.
As such, there are good and bad investments within the Groundfloor app. The company vets all properties to provide as much security as possible.
The best thing you can do as an investor is to do your due diligence, understand your risk tolerance, and assess each property using whatever data you have.
What is Regulation A?
The Securities Act of 1933 requires companies to register with the United States Securities and Exchange Commission (SEC) when selling securities. Regulation A provides rules for registration requirement exemptions and essentially enables equity crowdfunding without registering.
According to Groundfloor, the company offers and sells securities under Regulation A, only to investors “who are residents of the states in which Groundfloor Finance Inc. (“Groundfloor”) has either qualified an offering statement under Tier 1 of Regulation A or made notice of its intent to offer and sale securities under Tier 2 of Regulation A.”
Check out Groundfloor’s complete disclaimer on the footer of its website for more information.
Does Groundfloor fund multifamily properties?
Groundfloor funds both single-family and multifamily properties. This means you don’t have to worry about restricting yourself to one type of property if you’re looking to build a real estate investment portfolio.
Since both types of properties can be profitable, this is a great thing because you have more options.
Is Groundfloor Best for You?
At the end of the day, crowdfunding sites like Groundfloor help average investors act as hard money lenders and enjoy ongoing passive income from real estate.
This particular investment platform allows house flippers and real estate entrepreneurs to secure short-term loans to further their real estate projects. At the same time, the lending platform can also help you achieve your personal finance goals if you’re able to profit from the deals you select. It has a solid track record of success.
Of course, when it comes to investing, nothing is guaranteed. As a real estate investor, you still need to be careful. The last thing you want to do is pour all of your money into an opportunity only to learn the hard way that you made the wrong decision.
Furthermore, while Groundfloor can help you make money, you should also consider investing in REITs, which have repeatedly proven to be among the best asset classes over the last few decades.
Whatever you decide, don’t bite off more than you can chew. On the journey to financial independence, slow and steady wins the race.