Overall:
Platform Provided Due Diligence:
Platform Fees:
Quality of Deals:
Website - Groundfloor
Fees - 1-2% annual management fee
Phone - 678-701-1194
WE MAY ONLY MAKE OFFERS FOR INVESTMENT SECURITIES TO RESIDENTS OF MA, MD, DC, VA, GA, IL, TX, WA, and CA.
GROUNDFLOOR is open to accredited and non-accredited investors alike.
GROUNDFLOOR is the first and only real estate lending marketplace open to non-accredited investors. We open the door to short-term, high-yield returns backed by real estate. Typical loans have returned 12 percent annually on a six to 12 month term.
GROUNDFLOOR is a marketplace that brings together investors and borrowers. Borrowers have access to more flexible, faster, and cheaper capital and investors earn more by having access to short-term, high-yield investments offering returns of 5% to 26%.
It all starts with the borrower. A real estate investor, who we call a borrower, secures a loan through GROUNDFLOOR rather than a traditional bank or a hard money lender to finance a residential real estate project. That borrower submits a loan application and we review and underwrite the loan using our loan grading engine. After review, the loan is assigned a loan Grade A through G and a corresponding rate where Grade A loans are the least risky, with the lowest rate of return and Grade G loans are most risky, with the highest rate of return. Grade A loans generally offer returns of 6% and Grade G loans generally offer returns of 26% with each letter grade offering a rate in that in range.
Our Borrower Services Team works with the borrower to tailor the loan to meet the needs of the project. The loan is then underwritten and assigned a grade and interest rate. We have filed an offering circular with the Securities Exchange Commission (SEC) through which we sell securities. The proceeds of these securities and the performance of these securities are tied to the individual loans we decide to originate. If we decide to put a loan up for funding, we amend our offering circular with the details of that loan. When that amendment is qualified, the loan may be taken live for investment. "Qualification" by the SEC is not an endorsement of our investments, and no government or agency has passed on the merits of our offering.
Groundfloor is a crowdfunding personal finance platform for real estate investments that specializes in short-term loans for investors and independent home builders alike. Borrowers use the funds for renovation or construction projects, then either rent out the property as investment income or sell the property and use the proceeds to repay the loan.
In essence, Groundfloor works by loaning money for individual projects and then offers portions of those loans to investors. These investors finance the project piecemeal and earn interest on the cash they invest. These are “hard-money” loans, where they’re backed by so-called “hard” assets, such as properties that are understood to repay quickly through projected profits.
Groundfloor’s lending amounts vary wildly. In fact, as a marketplace, it offers opportunities to investors with high-yield, short-term loans that can be funded with incredibly low investment minimums. We’re talking as little as $10 a loan in some circumstances. Another interesting fact about Groundfloor is it can accommodate both the accredited and non-accredited investor.
Low minimum investment: at just $10, Groundfloor is one of those rare crowdfunding platforms that doesn’t make deep pockets a requirement.
High deal flow: There are a number of different loans from which to choose, all with a wide variety of deal risk/return.
No investor fees: Lenders are not required to pay maintenance fees. Instead, borrowers are responsible for all fees associated with their loans.
Open to non-accredited investors: A crowdfunding platform that doesn’t require you to be an accredited investor is also very rare, making Groundfloor even more egalitarian.
High level of control: Investors pick and choose their investments that make up their portfolio. This differs from a real estate investment trust, where management does the choosing.
High default rate: when comparing Groundfloor’s default rates against the Federal Reserve’s industry trend tracker, the crowdfunding platform shows higher overall levels of default..
No bankruptcy protection: Groundfloor does not have any protection policies in place when it comes to the possibility of bankruptcy.
Foreclosure risks: There are little to no options for an investor to get their money back if the property they financed goes into foreclosure.
Lack of diversification: The Groundfloor platform doesn’t have as wide a mix of real estate asset types as it could. Diversifying across single family, multi-family, commercial, and industrial real estate offers more favorable risk factors.
Reserved for house flippers: There’s no equity investing options for those who want to finance permanent property owners.
Research shows that Groundfloor originates anywhere between 60 to 70 loans every month, with a concentration on high-liquidity, high-volume lending. This enables it to not necessarily avoid default but instead maximize net ROI by liquidating defaults quickly to return funds to investors or to create workout plans in the event that default looks likely. This is typical in hard-money real estate investing , however; Groundfloor’s properties go through foreclosure at around 2%, which is significantly higher than the 0.6% national average. That being said, on a state-by-state basis most foreclosure laws tend to favor the lender in the case of investment properties.
Groundfloor does do what it can to make lending comfortable for its investors. Borrowers pay fees for the privilege of using the platform - anywhere from 2% to 4.5% of the loans’ principal. They also pay investors their interest accrued at the tail end of the loan, along with an accompanying balloon payment of the balance. A few loans pay monthly interest as well, but this only represents a fraction of the platform’s lending.
Groundfloor also reviews lending, pre-screening and pre-funding them before opening them up to their investor members. Loans are ranked by risk through 7 levels; a Grade A loan carries the least risk, while a Grade G loan is the high-risk end of the spectrum. Higher returns accompany these higher-risk loans. It’s important to keep in mind that these ratings do not take the creditworthiness of borrowers into account. Real estate flipping is a gamble, after all, as when things go wrong expenses can balloon very quickly.
As for loan ownership, investors don’t have any claim against the loan notes outright. Instead, Groundfloor relies on the use of an investment security known as Limited Recourse Obligations, or LRO, which creates a legal obligation for Groundfloor to pay participating investors depending on their loan performance. This LRO also acts as a limiter when it comes to investors trying to claim recourse beyond that on the funds they paid into the loan in the first place, though.
Groundfloor occupies a unique niche - it’s one of the few and proud real estate crowdfunding sites that has non-accredited investor support. This, combined with the ultra-low investment minimums amounts, makes this real estate crowdfunding site incredibly accessible to one and all. That being said, there are investment limitations: you’re only able to invest in a single type of asset class on the platform. Investing in house flipping might be accessible, but it’s also inherently higher risk than other real estate investment assets.
Thankfully, its ultra-low minimum investment amounts makes it easy to spread risk across a wide variety of projects on the platform. This reduces risk of loss per loan to manageable levels, all without an investor running the risk of overexposing themselves. A $10 investment isn’t going to net big returns of course; the average investment amount is anywhere from $3,000 to $8,000 within the first 12 months. This average jumps to around $20,000 by the third year.
Groundfloor says that typical gains are around 10% annually on a term, which is usually either six months or 12 months. This average return fluctuates by risk; a Grade A loan might only net you 5.5% in returns, while a Grade G loan, if successful, can net as much as 25%. Groundfloor evaluates loan risk by assessing the property as it exists and it will be after its projected improvements as well as the business plan and the experience of the borrower looking for the funds. All of these investments are in the shorter-term, as house flipping is a very time-sensitive process. Terms are no longer than 12 months, with most being much shorter - three, six, and nine months, for example. Once the house flipper is done, they typically sell the house at a profit or refinance the loan into a traditional mortgage and rent out the house as rental property. Either way, your investment return comes from this action.
Taken all together, this means that one of the best strategies for investing on Groundfloor is to have a highly diversified portfolio. This protects an investor from losses, as having your investments spread far and wide can still earn a high ROI from the other successful investments. Groundfloor provides a model portfolio to prove this: equal investments made into 1,503 loans repaid as of November 2020 ended up earning a lender a 10.5% annualized net return, after taking a 0.67% loss ratio into account.
There’s a lot going for Groundfloor as a real estate investment program. First and foremost, it’s unique in that it offers non-accredited investors with individual note purchase investments. Combine this with the ultra-low minimum requirement for investing and you’ve got even more accessibility. This makes it stand out from the crowd; while it doesn’t offer much to attract fully-accredited investors with deep pockets, if you’re looking to get your feet wet when it comes to real estate investment and not expose yourself to too much potential financial risk, there’s much to like about this platform.
At the same time, there are some things that any investor needs to be aware of if thinking of investing in Groundfloor. First and foremost, a $10 minimum investment isn’t going to make you wealthy, not unless you invest in a number of loans that Groundfloor has on offer at the same time. Additionally, the risk profile of real estate lending to house flippers is naturally going to be mildly to moderately higher than other types of real estate investing. You can counteract this by diversifying across as many Groundfloor investments as you wish, but this doesn’t change the fact that you’re still only investing in one class of real estate. Then again, this is typical of hard money lenders.
Can you make money through making debt investments through Groundfloor? Absolutely. Average returns of around an annualized 10% isn’t bad. As with any type of investing, you’ll get higher ROI if you invest in higher-risk debt investments. It’s a good way to make money on the types of loans available on this crowdfunding platform. Real estate entrepreneurs have to start somewhere, and starting small is a valid and legitimate strategy, especially if you have limited resources and don’t have access to other platforms.
That being said, you have an obligation to yourself to do your due diligence when choosing crowdfunding platforms. This Groundfloor review should help you understand how this crowdfunded real estate platform works and the potentials and limits of real estate crowdfunding through it. Always diversify your holdings, read plenty of reviews on each platform you consider, and always examine what you’re offered before you invest in any of these platforms. That way, you can rely invest in real estate crowdfunding the safe and smart way.
Feb 15, 2021
Even though I've only been using them for 7 mos, I've seen a dramatic arc in quality/performance which has resulted in my beginning the disbursement process to eventually move completely off the platform.
My biggest issues with GF are: 1) they reduced the notes rate without any heads up to investors (the main reason why I opened an account in the first place) and 2) they have made a strategic move *away* from monthly payments to balloon (which places far too much risk on the investor); 3) I feel they are playing 'shell games' with sponsors with refis funded by GF investors that go way beyond what I've seen as normal and 4) open to non-accredited investors - their shift in strategy/offerings has convinced me that they are now focused on this group as the more savvy & 'demanding' accredited investors were causing them too much 'heartburn' to satisfy/support.
Pros: s/t notes paying higher than bank interest, GUI is easy to navigate, good investor 'control panel,' variety of loans
Cons: poor communication, misleading marketing, little/no info on sponsors, experience rating of sponsors inaccurate/misleading, payment strategy places too much risk on investors, too much emphasis to refi delinquent sponsors (only benefits sponsor/GF with fees) instead of working out deals/removing them, open to non-accredited investors (lower quality deals, lower expectations from investors)
I'm awaiting my remaining deals to term and then will avoid GF until I hear otherwise from this community.
Mar 10, 2020
I have been using this site for several years now, and believe it has improved considerably in the last few years. In particular, the deal flow has greatly increased as well as the due diligence. Both of these were issues about 3 years ago.
There are also no fees to the loan investors now.
I primarily use it for self-directed IRA investments for tax reasons. I also like the low miniumums as it is easy to reinvest distributions paid from other investments.
Dec 19, 2017
Been on platform for only about 6 months but so far no credit issues. At this point the primary issue has been a serious supply limitation. Another weakness of this platform is that the loans are all full balloon payments (principal and interest).
Feb 03, 2017
They have much lower limits (I think as low as $100 or $500) per loan, which might be a good site for none accredited investors.
Communications is pretty good, especially when a loan doesn't perform as expected.
Downside of the site is they don't have very many loans up often, and good loans can fund very quickly. Another downside and major difference of Groundfloor from the other debt investment sites is there is no cash flow (no monthly payment). All notes and interest is due at maturity. The issue with that is investors don't find out if there is a problem with their investment until after maturity (usually 12 months from investment date)
Feb 03, 2017
I tried using GroundFloor like lendingclub because of the low minimums and loan grading. I tested the site out with 5K and invested in around 10 loans. Almost all of them were returned because the deal didn't close. I have one outstanding where the home was vandalized. Communication is on par with the other CF sites.
The biggest problem is that there are no interest payments. Interest is paid in balloon fashion at the end of the loan. An 11% balloon payment is not the same as 11% paid monthly (time cost of money).
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Website - Groundfloor
Fees - 1-2% annual management fee
Phone - 678-701-1194
WE MAY ONLY MAKE OFFERS FOR INVESTMENT SECURITIES TO RESIDENTS OF MA, MD, DC, VA, GA, IL, TX, WA, and CA.
GROUNDFLOOR is open to accredited and non-accredited investors alike.
GROUNDFLOOR is the first and only real estate lending marketplace open to non-accredited investors. We open the door to short-term, high-yield returns backed by real estate. Typical loans have returned 12 percent annually on a six to 12 month term.
GROUNDFLOOR is a marketplace that brings together investors and borrowers. Borrowers have access to more flexible, faster, and cheaper capital and investors earn more by having access to short-term, high-yield investments offering returns of 5% to 26%.
It all starts with the borrower. A real estate investor, who we call a borrower, secures a loan through GROUNDFLOOR rather than a traditional bank or a hard money lender to finance a residential real estate project. That borrower submits a loan application and we review and underwrite the loan using our loan grading engine. After review, the loan is assigned a loan Grade A through G and a corresponding rate where Grade A loans are the least risky, with the lowest rate of return and Grade G loans are most risky, with the highest rate of return. Grade A loans generally offer returns of 6% and Grade G loans generally offer returns of 26% with each letter grade offering a rate in that in range.
Our Borrower Services Team works with the borrower to tailor the loan to meet the needs of the project. The loan is then underwritten and assigned a grade and interest rate. We have filed an offering circular with the Securities Exchange Commission (SEC) through which we sell securities. The proceeds of these securities and the performance of these securities are tied to the individual loans we decide to originate. If we decide to put a loan up for funding, we amend our offering circular with the details of that loan. When that amendment is qualified, the loan may be taken live for investment. "Qualification" by the SEC is not an endorsement of our investments, and no government or agency has passed on the merits of our offering.
Groundfloor is a crowdfunding personal finance platform for real estate investments that specializes in short-term loans for investors and independent home builders alike. Borrowers use the funds for renovation or construction projects, then either rent out the property as investment income or sell the property and use the proceeds to repay the loan.
In essence, Groundfloor works by loaning money for individual projects and then offers portions of those loans to investors. These investors finance the project piecemeal and earn interest on the cash they invest. These are “hard-money” loans, where they’re backed by so-called “hard” assets, such as properties that are understood to repay quickly through projected profits.
Groundfloor’s lending amounts vary wildly. In fact, as a marketplace, it offers opportunities to investors with high-yield, short-term loans that can be funded with incredibly low investment minimums. We’re talking as little as $10 a loan in some circumstances. Another interesting fact about Groundfloor is it can accommodate both the accredited and non-accredited investor.
Low minimum investment: at just $10, Groundfloor is one of those rare crowdfunding platforms that doesn’t make deep pockets a requirement.
High deal flow: There are a number of different loans from which to choose, all with a wide variety of deal risk/return.
No investor fees: Lenders are not required to pay maintenance fees. Instead, borrowers are responsible for all fees associated with their loans.
Open to non-accredited investors: A crowdfunding platform that doesn’t require you to be an accredited investor is also very rare, making Groundfloor even more egalitarian.
High level of control: Investors pick and choose their investments that make up their portfolio. This differs from a real estate investment trust, where management does the choosing.
High default rate: when comparing Groundfloor’s default rates against the Federal Reserve’s industry trend tracker, the crowdfunding platform shows higher overall levels of default..
No bankruptcy protection: Groundfloor does not have any protection policies in place when it comes to the possibility of bankruptcy.
Foreclosure risks: There are little to no options for an investor to get their money back if the property they financed goes into foreclosure.
Lack of diversification: The Groundfloor platform doesn’t have as wide a mix of real estate asset types as it could. Diversifying across single family, multi-family, commercial, and industrial real estate offers more favorable risk factors.
Reserved for house flippers: There’s no equity investing options for those who want to finance permanent property owners.
Research shows that Groundfloor originates anywhere between 60 to 70 loans every month, with a concentration on high-liquidity, high-volume lending. This enables it to not necessarily avoid default but instead maximize net ROI by liquidating defaults quickly to return funds to investors or to create workout plans in the event that default looks likely. This is typical in hard-money real estate investing , however; Groundfloor’s properties go through foreclosure at around 2%, which is significantly higher than the 0.6% national average. That being said, on a state-by-state basis most foreclosure laws tend to favor the lender in the case of investment properties.
Groundfloor does do what it can to make lending comfortable for its investors. Borrowers pay fees for the privilege of using the platform - anywhere from 2% to 4.5% of the loans’ principal. They also pay investors their interest accrued at the tail end of the loan, along with an accompanying balloon payment of the balance. A few loans pay monthly interest as well, but this only represents a fraction of the platform’s lending.
Groundfloor also reviews lending, pre-screening and pre-funding them before opening them up to their investor members. Loans are ranked by risk through 7 levels; a Grade A loan carries the least risk, while a Grade G loan is the high-risk end of the spectrum. Higher returns accompany these higher-risk loans. It’s important to keep in mind that these ratings do not take the creditworthiness of borrowers into account. Real estate flipping is a gamble, after all, as when things go wrong expenses can balloon very quickly.
As for loan ownership, investors don’t have any claim against the loan notes outright. Instead, Groundfloor relies on the use of an investment security known as Limited Recourse Obligations, or LRO, which creates a legal obligation for Groundfloor to pay participating investors depending on their loan performance. This LRO also acts as a limiter when it comes to investors trying to claim recourse beyond that on the funds they paid into the loan in the first place, though.
Groundfloor occupies a unique niche - it’s one of the few and proud real estate crowdfunding sites that has non-accredited investor support. This, combined with the ultra-low investment minimums amounts, makes this real estate crowdfunding site incredibly accessible to one and all. That being said, there are investment limitations: you’re only able to invest in a single type of asset class on the platform. Investing in house flipping might be accessible, but it’s also inherently higher risk than other real estate investment assets.
Thankfully, its ultra-low minimum investment amounts makes it easy to spread risk across a wide variety of projects on the platform. This reduces risk of loss per loan to manageable levels, all without an investor running the risk of overexposing themselves. A $10 investment isn’t going to net big returns of course; the average investment amount is anywhere from $3,000 to $8,000 within the first 12 months. This average jumps to around $20,000 by the third year.
Groundfloor says that typical gains are around 10% annually on a term, which is usually either six months or 12 months. This average return fluctuates by risk; a Grade A loan might only net you 5.5% in returns, while a Grade G loan, if successful, can net as much as 25%. Groundfloor evaluates loan risk by assessing the property as it exists and it will be after its projected improvements as well as the business plan and the experience of the borrower looking for the funds. All of these investments are in the shorter-term, as house flipping is a very time-sensitive process. Terms are no longer than 12 months, with most being much shorter - three, six, and nine months, for example. Once the house flipper is done, they typically sell the house at a profit or refinance the loan into a traditional mortgage and rent out the house as rental property. Either way, your investment return comes from this action.
Taken all together, this means that one of the best strategies for investing on Groundfloor is to have a highly diversified portfolio. This protects an investor from losses, as having your investments spread far and wide can still earn a high ROI from the other successful investments. Groundfloor provides a model portfolio to prove this: equal investments made into 1,503 loans repaid as of November 2020 ended up earning a lender a 10.5% annualized net return, after taking a 0.67% loss ratio into account.
There’s a lot going for Groundfloor as a real estate investment program. First and foremost, it’s unique in that it offers non-accredited investors with individual note purchase investments. Combine this with the ultra-low minimum requirement for investing and you’ve got even more accessibility. This makes it stand out from the crowd; while it doesn’t offer much to attract fully-accredited investors with deep pockets, if you’re looking to get your feet wet when it comes to real estate investment and not expose yourself to too much potential financial risk, there’s much to like about this platform.
At the same time, there are some things that any investor needs to be aware of if thinking of investing in Groundfloor. First and foremost, a $10 minimum investment isn’t going to make you wealthy, not unless you invest in a number of loans that Groundfloor has on offer at the same time. Additionally, the risk profile of real estate lending to house flippers is naturally going to be mildly to moderately higher than other types of real estate investing. You can counteract this by diversifying across as many Groundfloor investments as you wish, but this doesn’t change the fact that you’re still only investing in one class of real estate. Then again, this is typical of hard money lenders.
Can you make money through making debt investments through Groundfloor? Absolutely. Average returns of around an annualized 10% isn’t bad. As with any type of investing, you’ll get higher ROI if you invest in higher-risk debt investments. It’s a good way to make money on the types of loans available on this crowdfunding platform. Real estate entrepreneurs have to start somewhere, and starting small is a valid and legitimate strategy, especially if you have limited resources and don’t have access to other platforms.
That being said, you have an obligation to yourself to do your due diligence when choosing crowdfunding platforms. This Groundfloor review should help you understand how this crowdfunded real estate platform works and the potentials and limits of real estate crowdfunding through it. Always diversify your holdings, read plenty of reviews on each platform you consider, and always examine what you’re offered before you invest in any of these platforms. That way, you can rely invest in real estate crowdfunding the safe and smart way.
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