Groundfloor Review and Investment Analysis

Groundfloor is a real estate investment platform that allows users to invest in short-term, high-yield loans to real estate developers and property owners.

The platform has a minimum investment requirement of $10, with a focus on providing liquidity to borrowers.

Groundfloor's loan terms typically range from 3-12 months, offering a relatively short-term investment opportunity.

Investors can expect to earn an average annual return of 10-12% on their investments, although returns can vary depending on the specific loan.

Groundfloor connects individuals looking to invest in real estate loans to people and companies wanting to borrow for real estate projects. It raises money from many individual investors to fund these loans, then creates and manages the loans.

As an investor, you pick between different projects, lend the funds, and collect repayment of your money plus interest. Groundfloor offers three main investment options: Limited Recourse Obligations (LROs), Auto Investing, and Groundfloor Notes.

LROs allow you to lend directly to real estate borrowers, with interest rates and repayment schedules varying based on creditworthiness. On average, investors earn 10% a year funding real estate loans.

Groundfloor is a lending marketplace, not a real estate investment trust (REIT), which means there are no guarantees with their loans. The platform is run by a team of real estate experts with over 100 years of collective experience.

You can invest in Groundfloor loans with a minimum of $10, and there are no fees. This makes it a great way to try out the platform and get a feel for how it works before committing larger sums of money.

Groundfloor's loans are secured debt investments that provide a share of the interest and principal payments on a specific real estate loan. This means you'll earn interest and potentially receive some or all of your principal back if the loan experiences a loss.

Loans in default don't always result in a loss, and Groundfloor's analysis shows that loans that have gone into default have still returned over 8% interest on average. The platform is always in first lien position on the home, so you may receive some or all of your principal back in the event of a loss.

Groundfloor's loss ratio has been less than 1% since launching in 2013, which is a relatively low risk compared to other investment options. However, it's still possible to experience losses, which is why diversification is key to successful investing on the platform.

Diversification is crucial on Groundfloor, as it allows you to spread your risk across multiple loans. According to Groundfloor's analysis, a model portfolio consisting of an equal investment in all 3,663 loans repaid as of 2023 would have earned an annualized net return of 9.84%.

Here's a breakdown of the different ways you can invest on Groundfloor:

To get started, you'll need to set up an account and add money to your Groundfloor account. You don't need to be an accredited investor to use the platform, making it more accessible to a wider range of investors.

A deal on Groundfloor is essentially a loan to a real estate borrower. You lend the funds and then collect repayment of your money plus interest.

The interest rate and repayment schedule are clearly listed on the loan terms before you sign up. This way, you know exactly what to expect.

You can choose from various loans, each with its own creditworthiness, interest rate, and repayment schedule. Borrowers with higher credit scores are more likely to repay the loan.

Groundfloor offers three main investment options: Limited Recourse Obligations (LROs), Auto Investing, and Groundfloor Notes. Each has its own unique features and benefits.

With LROs, you lend directly to real estate borrowers and earn an average of 10% per year. The return is based on the creditworthiness of each borrower.

Auto Investing is a feature that automatically picks your real estate loan investments, taking the work out of your hands. This way, you don't have to constantly track the loans and find new opportunities for your money.

Groundfloor Notes earn interest and are secured by a pool of real estate loans. They typically have a shorter holding period and less risk than LROs.

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To use Groundfloor, you'll need to set up an account by entering your personal information and a funding mechanism. This is a straightforward process that doesn't require you to be an accredited investor.

Groundfloor allows you to add money to your account, which will then be available for investing. You can choose the loans with the terms you find most appealing and invest in them.

Groundfloor will manage the loan and repay you plus interest according to the terms. You can also use Groundfloor's automatic tool to find and make loan investments for you.

The auto-invest feature on the Groundfloor app can automatically pick your real estate loan investments, taking the work out of your hands. This way, you don't have to constantly track the loans and find new opportunities for your money.

You can access these investments through your individual retirement account (IRA), and Groundfloor can set up a self-directed IRA for real estate investing if you don't have one.

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Groundfloor offers a range of benefits for investors, but like any investment platform, it also has its downsides.

One of the biggest advantages of Groundfloor is its potential for high returns. With an average annual return of 10%, investors can earn significantly more than they would from a traditional savings account.

Groundfloor also offers no fees for investors, which means you get to keep all of your earnings.

Another perk is that Groundfloor is available to non-accredited investors, making it a more accessible option for those who may not meet the typical requirements for real estate crowdfunding platforms.

Here are some key pros and cons of Groundfloor:

Overall, Groundfloor's pros and cons should be carefully considered before investing.

Groundfloor doesn't charge any fees to investors, so you won't owe platform fees, investment management fees, or withdrawal fees.

The platform makes money by charging borrowers a fee of roughly 2.5% to 4% of the principal, plus possible closing costs and loan application fees. You, as an investor, get to lend money and collect interest plus repayment of the principal.

Groundfloor focuses on private real estate loans, offering a relatively simple investment selection.

Groundfloor doesn't charge any fees to investors, which is a big plus.

You won't owe platform fees, investment management fees, withdrawal fees, or penalties for cashing out.

Groundfloor makes money by charging borrowers a fee of roughly 2.5% to 4% of the principal, plus possible closing costs and loan application fees.

This means you lend money and collect the interest plus repayment of the principal, with no fees deducted from your earnings.

The only way to lose money is if the borrower defaults and can't repay the investors.

Liquidity is a crucial aspect of any investment, and real estate crowdfunding is no exception. Groundfloor has restrictions on getting your money back, you only get your money back according to the repayment schedule.

The typical Groundfloor loan lasts six to 18 months, which is relatively short compared to other investment options. Diversyfund and Fundrise can take five years or longer to pay you back.

Groundfloor has no restrictions on investments, you can invest as much as you want into its loans.

Groundfloor is very transparent about its fees, which is a big plus for investors. Investors don't have to worry about paying any fees, making it easy for Groundfloor to be transparent about this aspect.

However, Groundfloor falls short in explaining how it works for liquidity and access to your money in an investment. It's also unclear how you can receive reports about the ongoing performance of your investment, including the frequency of updates.

Groundfloor's customer support options are decent, offering phone support from 9 a.m. to 5 p.m. ET, Monday to Friday. You can also email them or submit a question through a customer service form.

Groundfloor has a 4.0/5.0 score on Trustpilot, with most reviewers praising the customer service. Reviews mention that the customer service reps are friendly and answer questions quickly.

Groundfloor's customer support offering includes:

Groundfloor is very transparent about its fees, which is a relief since investors don't owe any fees. This transparency is a major plus for potential investors.

However, when it comes to explaining how the platform works for liquidity and access to your money, Groundfloor falls short. This lack of clarity can be frustrating for investors who want to know how they can get their money back quickly.

Groundfloor also fails to provide clear information about how often investors can expect to receive reports on the ongoing performance of their investments. This lack of transparency can make it difficult for investors to make informed decisions about their investments.

Groundfloor's customer support options are decent and available Monday to Friday from 9 a.m. to 5 p.m. ET, which is a nice feature for a real estate crowdfunding platform.

You can reach out to them through phone support, which is a feature that many other tech-focused companies like Crowdstreet and Fundrise don't offer. They also answer questions by email and through a customer service form.

Groundfloor has a 4.0/5.0 score on Trustpilot, which is a good indication of their customer service. Many reviewers mentioned that the customer service reps were friendly and answered questions quickly.

Here are the details of Groundfloor's customer support offering:

Groundfloor markets its investment opportunities under Regulation A+ Tier 2, making it available to both non-accredited and accredited investors. This means investors don't directly own the notes, but rather have an indirect security through a separate LLC.

Groundfloor's structure helps avoid certain legal issues and prevents the disclosure of investor names in UCC filings, but it also creates a risk in the event of bankruptcy. If the company stops performing its duties, investor money might be held in limbo by the bankruptcy court for a year or more.

Groundfloor is a legitimate company, having been in business since 2013 with over 230,000 users, and it runs its investment offerings through the SEC. However, real estate investing carries risks, and investors could lose money if a borrower defaults.

The uninvested cash in your Groundfloor account is FDIC-insured, meaning you'll get it back if the company goes bankrupt. However, the money you invest in loans or Groundfloor Notes is not FDIC-insured, and there's no guarantee you'll get all your money back if the borrower defaults.

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Groundfloor markets to investors under Regulation A+ Tier 2, making it available to both non-accredited and accredited investors. This means that investors do not directly own the notes, but are instead indirectly secured through a separate LLC.

Investors would not notice a difference between this and directly secured notes, and would receive the same benefits and/or losses as if the investment were directly secured. However, in the event of bankruptcy, a court would determine the treatment of the Limited Recourse Obligation Agreements, which could potentially leave investors in limbo.

Groundfloor does not have any bankruptcy protection, which is a major risk for investors. In contrast, other platforms solve these issues using bankruptcy protection.

Investors should be aware that in the event of bankruptcy, a court could decide to pool all LRO holders and underlying notes together, direct administration to facilitate recovery, or group LRO holders together with other unsecured creditors. This highlights the importance of understanding the risks involved with investing through Groundfloor.

Groundfloor is FDIC-insured for the uninvested cash you keep in your account.

The government will get you this money back if Groundfloor goes bankrupt.

You don’t have FDIC insurance for the money you invest in the Groundfloor loans.

There’s no guarantee you’ll get all your money back if the real estate borrower defaults.

Groundfloor tries to collect repayment by making a legal claim against the real estate, but success is not guaranteed.

While Groundfloor’s assets back up these loans, they are not FDIC-insured.

Groundfloor's educational resources are limited, but they do have a blog with articles, market reports, and project spotlights.

The blog's content is basic and not well-organized, making it difficult to find the information you need.

Groundfloor also has an FAQ page that answers the most common questions, which can be a good starting point for new investors.

They even run a podcast, but it's not a comprehensive resource for learning about real estate investing.

If you're looking for more in-depth education, you might want to consider companies like EquityMultiple and Yieldstreet, which offer more extensive educational resources.

Groundfloor's website does a good job explaining how their service works, but it's not enough to get you started as a real estate investor.

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If you're willing to take on a bit more risk in exchange for somewhat higher returns, Groundfloor might be a great investment for you. Groundfloor could function like high-yield bonds in a well-diversified portfolio.

As an investor, you don't need to have a lot of experience or a large amount of money to get started. The minimum to invest is just $10 per project, making it accessible to a wide range of people.

Investors who don't need immediate liquidity and are willing to experiment should look at Groundfloor LROs. This is a passive way to get into the real estate project action, and it's a great way to diversify your portfolio.

Some key characteristics to consider when deciding if Groundfloor is right for you include:

If you're considering investing with Groundfloor, you'll want to know the types of projects they finance. Groundfloor creates loans for residential and small commercial real estate projects.

They focus on properties like office buildings, apartment buildings, and single-family homes. Major industrial projects and significant commercial developments, like self-storage units, are not part of their offerings.

As an investor, you'll have the opportunity to choose from two programs: fix-and-flip and new construction loans. The fix-and-flip program is for borrowers who need a short-term loan to renovate, expand, or improve a property before selling.

If you're willing to take on a bit more risk in exchange for somewhat higher returns, Groundfloor might be a great investment for you. You can start investing with just $10 per project, making it accessible to a wide range of investors.

Groundfloor Notes offer a way to get into the real estate project action in a passive way, which will appeal to investors who don't need immediate liquidity and are willing to experiment.

Investors who are looking for a high-yield investment can consider Groundfloor, which can function like high-yield bonds in a well-diversified portfolio. This can be a great option for those who are willing to take on a bit more risk.

Groundfloor Notes offer more liquidity and attractive short-term rates compared to savings accounts and T-Bills, making them an attractive option for investors who are looking for a higher return on their investment.

Investors who are willing to tolerate some risk can earn much higher returns with Groundfloor Notes compared to keeping their cash in a checking or savings account.

Groundfloor is not the only platform for investing in real estate related assets, but they take a unique approach by focusing on lending rather than owning actual properties.

Their closest competitor is Peerstreet, but Peerstreet declared bankruptcy on June 26, 2023, so its future is uncertain.

Groundfloor has some advantages over other platforms, such as allowing investors to pay no fees and not needing to meet accredited standards.

You can start investing with just $100, which is a relatively low barrier to entry.

Groundfloor's loans usually return your money within six to 18 months and earn, on average, a 10% annual return.

If you're looking for a simple and relatively low-risk way to add real estate to your portfolio, Groundfloor is definitely worth considering.