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Written by Sam Pennington on September 11, 2021
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Groundfloor Review 2021: Best Real Estate Investing Platform?

Real estate is commonly talked about as a great way to diversify a portfolio. While this is true, it can be difficult to acquire a property, not to mention the process of finding a tenant, keeping up with repairs, and tracking down rent checks.

However, buying a property directly is not the only way to get involved in real estate. In fact, there are a number of other ways to invest in real estate such as REITs and crowdfunding platforms.

In this article, we are going to be taking a deep dive into one of these other options: Groundfloor. This company is a crowdfunding real estate investment platform that offers investors a way to participate in real estate through debt investments.

So, is Groundfloor the best option for you? Keep reading for our full Groundfloor review to learn more about the platform.

why groundfloor

Groundfloor Review: Highlights

  • Available to accredited and non-accredited investors
  • $10 Minimum Investment
  • Access to high-yield and short term real estate debt investments
  • 3 - 12 Month Investment Terms
  • 5.5% - 26% Returns
  • 10.5% actual returns since inception
  • Investors can pick and choose investments as they please or use Groundfloor automatic investing
  • Available to Non-US Residents
  • Minimum Investment
  • Transparency
  • Real Estate Variety
  • Interest Rates
  • Fees
  • Investor Protection
3.3

Summary

Groundfloor is a real estate investment platform that offers individuals the ability to participate in real estate through debt investments.

The company starts by connecting investors with other entrepreneurs looking to flip a property. These investors then fund the deal and receives interest after the project is finished.

Groundfloor is unique in that it focuses on debt investments rather than equity investments. The platform is open to both accredited and non-accredited investors and features a $10 minimum. What's even better is that there are no fees to investors.

The company focuses on residential properties that have 1-4 units. This limits the types of properties that are listed on the site and doesn't allow investors to diversify their holdings. There is also risk of foreclosure and bankruptcy with each deal, though the company strives to limit this. Groundfloor has experienced over double the national foreclosure rate.

This platform could be a great option for you if you are looking to get started with real estate with as little as $10!

Pros

  • Open to non-accredited investors
  • $10 minimum
  • 0 investor fees
  • Multiple listings at any given time

Cons

  • Limited diversification of real estate assets
  • Access to debt investments only
  • No bankruptcy policy

What is Groundfloor?

Groundfloor is a real estate crowdfunding platform that focuses on lending and debt investments.

Groundfloor presents a unique investment for individual investors that allows both non-accredited and accredited investors to participate directly in real estate investment loans on a fractional basis. The company opens the door to short-term, high-yield returns backed by real estate. The loans typically have a  return of 10 percent annually with a 3 to 12 month term.

"GROUNDFLOOR offers short-term, high-yield real estate debt investments to the general public. We believe that everyone should have the freedom to invest on their own terms."

The company was founded in 2013 by partners Brian Dally and Nick Bhargava. The investment platform is headquartered in Atlanta, Georgia. Since, they have earned roughly $12.7 million in interest for their investors with an actual return of 10.5% since inception.

Groundfloor's product to investors is based on venture loans to real estate entrepreneurs, originated and serviced by the company itself. Prior to ever accepting a loan application from a borrower, Groundfloor pre-funds a loan and proceeds with  a thorough vetting process examining the borrower's experience, credit worthiness, and business plan, plus an assessment of the property value. If a deal is determined to be a good fit for the site, it is then listed on the website for everyday investors to fund.

recent groundfloor investments

How Does Groundfloor Work?

Groundfloor offers everyone a unique way to participate in real estate opportunities. Rather than investing in a property directly, Groundfloor funds a project in the form of a loan and makes money through interest.

Real estate investors, or 'borrowers' as called by Groundfloor, come to Groundfloor with a project, most often a residential rehab or flip project. Groundfloor then evaluates the project and determines whether or not to list it on the website. The platform will assign each listing a letter grade: A to G. An 'A' grade represents a deal that Groundfloor deems the least risky while a 'G' project features the highest risks. Likewise, an 'A' rated project will have the smallest return percentage while a 'G' project will have the highest return percent.

Once a project is listed on the website, everyday investors have the opportunity to fund the deal. Once a deal is fully funded, the loan closes. The borrower then takes the money and completes the project. After the rehab or flip is complete, the property is sold and the loan is repaid to investors plus interest.

Once you are signed up for an account, you will be able to browse the available deals. Each deal shows the letter grade, interest rate, time remaining on the project, number of investors that already funded a part of the deal, loan value, and remaining capital needed.

The projects are residential real estate properties that are most commonly on the East Coast of the United States. The barrier to entry is incredibly low! Investors can get started with as little as $10. One great feature about the platform is that you can sign up for an account and start browsing deals before ever linking a bank account. This offers members a way to familiarize themselves with the platform and determine if it is right for them.

Non-US residents are also able to invest with Groundfloor, though the minimum is $5,000 instead of $10.

What are the Returns?

One of the benefits of investing with Groundfloor is that you will be able to see the return before ever investing. Each deal has an associated interest rate based upon the risk associated with the project. Returns range from 5.5% to 26%.

Investors can expect the following minimum rates for each grade:

  • A: 5%
  • B: 6%
  • C: 8%
  • D: 9%
  • E: 12%
  • F: 14%
  • G: 15%

Let's look at an example.

Suppose you invest $500 dollars into a project that is listed as a 'C' and offers a 10% return. (This is a real example currently listed on the site.) The earnings you can expect are not as simple as $500 multiplied by 10%. Instead, you will take the amount invested and multiply it by the interest rate and then divide it by 365 days. This is because the rates of return listed on the site are annualized numbers.

That number, or 0.137 {(500*0.10)/365}, is then multiplied by your actual term or actual amount of time your money was invested. The moment you commit your money you begin earning interest. So if you committed your money for 92 days, then your return would be 0.137*92 or $12.60. In this scenario, an investor could expect to receive back their original $500 plus $12.60 of interest.

While this may not seem like much, it is important to remember that this scenario was paid out through a term of just over 3 months.

groundfloor current states

Automatic Investing

One of the main benefits of using Groundfloor is the ability to choose your own deals. This gives investors the ability to evaluate various deals and find the ones that make most sense for their needs and situation.

However, for those that want to invest more passively, Groundfloor offers an automatic investing option.

Within the platform, you can set up automatic investment by going to account settings and selecting automatic investing.

From there, you will enter in a dollar amount in multiples of $10 by letter grade. For example, you could enter in $50 dollars in grade 'C' and $20 in grade 'G'. With those settings, when new listings go live, Groundfloor would automatically invest your allotments into various deals with the desired grade.

After Groundfloor invests your funds, you will receive a notification of the investments it chose. If you are not happy with the choices, you can easily cancel those investments.

What Happens if a Loan Doesn't Fully Fund?

Once a project is listed on the site, it has 45 days to become fully funded, which then triggers the closing of the loan. However, if the loan is not fully funded after 45 days, the listing will be removed from the site. If you committed funds to the project, you will see a credit in your account in the amount you invested plus interest for the amount of time you were committed.

What Happens if a Borrower Faults on a Loan?

If a borrower is unable to meet the demands of the loan, Groundfloor places the loan into default. They then assign their asset management team to assist with the loan. They do this to try to work with the borrower to help the project get back on track.

While Groundfloor does have the right to foreclose a property, they have found that working with the borrower often results in a better situation for everyone involved.

Currently Groundfloor does not have a bankruptcy policy in place.

For more information about a foreclosure or faulty loans, be sure to read about Groundfloor's foreclosure process.

the groundfloor advantage

Groundfloor Borrowers

Groundfloor not only offers individuals the opportunity to fund deals and earn interest, but also offers borrowers a competitive offering:

  • Interest rates start at 5.5%
  • Loans of $75,000 to $1,000,000
  • Minimum property value of $50,000
  • Minimum credit score of 640
  • No minimum transactions experience required
  • 5 year look back for experience
  • True Deferred payments - NO payments until loan repays
  • Up to 100% Loan-to-Cost, depending on experience
  • Up to 75% Loan-to-After Repair Value
  • 6, 9, and 12 month terms

Groundfloor currently limits loan offerings to properties with 1-4 units in 31 states.

The application to be a borrower is a simply online form that you can complete on your own time. They also have a customer support phone number (404-480-9025) for those that would rather talk through the application. Loan applications are typically received and decided within 3 weeks.

Are There Any Fees?

A key benefit of using Groundfloor's investment platform is that there are no fees for investors. The platform makes its money through interest rates charged to borrowers. Investors then share the returns with the company.

Is Groundfloor Secure?

The investing platform ensures security by using AES-256 encryption, which is the same standard used by banks. This level of security keeps your information private and secure.

Additionally, any money you transfer into your Groundfloor account is FDIC insured until invested in a deal.

It is important to note that all investments carry risk. However, this risk pertains to the investment itself, not the platform.

Groundfloor Review: Final Thoughts

Groundfloor offers a unique opportunity to investors through debt investments. Typically, investments of this kind are reserved for accredited investors. With Groundfloor, any investor can get started with as little as $10.

The entire process is started with an entrepreneur looking to flip a residential real estate property. They apply for a loan, Groundfloor verifies the deal, and then investors can fund the deal. With returns clearly stated, investors can expect between 5% and 26% returns with a 3 - 12 month term.

This platform has a few key features that make it shine. First, the minimum investment of $10 and zero fees make the barrier to entry nearly non-existent. Second, the platform consistently has a large number of deals to choose from. And third, the platform itself is fairly simple to navigate and understand.

However, there are a few negatives with the platform as well. First, the company focuses on residential properties with 1-4 units. Thus there really isn't much diversity when it comes to the assets listed on the site. And investors can participate through debt investments only. There are not any equity investments available.

Second, there is not much currently in the way of investor protection. In fact, the company does not have a bankruptcy policy in place. Deals do run the risk of foreclosure, which is something investors should fully understand before investing with Groundfloor. Additionally, some investors would like to see an app rather than a desktop version only.

Groundfloor does offer members a unique offering. One great feature is the ability to sign up for an account and browse listings before ever funding your account.

If Groundfloor sounds like it might cater to your needs, then check it out today!

Best Real Estate Investment Apps

groundfloor featured image
Article written by Sam Pennington
Sam is a personal finance writer. While in college, he dedicated his spare time to learning about personal finance, investing, and real estate. Sam currently works as a business analyst for one of the top food manufacturers in the world.

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