Groundfloor review
Moneywise.com / Moneywise.com
Groundfloor offers residential real estate investing for as little as $10
Many investors want access to real estate investments within their portfolio but aren’t interested in swinging a hammer, hiring a home inspector or renovating a house. Since 2012, real estate crowdfunding platforms have emerged to offer a variety of more passive options for investing in real estate.
4.0
4.0
Commissions and fees5
Customer service4
Ease of use4.3
Diversification4
Due diligence4.5
If you're not an accredited investor and want to take part in residential crowdfunded real estate deals for as little as $10, Groundfloor may be for you. This service's model, like that of other real estate crowdfunding platforms not without risk.
Groundfloor features
| Feature | Details |
|---|---|
| Minimum investment | $10 |
| Account fees | No fees for investors |
| Time commitment | 12-18 months for projects, but investors can see some returns in as little as 7 days. |
| Accreditation required | ❌ |
| Private REIT | ❌ |
| Offering types | Debt |
| Property types | Residential, single family |
| Regions served | 35 states plus Washington, D.C. |
| Secondary market | ❌ |
| Self-directed IRA | ❌ |
| 1031 exchange | ❌ |
| Pre-vetted | ✅ |
| Pre-funded | ✅ |
Groundfloor pros and cons
Pros
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Open to non-accredited investors
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Only requires $10 to start investing
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Groundfloor has seen 10% annualized returns on average
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Short-term investing option
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Investors don't pay any fees
Cons
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Debt-investing carries the risk that borrowers default
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Some investments aren't very liquid, though Groundfloor offers a liquid product called Rollover Notes
What is Groundfloor?
If you’ve been looking at real estate fractionalization as an investing option, you’ve likely noticed that most of the platforms restrict participation to accredited investors. Groundfloor has broken that mold by developing a platform and mobile app open to anyone with as little as $10 who is interested in loaning money for real estate fix-and-flip and new construction deals.
Founded in 2013 by Brian Dally and Nick Bhargava, Groundfloor is headquartered in Atlanta. Their platform targets small residential development projects. Dally says:
We think this is a revolutionary concept for personal finance. This is a steady, tangible way for ordinary people to make good returns on their money.
Brian Dally
An online marketplace, Groundfloor brings together individual investors looking for short-term lending investments and borrowers looking for short-term financing for their real estate projects. The borrowers get access to more flexible, faster and cheaper capital than a traditional bank or hard-money lender.
Investors get access to short-term, high-yield investments offering returns that typically range between 8% and 15%, depending on the risk grade of the specific loan.
Groundfloor loans
It all starts with the borrower looking for a loan to finance a real estate rehab or renovation project. Groundfloor reviews the details and conducts the due diligence on the deal and the borrower.
Once a loan is fully funded, the borrower draws money according to an approved schedule and completes the renovation or rehab project. The property is then listed, sells and eventually closes. After closing, the borrower repays Groundfloor, and a lump sum of principal invested plus interest earned is deposited into the account of all investors who participated.
Borrowers in 35 states can get loans for $75,000 to $750,000 at rates between 2.57% and 4% (for a Grade A loan on a three-month term with a monthly payment). Groundfloor can fund up to 100% of the cost of a project and up to 70% of the after-flip value based on experience.
And borrowers can choose to make no payments during the term of the loan. These terms are very favorable compared to hard-money lenders that typically charge 12%–15% interest and require a more stringent loan-to-value (LTV) ratio.
How does Groundfloor work?
First, you create an account on Groundfloor’s website or download the mobile app and fund your Groundfloor account by linking your checking or other designated account. You transfer funds and as of All 2023, once your Groundfloor account is funded, your money is automatically invested into an array of loans, giving you instant diversification that can yield repayments in as little as seven days.
Technically, you are investing in a Limited Recourse Obligation (LRO), which is a debt security issued by Groundfloor and qualified by the Securities and Exchange Commission (SEC). Each LRO's performance is determined by the performance of the borrower's loan.
Once you invest in an LRO, you become a creditor to Groundfloor. They repay the LRO when the borrower repays the loan in which you've invested.
Groundfloor is registered with the SEC to lend in 35 states, and Washington, D.C. Note: Groundfloor can lend in 35 states but anyone from the U.S. can invest and you can even invest internationally (with some limitations).
The Groundfloor due diligence team consists of executives with real estate experience, and they carefully vet each borrower and loan application. But there are no guarantees; if you buy into a loan and the loan goes into default, you could lose your entire investment.
However, Groundfloor is almost always in a first-lien position to help mitigate your risk as much as possible. More often than not, investors still see a return on these defaulted loans, albeit at a lower rate. Foreclosure is a last resort as a solution for defaulted loans.
When the money is in the loan, it’s not liquid. You can’t sell it to another investor, and you can’t cash it out. Once the principal is returned, you’ll receive interest on top of the loan. You’ll have the option to invest again or withdraw the cash to your bank account.
So far, Groundfloor has lent over $1 billion across 4,879 projects. To date, investors have invested more than $1.3 billion and received average returns of 10%.
Investing in private real estate without being an accredited investor is arguably the single biggest advantage of Groundfloor. To be clear, a few other sites — such as Modiv and Fundrise — allow non-accredited investors to invest in private real estate via real estate investment trusts (REITs). Fundrise, for example, runs a private REIT that allows investors access to private real estate. The difference is that Groundfloor offers direct access to private real estate, rather than investment in a particular management company. Groundfloor also only requires a minimum investment of $10 and doesn’t charge investors any fees.
Groundfloor fees
One advantage of Groundfloor is that it doesn't charge investors any fees. Instead, it makes money by charging borrowers with fees so you don't have to worry about management or trading fees that exist with most other platforms.
How to contact Groundfloor
You can reach Groundfloor's investor support team by emailing [email protected] or by calling 404-850-9223. Hours are 9:00am to 5:00pm EST, Monday through Friday.
Best Groundfloor alternatives
Groundfloor provides non-accredited investors with a simple way to invest in real estate with little money. The platform also has a strong track record in terms of annual returns.
However, investing in real estate debt is riskier than some types of investing because borrowers can default. Groundfloor's $10 minimum helps reduce risk since you can spread out your capital across numerous projects. But the risk of default still remains.
If you prefer equity-based investing or want some other debt-based investing options, there are several Groundfloor alternatives worth considering.
| Highlights | Fundrise | PeerStreet |
|---|---|---|
| Rating | 4.5/5 | 4.5/5 |
| Minimum investment | $10 | $1,000 |
| Account fees | 1%/year | 0.25% - 1.0% setup fee |
| Private REIT | ✅ | ❌ |
| Reviews | Read Review | Read review |
| Links | Learn more | Learn more |
Fundrise is our favorite Groundfloor alternative since it also has a $10 investing minimum. The main difference is that Fundrise focuses on commercial and residential equity-based investments. You earn quarterly dividend payments and from potential share appreciations. There's also a 1% annual management fee unlike Groundfloor.
This is a testimonial in partnership with Fundrise. We earn a commission from partner links but all opinions are our own.
Groundfloor review summary
Groundfloor is a fractionalized real estate lending and investing platform and mobile app for real estate projects open to all investors. The low minimum investment opens up direct access to private real estate deals to anybody — and allows you to spread your risk among many individual projects.
If you’re willing to take on more risk for somewhat higher returns, Groundfloor might be a great investment for you. Investors who don’t need liquidity and are willing to experiment should look at this platform. It’s a passive way to get into the fix-and-flip action of real estate investing. But make sure you understand the risks of crowdfunding platforms and do your due diligence before investing.
If you’re an accredited investor, you can of course invest on Groundfloor’s platform and mobile app, but there are lots of other platforms that you should also look into.
However, if you're interested in investing in real estate projects passively but are not accredited, it’s worth your time to check out Groundfloor. It's one of the few apps that accepts non-accredited investors — and the only site that allows non-accredited individuals to invest in private real estate deals rather than REITs. And the minimum investment of just $10 provides access to diversification even if you have only a small amount to invest.
Ruth Lyon is a freelance contributor for Moneywise.
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