Groundfloor Review 2023 – 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 rehabbing a house. Since 2012, real estate crowdfunding platforms have emerged to offer a variety of more passive options for investing in real estate.
Commissions & Fees - 10
Customer Service - 8
Ease of Use - 8.5
Diversification - 8
Diversification - 8
Due Diligence - 9
Groundfloor Features
| Minimum Investment | $10 |
| Account Fees | No Fees for Investors |
| Time Commitment | 3 Months |
| Accreditation Required | |
| Private REIT | |
| Offering Types | Debt, Equity, Preferred Equity, Direct Ownership |
| Property Types | Commerical, Residential, Single Family, Foreign Investors |
| Regions Served | 8 states plus Washington, D.C. |
| Secondary Market | |
| Self-Directed IRA | |
| 1031 Exchange | |
| Pre-vetted | |
| Pre-funded |
Pros & Cons
pros
cons
What Is Groundfloor?
If you’ve been looking at real estate crowdfunding 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 open to anyone with as little as $10 who is interested in loaning money for real estate fix-and-flip 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.
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 6% and 14%, depending on the risk grade of the specific loan. Groundfloor currently has some Grade G loans on their platform with projected returns as high as 25%. Just remember, the higher the projected return, the higher the risk.
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.
If Groundfloor decides to underwrite the loan, it is assigned a loan Grade A through G and a corresponding rate of return wherein Grade A loans are the least risky (with the lowest rate of return) and Grade G loans are the most risky (with the highest rate of return). Factors that Groundfloor uses to grade a loan and assign a rate include: location, lien position, borrower commitment, skin-in-the-game and others. The final rate is adjusted around factors like loan size, loan term, personal guarantee, history with Groundfloor, credit worthiness and other factors.
Grade A loans offer returns of around 6%, and Grade G loans generally offer returns of up to 25% with each letter grade offering a rate falling in between:
- Grade A: 6%
- Grade B: 8%
- Grade C: 11%
- Grade D: 14%
- Grade E: 18%
- Grade F: 21%
- Grade G: 25%
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 23 states can get loans for $75,000 to $2 million at rates as low as 5.4% (for a Grade A loan on a three-month term with a monthly payment). Groundfloor will fund up to 90% of the cost of a project and up to 70% of the after-flip value.
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 set up and fund your Groundfloor account by linking your checking or other designated account. You transfer funds and once your Groundfloor account is funded, you choose which project(s) you wish to invest in. You can browse the summary page of loans being funded on the platform and then view more information on each loan's detail page. You decide when, how much and where to invest.
Once the deal is available for funding, investors have up to 45 days to fund the loan. Usually the loan is for a term of six to 12 months, but it could be shorter or longer.
Technically, you are investing in a Limited Recourse Obligation (LRO), which is a debt security issued by Groundfloor. The LRO you are buying corresponds to the project that you have chosen to fund. Each LRO's performance is determined by the performance of the borrower's loan.
Once you purchase 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 Securities and Exchange Commission (SEC) to do business in California, Georgia, Illinois, Maryland, Massachusetts, Texas, Virginia, Washington, and Washington, D.C. The company plans to expand into more states and eventually go nationwide.
The Groundfloor due diligence team consists of executives with real estate experience, and they turn down most people who plan to borrow from them. But there are no guarantees; if you buy into a loan and the loan goes into default, you could lose your entire investment.
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 $38 million across 318 projects. To date, investors have received average returns of 10.5%.
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 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.
How to Contact Groundfloor
You can reach Groundfloor's investor support team by emailing support@groundfloor.us or by calling 404-850-9223. Hours are 9:00am to 5:00pm EST, Monday through Friday.
Best 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 |  |  |  |
| Rating | 9/10 | 8/10 | 9/10 |
| Minimum Investment | $10 | $25,000 | $1,000 |
| Account Fees | 1%/year | None | 0.25% - 1.0% setup fee |
| Private REIT | |||
If you have more capital to invest, you can also consider CrowdStreet. This crowdfunding platform specializes in commercial real estate deals and funds. There's a $25,000 minimum investment requirement for most deals, but it provides more investing selection than Groundfloor.
Finally, you can also invest in real estate debt through PeerStreet's marketplace. You get more individual deals on PeerStreet than Groundfloor, although you have to pay fees as an investor which is a small downside.
This is a testimonial in partnership with Fundrise. We earn a commission from partner links on Investor Junkie. All opinions are our own.Summary
Groundfloor is a P2P real estate lending platform for fix-and-flip properties open to non-accredited 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, but there are lots of other platforms that you should also look into.
However, if you interested in investing in fix-and-flip properties passively but are not accredited, it’s worth your time to check out Groundfloor. It's one of the few sites 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.
I’m not really happy with GF. I had login problem for few weeks in March, then they found the problem that my account linked to other person’s account. I got my GF account back but my money from GF account transferred to someone else’s bank account at this period of time. They wanted me to file a police report for wire fraud by myself. I keep ask that I want to talk supervisor but couldn’t contact. It seems like I lost my money. I can’t trust their security system and their team anymore.
I have had very mixed results, to the point I stopped adding new funds. Out of 12 loans, 3 went into default and one is in a workout phase but that has been going on for some time. That’s a pretty weak track record. By all appearances the workout is progressing and could eventually be repaid. Of the three defaults, honestly it appears as though none of them had a chance from the start. One looks like a straight mortgage fraud situation where they never even started the work. The others seem to have barely gotten off the ground before updates stopped and they were listed in default. Now I’m just waiting to see what recovery comes from foreclosure. The periodic progress updates on the various loans are insufficient from my perspective. The bigger concern is you have minimal ability to evaluate the person taking out the loan. For example, one one default the borrower experience score is a 5 out of 5, yet it went into foreclosure very early in the process after demolition and some roof work was done. Not enough transparency for me to use this as anything other than a source of amusement for small sums.
I have been using them for over 3 years and they proved out to be a fantastic platform. Simultaneously, I have been experimenting with other “p2p” lending (LendingClub) that don’t come close. Loans are collateralized and worst case scenario you lose time, not money. While liquidity is not its forte GF, you can achieve decent flexibility by diversifying. Also loans tend to repay quickly once the house is flipped. I can only recommend them.
How does one withdraw funds back to their bank? For that reason, I’m apprehensive about investing with them.
You link your bank account and simply click to transfer funds from your bank account and your Groundfloor cash account. Same for deposits to Groundfloor.
I am somewhat puzzled by your review. The review that you have written for Fool, you give it a significantly less rating and that review was a few months prior to this one. So my question is, how much has this company changed in the last few months that would cause you to award a more positive review?
Absolutely agree. The investment I made had matured in April 2020. Since then I have repeatedly requested the funds to be released. Groundfloor has completely stalled out. At this point, I do not recommend Groundfloor as an alternative investment.
In 2020, due to the pandemic or whatever confounding economic factors, Groundfloor has totally stalled out. By that, I mean that repayments to investors on loans are 6 months or more behind schedule AND COUNTING. Most if not all loans are not getting repaid now for a period of 6 months or longer. You have decide if the time lost on waiting for Groundfloor repayments is better spent in other investment vehicles. Groundfloor has not done a good job of following up with borrowers for timely updates (some loans have not seen updates since February or April).
Not true. Groundfloor has not “totally stalled out” and it is not at all the case that “most if not all loans are not getting repaid now for a period of 6 months or longer.”
Each week the company publishes repayment and asset management activity on its blog. For example, here is last week’s post, containing detailed, loan-specific information and aggregate metrics:
https://blog.groundfloor.com/asset-management-weekly-update-august-9-15-2020
In fact, as of last week, Groundfloor had repaid 166 loans for over $25.4 million since April 1, 2020. Of that, 49 loans and $7.3 million was repaid in the past four weeks, and 11 loans and $1.5 million in the past week alone. The very week you posted your defamatory screed, the company reported $3.2 million repaid on 29 loans.
On their investor Facebook group page, the company says it is aware that it did fall behind on communicating updates for a handful of loans, but they have since taken steps to remediate that situation for those loans as well as to improve our investor update processes to catch and intervene in such situations.
GF has a self-directed IRA. I know because I have one. Very happy overall with the performance of my portfolio with them. There are defaults, but they are quite good with establishing “workout” arrangements with developers and getting investors’ money back with a return.
Ruth. You wrote ——If you’re an accredited investor, you can of course invest on Groundfloor’s platform, but there are lots of other platforms that you should also look into.
Might I please inquire which ones these are. Thanks.
Hi Chris,
See our website compare tool: https://investorjunkie.com/real-estate/compare/
As a year long investor with GF I am not so happy. Over the last year I invested in 80+ properties. So far about 50 have paid off. Many paid off early – significantly reducing the expected money earned. Several went into default but were eventually cured. Currently I have about 40 properties with about 10 in default. GF suffers from poor pre investment (and during investment) due dilligance. Several of the properties I invested in seemed to have borrowers who did nothing on the properties and used refinancing to get GF their money. Several properties seemed to have been grossly overvalued and now the properties are not selling, extending the time until I see my money. Several borrowers said they were refinancing but when the date came… nothing happened and GF had to be prompted to check up on it. Management seems to have a let them eat cake attitude as to current investors — now that they have your money your not the priority. Marketing and getting new people to invest is the priority. Any money I had in GF I am pulling out as soon as it is available to me.
I was pleased with GF during “proof of concept” (3-4 years ago) when most loans were in the Atlanta area. When they expanded into other states, couldn’t show that they could underwrite and originate good loans 5-10 states away, and defaults started increasing, I stopped investing.
I’m at a loss as to why anyone was defaulting on the loans,since its my understanding that the land is the collateral for the loan. I can understand if there are some problems with the overall management of GF in the areas of overseeing the property flippers. Even in the area of property appraisals, but inevitably those who contributed money to make the loans should eventually be made whole,but did you at least make a few points on the loans you financed?
This sounds really good. I was looking at Fundrise for my Self Direct IRA then I saw a comment about Groundfloor. I decided to see if there was a review on it and sure enough there was.
I think GF would be something I could invest in on the side since they do not allow Self Direct IRA’s. I’m really glad there are now P2P opportunities for regular investors like me. But, I do believe you need to educate yourself before investing.