Copyright 2022 - Donny Widjaja
Groundfloor is the first real estate investment platform that allows non-accredited (aka. don't need to have a minimum $200K annual income or minimum net worth of $1 million) and accredited investors alike to participate directly in real estate investment loans for as little as $10.
Groundfloor focuses on providing short-term high-yield secured loans backed by real estate. Typical loans have returned 10 percent annually on a six to 12-month term.
If you want liquidity on your investment, Groundfloor is NOT the best fit for you. Each loan is tied to a term. Even though Groundfloor shows the mature date of the loan, the borrowers might not be able to fulfill their obligation to repay Groundfloor on the agreed date.
If liquidity (ability to cash out at any time) is high in your priority, this is not the best investment platform for you.
If you're looking for a guarantee on ROI, Groundfloor offers Groundfloor Notes.
These are not the same as LROs (aka. Limited Recourse Obligation that we will discuss later) which is a debt security that GROUNDFLOOR submits to the SEC for qualification on their platform.
There are 3 terms available for Groundfloor Notes:
If you're looking to invest in high-yield, short-term, low entry-cost passive income, then Groundfloor is the perfect match for you.
Groundfloor currently between 40 to 60 different loans (LROs) with various rates on the return on investment, as you can see in the picture below.
If you think Groundfloor is the right investment platform for you, let's continue.
Brian Dally and Nick Bhargava founded Groundfloor in 2013.
Company's LinkedIn profile: https://www.linkedin.com/company/groundfloor-com/
Groundfloor's headquarters is located on
600 Peachtree St, Suite 810, Atlanta, GA 30308 (inside the Bank of America Plaza)
In my humble opinion, the current 3-stars rating for Groundfloor (as of October 2021) in the Better Business Bureau is not an accurate representation of the company. However, I feel it's' only fair to show the good and bad sides of the company in this post so you can make your judgment and see if Groundfloor is the right investment tool for you or not.
Groundfloor has partnered with SeedInvest to launch their first-ever open preferred equity raise and has raised over $7 million.
Groundfloor has won quite a few awards and received mentions in a variety of hot tech company lists.
As one of the investors since 2019, I can confirm the company is genuine and legit.
This is an example of the email I received when I got the repayment for one of my LROs.
The main thing you need to know is that before the offering every loan is pre-funded by Groundfloor after a thorough vetting of the borrower's experience, creditworthiness, and business plan, plus an assessment of the property value on an as-is and as-improved basis.
What it means for an investor like you and me:
In addition to showing you how Groundfloor works, I would like to share what I think of the process from my perspective as an investor.
1. Proprietary Algorithm Grades Loans.
Since this is a proprietary algorithm, I can't tell you exactly how it works. However, these are some of the criteria they used for grading:
a. Loan to ARV (After Repair Value)
b. Quality of Valuation Report
c. Skin-in-the-Game (borrower's own money in the project)
e. Borrower Experience
f. Borrower Commitment (full-time or part-time job)
2. Groundfloor funds loans
Groundfloor funds the loan using the money they collected from the promissory notes or their own money.
As an investor, I see this as a good thing because Groundfloor is not just the middleman who takes money from borrowers and investors. Groundfloor actually put their own money (Skin-in-the-game) or the money they borrowed from investors, so they have all the motivation to get their money back.
3. LRO (Limited Recourse Obligation) security created from loans.
4. Investors allocate into LROs
5. The borrower repays the loan to Groundfloor
Groundfloor does not guarantee a return on your investment.
Yes, Groundfloor did all the work to verify and grade the risk of the loan. However, as an investor, there is a risk we might not get our money back, or the payment gets delayed because the borrower can't make the payment on time.
6. Investors repaid on LROs
Yeah.... we get our money back with interest.
Groundfloor does NOT charge investors any fee.
While this article focuses on becoming an investor at Groundfloor, I want to mention that Groundfloor charges borrowers a fee between 2% and 4.5% of the principal amount, $250 borrower application fee, and $1250 closing cost, and possibly additional costs.
As investors, you and I don't have to pay for anything to invest at Groundfloor.
You can take advantage of three different types of investments at Groundfloor.
LRO (Limited Recourse Obligation)
When the borrower (primarily real estate developer) asks to borrow money, Groundfloor creates a first lien loan backed by the underlying real estate asset and lends the money to the borrower. A first lien is the first to be paid when a borrower defaults and the property or asset was used as collateral for the debt.
Groundfloor then works with the U.S. Securities & Exchange Commission (SEC) to convert the loan into securities sold to investors (LROs).
You choose which projects to invest in and how much to invest in each project. 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, and each LRO will be repaid to investors from the cash the borrower uses to repay the loan.
You can buy an LRO for as low as $10.
Groundfloor notes are promissory notes between you (an investor) and Groundfloor. These notes offer shorter terms and more stable investments. The money collected from these notes is used to pre-fund the loans before converting them to LROs.
You can choose to invest in a 1-month, 3-months, or 12-months term with a minimum investment of $1,000.
An IRA is a retirement account that you set up at a financial institution that allows you to save for retirement with tax-free growth or on a tax-deferred basis. Groundfloor partnered with Forge Trust, one of the oldest custodial trust companies in the industry, to manage your IRA account to comply with all the tax regulations.
You are still in charge of selecting which LROs to purchase from Groundfloor for your IRA accounts.
I would like to invite you to invest with Groundfloor because this is clearly the best platform that allows you to have passive income with high yield interest, even if you don't know anything about real estate investment.
If you have further questions about Groundfloor, feel free to send a message to me, or check our Groundfloor FAQs page.
If you open your new Groundfloor account using the link from this site, we both will get $10 towards Groundfloor investment.