Copyright 2022 - Donny Widjaja

30 December 2021

Published on

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.

 

 

Is Groundfloor the Right Investment Platform For You?

 

Is Liquidity Important To You?

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.

 

Are You Looking For a Guaranteed Return?

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:

  • Term: 30-days, annual interest: 3%, minimum: $1,000
  • Term: 90-days, annual interest: 5%, minimum: $1,000
  • Term: 12-months, annual interest: 7%, minimum: $1,000

 

List of Groundfloor Notes

 

Are You Looking For High-Yield and Short-Term Investments?

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.

 

List of Groundfloor Loans

 

If you think Groundfloor is the right investment platform for you, let's continue.

 

 

Is Groundfloor a Real and Legit Company?

 

Who are the founders?

Brian Dally and Nick Bhargava founded Groundfloor in 2013.

Company's LinkedIn profile: https://www.linkedin.com/company/groundfloor-com/

 

Where is Groundfloor's headquarters?

Groundfloor's headquarters is located on

600 Peachtree St, Suite 810, Atlanta, GA 30308 (inside the Bank of America Plaza)

 

Groundfloor HQ map

 

Better Business Bureau

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.

 

SeedInvest

Groundfloor has partnered with SeedInvest to launch their first-ever open preferred equity raise and has raised over $7 million.

 

Awards and Mentions

Groundfloor has won quite a few awards and received mentions in a variety of hot tech company lists.

  • Ranked in the top 10% (#402) on Inc. Magazine's 2020 Inc. 5000 List
  • Ranked #102 in Deloitte's Technology Fast 500 2020.
  • HousingWire Tech 100 Award
  • 2019 Fintech Breakthrough Award for Best Crowdfunding Platform
  • Benzinga Global Fintech Awards Finalist
  • Atlanta Business Chronicle Pacesetter Award
  • Technology Association of Georgia Top 10 Most Innovative Companies
  • Technology Association of Georgia's Fintech ADVANCE Award
  • Atlanta Inno's 50 on Fire Award
  • TiE Atlanta Entrepreneur of the Year Award
  • Golden Bridge Award for Startup of the Year

 

Best Crowdfunding Platform Award

 

My Personal Experience

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.

Groundfloor Repayment email notification

 

 

How does Groundfloor work?

 

TL;DR (Too Long Didn't Read)

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:

  • Groundfloor is doing all the work to make sure they can get their money back from the borrowers.
  • After Groundfloor loaned out their money to the borrower, they created a pool (LRO) for investors to participate in the loan.
  • When the borrow returns the money, Groundfloor will split the interest earned to all investors based on the amount you put in. Groundfloor does not take any fees from investors.

 

The Full Lifecycle of Loans at Groundfloor

 

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.

 

These are the lifecycle of loans in Groundfloor

 

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)

d. Location

e. Borrower Experience

f. Borrower Commitment (full-time or part-time job)

Loan Grade Factors

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.

 

 

What are Groundfloor's fees?

Groundfloor does NOT charge investors any fee.

  • No fee for depositing money from your bank to Groundfloor.
  • No fee for withdrawing money from Groundfloor to your bank.
  • No application fee.
  • No charges to invest in a loan, so you should diversify your investments into multiple properties across the regions.

 

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.

 

 

What investments are available in Groundfloor?

 

You can take advantage of three different types of investments at Groundfloor.

  • LRO (Limited Recourse Obligation)

  • Groundfloor Notes
  • IRA

 

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

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.

 

IRA

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.

 

Invest With Groundfloor Today

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.

 

Groundfloor: My Real Estate Passive Income Secret