Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.
- Groundfloor offers real estate debt investments to non-accredited, accredited, and non-US investors.
- Investors won't have to pay any fees, but you'll need at least $10 to get started.
- Groundfloor is best for passive investors looking to profit from short-term, high-yield private real estate debt investments.
- Click here to open an account with Groundfloor .
Overall rating
| 5.00 |
| 4.25 |
| 4.50 |
| 4.00 |
| 5.00 |
| 3.75 |
| 4.42 |
Is Groundfloor right for you?
|
Founded in 2018 by Brian Dally and Nick Bhargava, Groundfloor says it's the first real estate investment platform to offer SEC-qualified (under SEC regulation A+) real estate note investments. It serves non-accredited investors, US-based and non-US individuals, and accredited investors (accredited investors are individuals with a minimum net worth of $1 million or annual salary above $200,000).
Groundfloor is best for passive investors looking to profit from short-term, high-yield private real estate debt investments. It offers several notable features, including shorter six to 18-month investment terms (many platforms, like Fundrise and Diversyfund , require a five-year minimum), a proprietary loan-grading algorithm, automated features, and investment options for borrowers and brokers.
Popular Articles
| 4.42 out of 5 |
| None |
| $10 ($5,000 minimum transfer for non-US residents) |
| Receive $10 investment credit when you refer friends. |
Not sure if Groundfloor is right for you? Keep reading to see how it compares to other real estate platforms.
How does Groundfloor compare?
|
Min. investment $10 |
Min. investment $0 ($5,000 for Roofstock One) |
|
Fees 1% (additional $125 for IRAs) |
Fees $500 or 0.5% of the contract price for offers on properties |
|
Investment choices Electronic real estate investment trusts (REITs), electronic real estate funds, and Fundrise IPOs |
Investment choices Single-family rental properties |
Groundfloor, Fundrise , and Roofstock all offer access to real estate investments. However, Fundrise is the best choice for passive investors in search of automated REIT portfolios.
If you're looking to earn monthly income from single-family rental properties while utilizing the assistance of a Roofstock property manager, the Roofstock platform could be right for you.
Groundfloor, on the other hand, is ideal for investors in search of low-cost real estate investments with more liquidity .
Ways to invest with Groundfloor
Limited Recourse Obligations (LROs) and notes
Groundfloor says it currently supports investing from personal accounts, LLCs, trusts, For Benefit of (FBO) accounts, and IRAs . When it comes to investment types, the company offers two choices: LROs and notes.
Here's how it works. Groundfloor offers financing to real estate developers, or borrowers, who need funding for fix-and-flip real estate projects. After providing the loan (which typically ranges from $75,000 to $1 million), Groundfloor collaborates with the SEC to convert the loans into qualified LROs, or fractional real estate debt investments.
As long as you meet the required $10 account minimum, you can purchase these investments in any of the states in which Groundfloor lends. According to its website, Groundfloor is the first lien on each loan (meaning it's the first to be repaid if the borrower defaults), and each loan is backed by the underlying real estate project(s). These investments return 10% on average.
Groundfloor also gives you the power to decide how much to invest in each private real estate loan, and the company uses a proprietary grading algorithm that rates loans using a grade scale of A-G. The company says grade A loans have lower risk, lower expected returns, lower expected loan losses, and lower interest payments.
Grade G loans, on the other hand, have higher risk, higher expected returns, higher expected loan losses, and higher interest payments, according to Groundfloor's website. If you're unsure about how the interest rates vary for different grades, consider Groundfloor's borrower rate minimums:
- Grade A: 5%
- Grade B: 7%
- Grade C : 9.5%
- Grade D : 13%
- Grade E: 16.5%
- Grade F: 20%
- Grade G: 24%
*Note: These are the minimum rates Groundfloor must charge borrowers for each loan grade.
Like the LROs, Groundfloor's notes (notes are real estate debt investments that utilize a repayment structure similar to bonds ) are also short-term investments, but it says these investments are secured by a pool of Groundfloor-originated loans that haven't yet been funded as LROs on its platform.
Its notes are typically available in 30-day, 90-day, or 12-month terms. These products offer lower returns than its LROS, but they also provide less risk and shorter terms, according to Groundfloor.
Finally, if you're more of a hands-off investor, Groundfloor also provides an auto investing feature that allocates your money to real estate projects that align with your risk tolerance. Its automated features used to be only available to accredited investors through the Anchor investor program, but now both accredited investors and non-accredited investors can take advantage of the tool.
Self-directed IRAs
Groundflooor also lets you invest in real estate through traditional, Roth , SEP, SIMPLE, and rollover IRAs. In fact, the investment app is currently waiving all fees on IRAs through the first quarter of 2021. Groundfloor says it will offer investors 90 days notice before it resumes its usual fees for IRAs.
You can fund IRAs through one of three ways:
- Contribute using a check
- Transfer funds from another IRA
- Rollover money from a qualified retirement plan such as a 401(k) or 403(b)
These retirement accounts are available both for individuals and businesses. It's important to note, though, that you'll only be able to invest in LROs and notes.
Borrower, broker, and shareholder offerings
Groundfloor also provides investment options for borrowers, brokers, and shareholders.
If you're a borrower or real estate developer interested in fixing and flipping real estate projects, Groundfloor offers six-, nine-, and 12-month terms with loans ranging between $75,000 and $1 million. Rates for these loans start at 5.5%, and Groundfloor doesn't require borrowers to have a minimum transaction experience.
In order to qualify, you must operate under an active LLC or corporation. In addition, Groundfloor only accepts projects that are single-family residential properties (with 1-4 units), and the property must be located in a state in which Groundfloor actively lends, according to its website.
There are just a few other things to note:
- You'll need to have a credit score above 600
- Groundfloor rolls mortgage points into closing costs , you can defer interest payments until the loan repays
- You can receive up to 100% loan-to-cost and up to 75% loan to after repair value (ARV represents the ratio between the loan amount and the value of the property after you've completed all repairs)
The reason borrowers don't have to provide interest payments until the loan repays is because of Groundfloor's true deferred payment option. While the company also offers a monthly payment option , the deferred option basically allows you to push off your interest payments until your loan ends. This could be a more attractive option for developers who don't want to pay monthly interest payments.
As for its broker offerings, the investment app's Preferred Broker Program gives real estate brokers the option to broker loans with Groundfloor for clients interested in investing (Groundfloor also has a referral broker offering that gives brokers one point for each client they refer).
On the shareholder side of things, Groundfloor's partnership with SeedInvest offers investors the opportunity to buy stock in Groundfloor itself.
Stairs mobile app
On September 22, 2021, Groundfloor launched a mobile app, Stairs, that lets you invest and save on the go. The app secures your money with short-term real estate debt notes, while providing 4-6% in annual interest.
Plus, you'll only need a minimum of $1 to invest, and you can trade without fees and make withdrawals without penalties. Stairs also offers the following:
- Automatic reinvesting : Stairs reinvests your earned interest every five days.
- Round Ups: Stairs can also add an additional 1% in interest by rounding your purchases up to the next whole dollar. It adds the difference between the original purchase price and final price to your Stairs account.
- Recurring transfers: If you turn on monthly recurring transfers, Stairs gives you an additional 1% in interest.
- Savings goals: You can also make sure your money and investments are on track by creating savings goals.
- Portfolio projections: Stairs analyzes your daily portfolio growth to help you project future balances.
The app also lets you transfer up to $5,000 per week, giving you more interest as you invest more money. Funds can take up to three business days to deposit in your account. It's available on iOS and Android devices.
Is Groundfloor trustworthy?
Groundfloor currently has an A+ rating with the Better Business Bureau . BBB ratings range from A+ to F and reflect the bureau's opinion of how well a company interacts with its customers. Therefore, an A+ exhibits of high level of customer trustworthiness.
Before issuing ratings, the bureau also considers a company's time in business (including the type of business it is), customer complaint history, licensing and government actions, and advertising issues.
But its ratings don't absolutely ensure a company will be reliable or perform well.
This is why it's important to also do your own homework before setting up an account. Groundfloor's record shows that it has closed two complaints in the last three years.
Via PakApNews