Автор: | Open to Non-Accredited Investors? | Yes |
|---|---|
| Fees | None for investors |
| Account Minimum | $100 |
| Investment Selection | Real estate debt |
| Dividend Frequency | Monthly, depending on loan terms |
| Website Transparency | Good in terms of fees and reporting on investments, poor in terms of liquidity |
| Available Customer Support | Phone, email, customer service form |
How Does Groundfloor Work?
Groundfloor connects individuals looking to invest in real estate loans to people and companies wanting to borrow for real estate projects. Groundfloor raises money from many individual investors to fund these loans. It then creates and manages the loans. As an investor, you pick between the different projects. You lend the funds and then collect repayment of your money plus interest.
You aren’t investing in the real estate properties themselves or taking part ownership of a project. You’re only making a short-term secured loan backed up by the property. If the borrower defaults, Groundfloor tries to get your money back from the borrower. If that doesn’t work, it will foreclose on the property. However, repayment is not guaranteed.
Groundfloor offers three main investment options:
Limited Recourse Obligations (LROs) allow you to lend directly to real estate borrowers. You see the creditworthiness of each possible loan, the interest rate, and the expected repayment schedule. Someone with a higher credit score is more likely to repay the loan. In exchange, borrowers with a worse credit rating pay the investors a higher interest rate and return. Groundfloor says that, on average, its investors earn 10% a year funding real estate loans.
Some loans pay interest monthly. Others wait until the end to pay you your money back plus interest as a lump sum. Once again, this is listed on the loan terms before you sign up.
Auto Investing is a feature on the Groundfloor app. This function can automatically pick your real estate loan investments, taking the work out of your hands. That way, you don’t have to constantly track the loans and find new opportunities for your money.
Groundfloor Notes earn interest and are secured by a pool of real estate loans. Groundfloor Notes typically have a shorter holding period and less risk than LROs because they are backed by multiple borrowers rather than just one. However, the return is usually lower too.
You can access these investments through your individual retirement account (IRA). Groundfloor can set up a self-directed IRA for real estate investing if you don’t have one.
Key Features
Groundfloor’s well-designed platform makes investing in real estate debt easy. By understanding the key features, you can see how this platform compares to other real estate crowdfunding companies.
Groundfloor is available to both non-accredited and accredited investors. You don’t have to qualify based on your income and net worth. Many real estate crowdfunding platforms investing directly in real estate, like Acretrader and Cityvest, only accept accredited investors. Groundfloor also accepts investors from anywhere in the world.
You can invest through Groundfloor with a minimum of just $100. That minimum is the same for both accredited and non-accredited investors. This is on the low end for real estate crowdfunding. In comparison, Realtymogul requires $5,000 and Yieldstreet requires $10,000.
As an investor, you decide how to allocate your money across the Groundfloor real estate loans. You can customize the portfolio, picking the loans off the Groundfloor platform. Alternatively, you can have the Auto Investing tool automatically curate a portfolio. The tool usually sets up a portfolio of between 50 to 80 projects. By spreading your money across many loans, you minimize the loss should a borrower default. In other words, you don’t put all your eggs in one basket.
When you collect interest and dividends from your Groundfloor investments, you can set up your account to automatically reinvest in new loans. The Auto Investing tool also continually reinvests the earnings into new projects.
Fees
There are no fees for Groundfloor investing. You don’t owe platform fees, investment management fees, withdrawal fees, or penalties for cashing out. Groundfloor instead makes money off borrowers taking out the loans.
Groundfloor charges roughly 2.5% to 4% of the principal to borrowers, as well as possible closing costs and loan application fees. But as an investor, you don’t owe these. You lend money and collect the interest plus repayment of the principal. The only way to lose money is if the borrower defaults and can’t repay the investors.
Transparency
Our researchers considered how transparent Groundfloor is about releasing information to potential investors about its platform and system. Groundfloor is very transparent about its fees. This is easy because investors do not owe any fees. However, our reviewers found Groundfloor was less clear in explaining how it works for liquidity/access to your money in an investment. It was also not transparent in explaining how you could receive reports about the ongoing performance of your investment, including the frequency of updates.
Liquidity
Since real estate is a long-term investment, crowdfunding platforms can have restrictions on getting your money back. Groundfloor is no exception. If you invest in a real estate loan, you only get your money back according to the repayment schedule. Groundfloor does not offer a redemption option for cashing out early. However, the typical Groundfloor loan only lasts six to 18 months. You get your money back faster than investing directly in real estate. Diversyfund and Fundrise can take five years or longer to pay you back.
Groundfloor does not have any restrictions on investments. You can invest as much as you want into its loans.
Investment Selection
Groundfloor does not offer much variety for the investment selection. It specializes in private real estate loans, and that’s all it offers. Groundfloor does not provide other real estate investments that let you buy ownership into projects. If you’re looking to invest in real estate through real estate investment trusts (REITs), pooled funds, or real estate IPOs, you’d need to look elsewhere. Diversyfund, Fundrise, and Yieldstreet are possibilities.
Groundfloor also does not invest in other types of alternative investments like art, hedge funds, and private equity. Groundfloor focuses on what it knows best: private debt lending to real estate projects.
Sectors and Domains
Groundfloor creates loans for residential and small commercial real estate projects. These include office buildings, apartment buildings, and single-family homes. Groundfloor does not offer loans for major industrial projects or significant commercial developments, like self-storage units.
Groundfloor offers two programs to borrowers. They provide a fix-and-flip program, where borrowers get a short-term loan to renovate, expand, or improve a property before selling shortly after. Groundfloor also offers new construction loans to developers and builders. As an investor, you see the loans Groundfloor is raising money for. You pick the types of borrowers who you think offer the best return and the highest chance of paying you back.
Educational Offerings
The educational offerings at Groundfloor are bare-bones. Its blog contains educational articles, market reports, and project spotlights. It also has an FAQ page answering the most common questions. The content is basic and not well-organized to sort through. Finally, Groundfloor runs a podcast. Groundfloor doesn’t offer courses on investing in real estate loans, live training, or other content types, like videos.
Groundfloor’s website does a good job explaining how its service works. However, companies like EquityMultiple and Yieldstreet have more extensive educational offerings if you want to learn more as a new real estate investor.
Groundfloor’s educational offering includes:
- FAQs
- Investment research and analysis
- Blogs/articles
- Podcast
Customer Support
Groundfloor’s customer support options are decent. You can call for help Monday to Friday from 9 a.m. to 5 p.m. ET. Phone support is a nice feature for a real estate crowdfunding platform. Many tech-focused companies like Crowdstreet and Fundrise only offer online support. Groundfloor also answers questions by email and through a customer service form. However, it does not offer live chat or a chatbot tool.
Groundfloor has a 4.0/5.0 score on Trustpilot and most reviewers seemed pleased with the customer service. Reviews mentioned that the customer service reps were friendly and answered questions quickly.
Groundfloor’s customer support offering includes:
- Phone: Weekdays, 9 a.m. to 5 p.m. ET
- Online submission form
The Bottom Line
Groundfloor is a solid option if you want to invest in real estate loans. Groundfloor focuses on this one specific part of the real estate crowdfunding ecosystem and does it well. As an investor, you pay no fees to use Groundfloor, don’t need to meet accredited standards, and can get started with just $100. Groundfloor’s loans usually return your money within six to 18 months and earn, on average, a 10% annual return.
You could potentially make even more by investing directly in real estate projects through other crowdfunding platforms. But the fees, restrictions, and risks are higher, too. If you’d like a simple, relatively low-risk way to add real estate to your portfolio, consider Groundfloor.
Why You Should Trust Us
Investopedia analyzed 19 real estate crowdfunding companies and scored each based on eight major categories and 38 criteria that are crucial in evaluating the offerings and usability of these platforms. We used this data to review each company for their fees, investment selection, transparency, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best real estate crowdfunding platforms since 2020.
How to Use Groundfloor
You use Groundfloor by first setting up an account. You’ll need to enter your personal information and a funding mechanism. You don’t need to be an accredited investor to use Groundfloor. Then, you’ll add money to your Groundfloor account.
On the Groundfloor platform, you can see what borrowers want to raise funding. You pick the loans with the terms you find most appealing. Groundfloor will manage the loan and repay you plus interest according to the terms. Alternatively, you can use Groundfloor’s automatic tool to find and make loan investments for you.
What Is Groundfloor?
Groundfloor is a real estate crowdfunding and lending platform. Its website and app connect investors to borrowers who need money for real estate projects. As an investor, you pick among the loans that Groundfloor creates. You then receive interest and the return of your principal from the borrower through Groundfloor. Groundfloor only offers real estate loans as an investment. It doesn’t allow users to buy directly into real estate projects.
Is Groundfloor Legit?
Yes, Groundfloor is a legitimate company. It has been in business since 2013 and has over 230,000 users. Groundfloor runs its investment offerings through the SEC as well. Real estate investing still carries risks, even with a legitimate company like Groundfloor. You could lose money on a loan if a borrower defaults. While Groundfloor does its best to get the money back on loans, repayment is not guaranteed.
Is Groundfloor FDIC Insured?
Groundfloor is FDIC-insured for the uninvested cash you keep in your account. If Groundfloor goes bankrupt, the government will get you this money back.
You don’t have FDIC insurance for the money you invest in the Groundfloor loans. If the real estate borrower defaults, Groundfloor tries to collect repayment by making a legal claim against the real estate. However, there’s no guarantee you’ll get all your money back. The same is true if you invest in Groundfloor Notes. While Groundfloor’s assets back up these loans, they are not FDIC-insured.
How We Review Real Estate Crowdfunding Platforms
To evaluate and review real estate crowdfunding platforms, Investopedia’s team of researchers, data collectors, and industry experts spent nearly two months conducting in-depth industry research, company survey data collection, and hands-on evaluations of 19 companies. We grouped the 38 criteria that we collected, like investment selection and minimums, holding periods, and curated portfolios, into eight categories. We then scored these criteria and weighted the categories to determine which real estate crowdfunding platforms are best for both accredited and non-accredited investors:
- Fees: 15%
- Account Services: 15%
- Investment Selection: 15%
- Liquidity: 12.5%
- Transparency: 12.5%
- Sectors and Domains: 12.5%
- Customer Support and Usability: 10%
- Educational Offerings: 7.5%
Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of real estate crowdfunding platforms. Read our full process for more information on how we review real estate crowdfunding platforms.
