July 13, 2021

GROUNDFLOOR Review

Read more about GROUNDFLOOR
This article contains references to products from our partners. We may receive compensation if you apply or shop through links in our content. You help support CreditDonkey by reading our website and using our links. (read more)

Want the strong returns of private real estate but don't like having your money tied up for too long? Groundfloor may be the right investment for you.

GROUNDFLOOR
Invest in Real Estate with $10

Overall Score

4.5

Annual Fee

5.0

Minimum Deposit

5.0

Customer Service

4.0

Ease of Use

4.0
5-point scale (the higher, the better)

Pros and Cons

  • No investor fees
  • High historical returns
  • Low minimum
  • Higher risk of default
  • No diversification opportunities
  • Limited to debt investments (no equity)

Bottom Line

Crowdfunding platform for passive investors looking for short-term real estate debt investments

Groundfloor is a real estate crowdfunding platform that serves investors and property flippers.

They offer short-term, high-yield real estate investments to the general public (not just accredited investors). Borrowers can also fund their own housing projects.

Is it better than platforms like Fundrise and Diversyfund? Find out the pros, cons, and returns in this review.

Is Groundfloor going public?
Groundfloor went public via a Reg A+ offering a couple years ago and is seeking to raise additional funds in 2021 via a preferred equity offering. So Groundfloor does have partial public ownership, but none of their securities are currently trading on any of the public exchanges.

What is Groundfloor?

Groundfloor is a real estate crowdfunding and lending platform founded in 2013.

Unlike sites like CrowdStreet and Streitwise that invest in big, commercial properties, Groundfloor specializes in fix-and-flip residential projects.

Groundfloor allows investors to fund short-term, real-estate-backed senior debt with attractive interest rates. Borrowers can also use Groundfloor to fund their own fix-and-flip housing projects with their loans.

How Does Groundfloor Work?

As a borrower
If you choose to use Groundfloor as a real estate developer/borrower, you submit their proposal to the Groundfloor team. This includes:

  • All of the target property details
  • Repairs/upgrades you plan to make
  • Expected increase in the property's resale value

The Groundfloor team then evaluates the risk profile of the project and the borrower, taking into account your experience and the economic viability of the property and project.

Assuming everything checks out, the project is then listed on their platform.

Given the short duration of these loans, most do not make monthly payments. Instead, the full principal and interest are repaid in a single "balloon" payment on the maturity date.

As an investor
It is free for investors to sign up on the platform and view the available projects. There are no investor fees and the minimum investment is just $10.

Each listing includes all essential details of the loan you'd be funding:

  • Interest rate (from 5% to more than 20%, depending on the project's risk level)
  • Investment period (usually from six to 12 months)
  • Loan-to-value ratio
  • Repayment terms
  • Borrower's profile

You'll then choose your investment, fund your account and receive repayments in 6-9 months (on average).

The investment model is attractive for both the investors and the borrowers, which is why Groundfloor is fairly popular.

Investors get relatively safe, real estate-backed returns with short-term maturities. Borrowers get flexible access to short-term capital that meets their needs better than the big banks.

Groundfloor referral bonus: Right now, Groundfloor has a referral going on where both you and the person you refer will get a $10 bonus as soon as they transfer money into their account, and there is no limit to the number of people you can refer. They also have a promotion where you can get a $100 bonus for depositing and investing at least $5,000.

Groundfloor Pros and Cons

Before signing up with Groundfloor, review the below pros and cons to see if it's the right investment for you.

Pros

  • No investor fees
  • High historical returns ~10.5%
  • Holding period <1 yr
  • Low minimum of $10
  • Ability to diversify across different risk levels
  • Open to all investors (don't need to be accredited)

Cons

  • Risk of default/foreclosure on the higher side (~5%)
  • Limited to debt investments (no equity)
  • Some borrowers have no experience flipping real estate
  • No diversification opportunities outside of residential real estate

Groundfloor App
Groundfloor doesn't currently offer an investing app. However, their web-based platform is at least compatible and easily viewable with mobile browsers.

What are Groundfloor's fees?

Groundfloor does not charge its investors any fees, which sets them apart from other real estate crowdfunding platforms.

They instead make all their money from the fees they charge their borrowers, which range from 2% to 4.5% of the amount of the loan.

Is Groundfloor a Good Investment?

Groundfloor is a solid addition to any diversified portfolio. They boast an inception-to-date overall return just above 10%, which is typical of many real estate investments. It also compares favorably on a risk-adjusted basis to stocks.

With Groundfloor, the biggest risk is obviously a default. If renovations are more difficult or costly than planned (or halted due to city permitting issues), this could delay or end the project.

Although this is not likely, do note that about 5% of loans on the platform ended up going through foreclosure.

Investors can mitigate some risk by selecting higher-quality projects. These are projects where the borrower is more seasoned (i.e., they've successfully paid off other Groundfloor loans) and has more skin in the game (by contributing more capital toward the project).

It's also a good idea to do some comparative research on other properties in the neighborhood to ensure the forecasted valuation after repairs is not inflated.

And, of course, diversification is always key, so spreading your money out across multiple loans is best practice here as well.

How do you contact Groundfloor customer support?
You can reach Groundfloor customer service during standard business hours (9AM-5PM EST) Monday through Friday at (404) 850-9223. You can also email them for less urgent inquiries at support@groundfloor.us.

Who is the Groundfloor Borrower?

The Groundfloor borrower is your typical real estate flipper. They want to raise money to buy properties in a state of disrepair, renovate them, and then resell them - hopefully at a profit.

They try to do all this as quickly as possible, generally within six to 12 months. Given the shorter time frame of these projects, the origination costs of a traditional mortgage can be prohibitively expensive.

That's why Groundfloor is popular with real estate flippers. The loan terms are shorter and the repayment is easier in the form of a single balloon payment instead of smaller monthly payments.

All the loans are backed by the properties that the funds are used for. They're full recourse loans with personal guarantees. In the event of default, the borrower has legal claim to not only the property but also the borrower's personal wealth.

Groundfloor has minimum quality requirements for its borrowers, like a minimum credit score of 640. Keep in mind, previous flipping experience is not a requirement, so try to look at borrower profiles before investing.

Groundfloor login: Logging into the platform is easy with your email address doubling as your username.

Who are Groundfloor's Competitors?

Anyone familiar with crowdfunding knows that there is no shortage of online real estate investment platforms.

Groundfloor is unique because they offer short-term debt investments backed by real estate. Most of their competitors only offer equity investments in real estate.

Review Groundfloor's main competitors below before choosing where to invest.

Groundfloor vs. DiversyFund

 GROUNDFLOORDiversyFund
 Visit SiteVisit Site
 

GROUNDFLOOR

DiversyFund

SPECIAL OFFER
Invest in Real Estate with $10 - Learn More

SPECIAL OFFER
Earn Passive Income with Real Estate - Learn More

Terms Apply. Offering Circular 

GROUNDFLOOR: Investments carry risk and may lose value. Not an offer or solicitation to purchase securities. Please consult the Offering Circular and related SEC filings before making an investment decision.

DiversyFund is a non-traded public REIT that invests in urban and suburban multi-family residential properties in California and Texas.

They create value for investors by upgrading and enhancing their portfolio properties to improve their rentability. The goal is to then sell the properties after 5 years, targeting an IRR between 10% and 20% for their investors.

The main difference to Groundfloor is that DiversyFund gives you equity ownership in their properties so that your return is directly linked to the price they are resold at.

With Groundfloor's debt investments, you get paid before the developer gets any profits, so you're not adversely affected if it sells for less than expected.

On the flip side, your return with Groundfloor is capped since it's a fixed-rate loan - you don't participate in any upside or downside of the property's resale amount.

Compared to Groundfloor, DiversyFund has longer investment time periods, higher investor fees, and higher minimums ($500). But they are both open to accredited and non-accredited investors alike.

Is DiversyFund a good investment?
DiversyFund is worth considering for anyone who is okay with their investment being locked up for five years and wants equity ownership as opposed to a debt investment.

Groundfloor vs. Fundrise

 GROUNDFLOORFundrise
 Visit SiteVisit Site
 

GROUNDFLOOR

Fundrise

SPECIAL OFFER
Invest in Real Estate with $10 - Learn More

SPECIAL OFFER
Invest in Real Estate with $10+ - Learn More

Terms Apply. Offering CircularTerms Apply. Offering Circulars

GROUNDFLOOR: Investments carry risk and may lose value. Not an offer or solicitation to purchase securities. Please consult the Offering Circular and related SEC filings before making an investment decision.

Fundrise is another popular private real estate investing platform. It launched the eREIT, which is essentially an ETF that holds a diversified mix of properties from different real estate sectors.

They offer different eREITs that target different subsets of investors - some focusing on dividends and others more focused on growth.

Just as with DiversyFund, Fundrise offers equity investments so your return is not guaranteed and is linked to the value of the properties they own.

Their historical returns are similar to those of Groundfloor (both around 10%), but their investor fees (~1%) are higher.

One benefit of Fundrise's eREITs is their superior liquidity, which allows you to make early redemptions for a small convenience fee.

Groundfloor vs. Rich Uncles

Rich Uncles, which is currently undergoing a rebranding to Modiv, is a private REIT offering its investors equity exposure to a variety of diverse real estate properties from different sectors (e.g., office, retail, industrial, etc.).

A benefit of Rich Uncles is that they are offering investors an easy way to invest in an existing, diversified REIT that already has performing properties and a history of monthly dividend payments (yielding ~5%).

On the downside, Rich Uncles' fees are rather high (3% upfront) and their minimum investment is currently $1,000, notably higher than Groundfloor's $10.

And while they don't require you to be an accredited investor, they do require you to have a net worth of at least $250,000 or annual income of at least $70,000. Comparatively, Groundfloor doesn't have any net worth requirements.

Rich Uncles is nice in that their REIT pays a regular dividend with an established track record, but other than that you should plan to have your principal investment tied up for at least three years.

Contrast that to the 6- to 12-month holding period on most Groundfloor investments.

Is Rich Uncles a good investment?
Rich Uncles' REIT is an existing portfolio of diverse commercial properties that are already generating cash flow. It might be a good investment if you are looking for regular dividend payments.

Groundfloor vs. PeerStreet

Of all the competition, PeerStreet is probably the most similar to Groundfloor. PeerStreet is a real estate crowdfunding platform where you can invest in real estate-backed debt.

Most of the borrowers on PeerStreet are experienced real estate owners who are seeking short-term financing to improve the quality and rentability of their properties.

At around 9%, the returns on PeerStreet are generally lower than the returns on Groundfloor because the risk is also lower. This is because the PeerStreet borrowers are enhancing their existing properties as opposed to buying and trying to flip a house that is in disrepair.

PeerStreet is somewhat less accessible to the average investor as their platform is only for accredited investors and they also charge their investors a small fee (0.25%-1%).

The term of the loans on PeerStreet is short term, ranging from six months to two years.

Bottom line: Is Groundfloor legit?

Groundfloor is legit. They are one of a few crowdfunding platforms that offer investors real estate-backed debt instead of equity with ~10% returns that are on par with many equity real estate investments.

They offer all this with no investor fees, very low minimums, and no requirements for you to be an accredited investor.

There are still foreclosure risks with Groundfloor's investments that investors need to be wary of, but we feel investors are being compensated for these with the current returns.

Before making an investment on the platform, investors should be sure to do their own due diligence on the borrower's profile and history. This research, in addition to independently confirming the value of the enhanced property, will help investors mitigate these risks and protect their capital.

GROUNDFLOOR

Invest in Real Estate with $10

  • Short-Term High Yield Real Estate Debt Investment
  • Open to Non-Accredited Investors
  • No Investor Fees
Fundrise

Invest in Real Estate with $10+

Become real estate investor with as little as $10

Ally Invest Coupon Codes

Get Up to $3,000

Expires 9/30/2021

The minimum qualifying deposit to receive a cash bonus is $10,000. Accounts will be reviewed 60 days after account opening to determine the total qualifying deposit. Corresponding cash bonus will be credited to the account within 10 business days. Once the bonus is credited to the account, the bonus and qualifying deposit (minus any trading losses) is not available for withdrawal for 300 days. If the qualifying deposit is withdrawn, the bonus may be revoked.

Deposit or TransferCash Bonus
$10,000 - $24,999$100
$25,000 - $99,999$250
$100,000 - $249,999$300
$250,000 - $499,999$600
$500,000 - $999,999$1,200
$1,000,000 - $1,999,999$2,000
$2,000,000+$3,000

TD Ameritrade

Commission-Free Trading - Online Stock, ETF and Option Trades

Applies to U.S. exchange-listed stocks, ETFs, and options. A $0.65 per contract fee applies for options trades, with no exercise or assignment fees.

Write to Andrew Fitzgerald at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

Read Next:

Real Estate Crowdfunding

Real Estate Crowdfunding

How to Become a Real Estate Investor

How to Become a Real Estate Investor

DiversyFund Review

DiversyFund Review

Fundrise Review: Is It Legit?

Fundrise Review

Rich Uncles Review: Is It Good?

Rich Uncles Review

RealtyMogul Review: Is It Good?

Realty Mogul Review

Leave a comment about GROUNDFLOOR Review?



Ledn Review

Ledn Review

Ledn is a Canada-based cryptocurrency banking service. They offer crypto-backed loans, interest accounts, and more. Are they safe and legit?

About CreditDonkey
CreditDonkey is a personal finance comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: Many of the offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.

About Us | Reviews | Deals | Tips | Privacy | Do Not Sell My Info | Terms | Contact Us
(888) 483-4925 | 680 East Colorado Blvd, 2nd Floor | Pasadena, CA 91101
© 2021 CreditDonkey Inc. All Rights Reserved.