GROUNDFLOOR Review

Groundfloor offers short-term real estate investments starting with just $10. With average returns over 10%, is it the right investment for you?

	Invest in Real Estate with $10 Learn More
	Overall Score	4.2
	Minimum Deposit	5.0
	Customer Service	4.0
	Commissions and Fees	5.0
	Ease of Use	4.0
	Liquidity	3.0

5-point scale (the higher, the better)

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Pros and Cons

• No investor fees
• High historical returns
• $10 minimum

• Risk of default
• Debt investments only (no equity)

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Bottom Line

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

Real estate crowdfunding is hot right now. But a big downside is that your money is often tied up for 5 years or more.

Not everyone wants their money locked up like that. If that sounds like you, Groundfloor may be your answer.

Most platforms invest in multi-year large commercial projects. But Groundfloor lets you lend money to borrowers for housing projects that last just 6-18 months.

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

What is Groundfloor?

Groundfloor is a real estate investment and lending platform for fix-and-flip and new construction residential projects. It's open to both investors and borrowers.

Investors provide loans to borrowers for fix-and-flip housing projects. Each loan has a fixed interest rate and projected term. Borrowers use the money to renovate the house and then sell it.

This investment model is attractive for both parties. Investors get relatively safe, real estate-backed returns. Borrowers get access to quick loans that meet their needs better than the big banks.

Groundfloor's stats to date show strong performance since its inception in 2013:

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• Short-term real estate investments lasting just 6-18 months
• Open to non-accredited investors
• No investor fees

What Makes Groundfloor Different

Groundfloor stands out from other real estate crowdfunding platforms. Here's why:

• Debt instead of equity
  You're investing in loans, so you already know the interest rate and terms. This is different from equity, which means you own a piece of the property. Your returns don't depend on how much it goes up in value.

• Short time frame
  Because other platforms depend on property appreciation, you usually need to wait at least 5 years. But Groundfloor's loans are short (typically a year or less). You can get a quick return on your investment.

• Customization
  Other platforms like Fundrise offer funds. You don't get a say in your investment. With Groundfloor, you make your own direct investments and build your own portfolio.

Short Term High-Yield Investments

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Who Can Invest on Groundfloor

Groundfloor is open to all investors. There are no accreditation or wealth requirements.

Groundfloor may be right for you if:

• You don't want a long multi-year investment
  
• You only have a little bit of money to invest
  
• You want to invest in debt instead of equity
  
• You want monthly interest payments
  
• You want the option of higher risk for more potential rewards

Groundfloor is open to investors in all 50 states except for Nebraska residents (due to state-specific legislation).^[1]

Diversify Your Portfolio

With Groundfloor you can diversify your investment portfolio with real estate like a pro without needing to be a millionaire.

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Groundfloor Pros and Cons

Pros

• No investor fees
  
• High historical returns 10+%
  
• Short term investments (6-18 months)
  
• 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
  
• Limited to debt investments (no equity)
  
• Some borrowers have no experience flipping houses
  
• No diversification opportunities outside of residential real estate

Real Estate Investing for Everyone

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$10 minimum short-term high-yield investments

If you want more diversification, Fundrise may be better for you. Fundrise automatically invests for you in a wide range of residential, commercial, and industrial real estate projects across the US. This exposes you to more markets and potentially higher returns.

How Groundfloor Works

Here's a quick look at how Groundfloor's loan process works:

1. The borrower submits a loan application. Every loan goes through a stringent underwriting process. Then it's assigned a loan grade based on risk.

   Each project is given a loan grade from A - G. Grade A means the lowest risk and lowest returns. Grade G means the highest risk but also potentially highest returns.

   The loan grade Groundfloor assigns depends on many factors, like:^[3]

   • Loan-to-value ratio
     
   • Location of house
     
   • Quality of valuation report
     
   • Borrower experience
     
   • Borrower Commitment
     
   • How much skin-in-the-game the borrower has

2. Groundfloor gives the borrower an initial payment (called pre-funding) so they can start the project.

3. Groundfloor then converts the loans into securities with the SEC. Once qualified, the public can invest in them starting with just $10. You're actually investing in a Limited Recourse Obligation (LRO).

4. During the project, Groundfloor carefully monitors the progress. They try to resolve problems if anything goes off-track.

5. When the project is complete, the house is put on the market. The borrower uses funds from the sale to pay back the loan in full. Groundfloor then distributes that to the investors.

Short Term High-Yield Real Estate Debt Investments

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Groundfloor offers short-term, high-yield real estate debt investments to the general public.

How to Start Investing on Groundfloor

From an investor's point of view, here's what you need to know:

1. Create an account:
   You can sign for free and view the available projects. There are no investor fees and the minimum investment is just $10.

2. Fund your account:
   Link an external bank account to transfer funds. It takes about 3-5 business days for transfers to clear.

3. Browse current projects:
   You will see a list of available investments like this:

   You can click into each one to see the details.

   Each listing includes all essential details of the loan:
   

   • Loan grade assigned by Groundfloor
     
   • Interest rate (5% to 15%)
     
   • Investment period (usually from 6 to 18 months)
     
   • Loan-to-value ratio
     
   • Repayment terms
     
   • Borrower's profile

   You can build a custom portfolio with loans of different grades. Or, you can choose Groundfloor's automated investing. We'll go over that in the next section.

4. Receive payments:
   You get either monthly interest payments or deferred payment after project completion. When the borrower has repaid all the principal and outstanding interest, you'll get your investment back in a lump sum.

   You can choose to withdraw or reinvest in other loans.

Invest in Real Estate with $10

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• Short-term real estate investments lasting just 6-18 months
• Open to non-accredited investors
• No investor fees

Automated Investing

Groundfloor also offers an Automatic Investing feature. This is great if you don't want to choose your own loans. Here's how it works:

1. Set up a recurring transfer schedule. The only option is once a month.

2. Create your portfolio by entering how much you want to invest into each loan grade.

3. Whenever new loans go live, your funds will automatically be invested according to what you set. Auto Investing runs every day.

4. Your repayments will also be auto invested into new loans.

5. If you don't like a loan the system selected, you can cancel it with 48 hours.

Automatic Investing is a great way to invest without thinking. All your excess cash is automatically put to work. You don't need to keep on logging in and actively select investments yourself.

What are Groundfloor's fees?

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

They instead make all their money from the fees they charge their borrowers. Fees for borrowers are:

• 2% to 4.5% of the amount of the loan
  
• $495 application fee

How Much Returns Can You Expect?

The average returns to date is 10+% . Interest rates go from 5% to 15%. How much you can make depends on your own risk tolerance and the loans you select.

Are Loans Risky on Groundfloor?

Groundfloor has a stringent underwriting process to reduce risk for investors. It also works closely with borrowers to make sure their projects are on track.

All loans are backed by the actual property. They're full recourse loans with personal guarantees. In the event of default, Groundfloor has legal claim to the property plus the borrower's personal wealth. So the risk of losing all your principal is low.

In 2022, Groundfloor repaid loans on 849 properties. And only 14 loans were repaid with a loss of principal.^[4]

The biggest risk is a default. If renovations are more difficult or costly than planned, this could delay or end the project. If a loan is not repaid on time, you continue to earn interest payments until the loan is fully paid off.^[5]

In very rare cases, a foreclosure may be necessary as a last resort. Investors will get their share back from the sell.

Is Groundfloor a Good Investment?

Groundfloor is a solid addition to any diversified portfolio. They boast average returns of just above 10%. This is on par with other real estate investments.

It's a good investment if you want to invest in debt instead of equity. You don't need to wait for years for the property to appreciate in value. You can see a quick return.

There's no accreditation requirements and only $10 minimum. So it's also a good option for small investors.

But as with all investments, there is risk. But having the actual house as collateral will reduce your losses.

How to Reduce Risk

Investors can reduce risk by selecting higher-quality projects. For example, choose projects where the borrower has successfully paid off other Groundfloor loans. Also look for borrowers that have more skin in the game (by contributing more of their own money).

And of course, diversification is always key. Invest your money in multiple loans and loan grades to spread out the risk.

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

Groundfloor Alternatives

Groundfloor is unique because they offer short-term debt investments backed by actual properties. Most other real estate platforms only offer long-term equity investments.

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

Annual Fee	$0	1% management fee	1% annual management fee
Minimum Deposit	$10	$10	$100
Dividends	Monthly	Choose quarterly payouts or auto reinvest	Quarterly rental income dividends
Investment Period	6 to 18 months	5+ years	5+ years
Investment Types	Short-term real estate loans	Commercial, single family, industrial	Rental homes
Wealth Requirements	None	None	None
	Terms Apply. Offering Circular	Terms 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.

Groundfloor vs. Fundrise

Fundrise is perhaps the most popular real estate investing platform. Just like Groundfloor, the minimum to start is only $10 and it's open to everyone.^[7]

Your money is automatically invested into a diversified portfolio of real estate projects across the US. You get a mix of commercial and industrial, debt and equity projects. It's really a "set it and forget it" approach to real estate investing.

Their historical returns are similar to those of Groundfloor (both around 10%). But their investor fees (~1%) are higher.^[8]

Fundrise is meant to be a long term investment. But it does have an early redemption program (with a small fee), so there is some liquidity.^[9]

Get $10 Bonus When You Invest in Real Estate with $10+

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• No wealth or income requirements
• Get a diversified portfolio of real estate projects across the US
• Low fees to maximize long-term returns

Groundfloor vs. PeerStreet

Of all the competition, PeerStreet is the most similar to Groundfloor. It lets you invest in short-term loans to borrowers for real estate projects.

But, Peerstreet is only for accredited investors. The minimum investment is $1,000.^[10] And there is an asset management fee of around 1%.^[11]

Most of the borrowers on PeerStreet are experienced real estate owners. They 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. The risk is also lower. This is because PeerStreet borrowers are improving their existing properties as opposed to buying and flipping a house in disrepair.

Groundfloor vs Arrived Homes

Arrived Homes also lets you invest in residential homes, but it works differently from Groundfloor. Instead of lending money to borrowers, you actually own a little piece of a house. The minimum is only $100.

The idea is for investors to pool funds to invest in a rental house. Arrived will take care of the tenants, property managers, and maintenance. You don't need to worry about the day-to-day stuff.

You'll earn money from the rental income (approx. 3.0% to 7.2% annualized^[12]), plus from the appreciation of the property itself.

Since this is an equity investment, expect to hold your investment for 5-7 years. There's no early redemption program yet (though it's in the works).

Arrived Homes has a 1% annual management fee. There's also a property management fee that's 8% of the rent.

Invest in Rental Homes with $100+

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Browse rental home investments for free. No bank account required

Groundfloor FAQ

Who is the Groundfloor borrower?
Groundfloor borrowers are your typical real estate flipper. They want to buy properties in a state of disrepair, renovate, and then resell - hopefully at a profit.

They try to do all this as quickly as possible, generally within six to 18 months. Given the shorter time frame, a traditional mortgage can be too cumbersome. This is what makes Groundfloor a better option for raising funds.

Borrowers need a minimum credit score of 640. But previous flipping experience is not required.^[13] So be sure to look at borrower profiles before investing.

Is Groundfloor FDIC insured?
When you transfer funds to Groundfloor, the cash is held at partner bank and will be FDIC insured up to the federal limit. However, once they are invested into loans, they are no longer FDIC insured.

Is Groundfloor a REIT?
No, Groundfloor is not a REIT. You're not investing in a fund of real estate projects. Instead, you are investing in individual loans to borrowers.

Bottom line: Is Groundfloor legit?

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

They offer all this with no investor fees, very low minimums, and no accreditation requirements.

But as with all investments, there is risk. The biggest risks are defaults (or even foreclosure). But having the actual house as collateral will reduce your losses.

Before making an investment, investors should do their own due diligence on the borrower's profile and history.

References