Most real estate crowdfunding sites have high minimum investment thresholds and require you to hold your investment for years. If you can’t afford that, read through my Groundfloor review to start investing with only $10.
Are you looking for profitable investment options? Market research shows that real estate investments are some of the best wealth-building options for serious investors.
However, before you start earning the speculated profits, you will have to acquire a property, maintain or renovate it, and deal with horrible tenants. If you’re funding property for flipping, first, you’ll have to find a borrower, run background checks, and complete legal documentation.
Sounds like quite a hassle, right? What if I told you there’s a platform that does all these tasks for you. All you have to do is invest your money and receive timely returns.
If that seems like an attractive prospect to you, read through my Groundfloor review to get all the details.
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I know what you’re thinking. Even if Groundfloor makes these tasks easier for you, real estate is still too expensive for a beginning investor. To find a decent property, you will need at least $50,000 to invest.
That’s where this Groundfloor Finance review will prove you wrong. This website lets both accredited, and non-accredited investors start funding projects with an initial investment of only $10.
Along with that, the platform offers impeccable management services, multiple lending options, and thorough property vetting. Additionally, there are a few downsides you’ll want to know about before you jump on the bandwagon.
If you’re craving information about all these aspects, my Groundfloor review has you covered. Let’s get started.
What is Groundfloor?
Groundfloor is a real estate crowdfunding platform founded back in 2013 by Brian Dally and Nick Bhargava. With its headquarters in Atlanta, the platform works to generate loans for small-scale residential projects.
If you’re new to the concept of real estate crowdfunding, it works in a simple way. Not everyone has the resources to acquire or fund entire properties by themselves.
However, there are thousands of properties out there that need funding. That’s where organizations like Groundfloor come in. They gather investments from small-scale online investors and fund carefully-vetted, profitable projects.
Today, if you search for real estate crowdfunding options online, you’ll get a long list of potential platforms. That’s where the issue lies. How do you tell which of these platforms provides legit returns?
Luckily, Groundfloor is an ideal option for investors looking to benefit from short-term loans in the real estate sector. Similarly, borrowers who need flexible short-term financing can fund their real estate projects through the site. It’s a win-win opportunity.
If you’re still skeptical, I’ve explained how Groundfloor loans and stocks are managed in the next section of my Ground Floor review to further insight.
How Groundfloor Works?
Groundfloor works by connecting borrowers and lenders on one platform. On one end, the platform screens projects put forward by the borrowers and pre-fund them.
After that, the website advertises the crowdfunding opportunity and gathers investments. This way, there is minimal risk involved as the platform itself already funds all the properties.
Although the platform charges around 2% to 4.5% as a loan fee from the borrowers, investors have no extra charges. All you have to do is pool in your money and receive interest.
Besides that, the platform rates all the crowdfunding options available on its website using a grading scale from A to G. The A-grade opportunities are the ones with minimal risk according to the property’s value and loss ratio.
One downside that I’ll further discuss in my Groundfloor review is that the platform does not assess each borrower’s creditworthiness. The borrowers only repay Groundfloor after the loan is closed, which only happens when the property in question is sold or refinanced.
After that, Groundfloor pays the investors after adding the interest accrued during the lending period. This means investors don’t lend money directly to the projects.
Instead, they buy investment securities called LROs, from Groundfloor and earn returns on their investments.
What Makes Groundfloor Different?
So, what makes Groundfloor investing different from other crowdfunding opportunities online? Mainly, when investors want to diversify their portfolio through real estate with minimal money, they go for REITs.
Most online crowdfunding options operate like REITs. They let multiple owners purchase properties together, which they couldn’t afford alone.
However, when you invest in Groundfloor stocks, you’re not investing in REITs. Instead, you’re investing in a loan.
Although the platform carefully vets each project before lending the money, there’s still a risk of experiencing loss. The loan you fund can either bring unexpectedly high profits or underperform.
But that’s no reason to worry. Since its advent in 2013, the loss ratio on Groundfloor real estate is less than 1%. Also, because Groundfloor owns the property first, you will receive your capital back, if not any profits from your funding.
Who Should Join Groundfloor?
Groundfloor investments are great options for those looking to earn revenue on minimum investment. You can start with as little as $10.
On the other hand, if you’re looking for liquid investments, Groundfloor is not the ideal investment option for you. Mainly, if you’re ready to take on some risks and create a steady real estate income, you should join Groundfloor.
Similarly, in the case of borrowers, those who can pass the strict vetting process of Groundfloor can access cheap short-term loans.
How to Sign-Up for Groundfloor?
If you’ve decided to give Groundfloor investing a try, here are all the details about how to join the platform. You can start the sign-up process if you’re 18 years or older.
After that, the process barely takes a few minutes to complete. You’ll have to provide some necessary information, including your name, address, contact, and ID proof.
After that, the website will ask you to verify your account through email, and you’re a member. Once you’ve joined, you can access the website’s funding options and look for potential LROs to purchase.
All the transactions will be conducted through your funding account within the Groundfloor portal.
You’ll have to create this account after you choose a funding option to invest in. Managed by Wells Fargo Bank, this account will be linked to your original bank account so you can transfer and receive funds online.
Pros of Groundfloor
Now that you have all the essential information about the Groundfloor platform, you’re probably ready to sign-up and get started. But before you do, here’s a list of its benefits to help you put things into perspective.
Low Minimum Investment
You can start with only $10, one of the lowest minimum investment rates in the online crowdfunding sector.
Plenty of Lending Options
Groundfloor lets you choose from a variety of low and high-risk funding options on the website. Referring to the grading system, you can select the option that fits your needs.
No Extra Fee or Hidden Charges
Investors don’t have to pay a dime on Groundfloor apart from their investment amount.
You Pick the Projects
In most REIT options, you simply put your money in, and the system uses it to fund any project. Here, you can choose the projects yourself and maintain control of your investment.
Cons of Groundfloor
While the benefits of Groundfloor seem quite attractive, I’ve rounded up the negative aspects as well in my Groundfloor review. This will give you an exact representation of the platform and help you evaluate it according to your preferences.
High Loan Default Rates
While the default rate only falls at around 1% since the platform was founded, it is relatively high compared to industry trends. Similarly, if you’re funding a project that faces a loss, you lose your investment.
Investors don’t get frequent updates about their investments. You will only be notified about any progress once every month.
Lack of Diversification
If you’ve already established yourself as a real estate investor, you won’t be able to diversify your assets through Groundfloor. That’s because it mainly deals in small-scale residential projects.
You Cannot Invest in Equity.
Through Groundfloor, you can only lend money to borrowers intending to renovate and flip a potential property.
After reading through the list of pros and cons, you must’ve decided whether the platform fits your needs or not. If you’re eager to try it out, here’s the detailed section of my Groundfloor review explaining all the information you need to start investing right away.
Groundfloor Managing Team
The efficient management team at Groundfloor is one of the most attractive features of the platform. All the leading team members come from diverse backgrounds, including financial services, tech, and real estate.
Most importantly, the two leaders of the pack, namely Brian Dally and Nick Bhargava, have an illustrious career in debt management, asset development, portfolio diversification, and real estate investments.
This means you can remain at peace knowing that your investments are safe in the hands of experienced professionals in the field. Besides that, their team includes experts about flipping and property rehabilitation concepts who help manage risks and review properties appropriately.
Groundfloor Fee Structure
Groundfloor is free to sign-up for investors. Additionally, while other popular crowdfunding companies ask investors to hold their investments for years, Groundfloor only requests a 6-12 month holding period.
However, most of these other crowdfunding options allow access to commercial properties, which are expensive to maintain. While Groundfloor only manages and lends money to small-scale residential projects.
From borrowers, the platform charges an application fee of $250 upfront. After that, the property was vetted and scrutinized to see if it qualifies for the platform.
If it does and the borrower receives the loan, he has to pay anywhere from 2% to 4.5% of the loan principal. Upon closing the loan, borrowers also have to part with $1,250 as closing costs.
Groundfloor Annual Returns
The annual returns for investors on Groundfloor are based on the projects they choose on the platform. As I mentioned earlier in my Groundfloor review, each property option is assigned an investing grade by the platform.
If you go for an A-grade loan, you’ll face minimal risks and receive around 5.5% annual returns on your investment. G-graded loans are highly risky at the end of the scale but offer approximately 26% in annual returns.
However, you won’t receive any dividends as you would on other crowdfunding sites. Instead, you will receive your entire income and the principal you invested when the loan is repaid and closed.
As an investor, you’ll be sharing your crucial financial details on the platform. That’s why you should make sure the website you choose has thorough security systems to protect your information.
Groundfloor uses the AES 256-bit symmetric key to keep your information away from shady online practices.
If you’re worried about joining Groundfloor as a beginner, you don’t need to be concerned. The platform has a learning section on its website where beginning investors can learn the industry’s ropes.
Besides that, it also includes a comprehensive blog with regularly updated content. The content ranges across various topics from market trends and investor habits to diversification techniques and property selection.
Similarly, if you’re new to the concept of LROs, you can get all the information you need in their resource center before you sign-up for the site.
Additionally, if you have any queries regarding the process during your investment, you can refer to the FAQ page on the site.
The page offers accessible information carefully categorized by topics. This way, you can simply click on the question on your mind and get prompt answers.
Groundfloor Customer Service
When there’s money involved online, make sure you only sign-up for sites that respond to your questions immediately. Luckily, Groundfloor has impeccable customer service for investors who need professional assistance.
You can reach out to the team directly through the contact number provided on their website. A representative will be available on the number during working hours from Monday to Friday.
On the other hand, if you’re more comfortable with emailing your query, you can post your question through the website’s contact page and wait for a reply through email.
Groundfloor Referral Bonus
Believe it or not, Groundfloor lets you earn free money by participating in their referral program like online reward sites. Once you become a member, you’ll get a unique link that you can share with your friends and family.
Now, anyone who joins through your referral link must create a funding account on the platform. When he does so and conducts his first transaction on the Groundfloor funding account, both of you will receive a bonus of $10 for free.
Concluding my Groundfloor review, you probably have all the information you need about the platform to decide whether it fits your needs or not. However, to give you a clear representation, I have rated the platform in the following aspects.
Ease of Use – 5 / 5
The website itself is very catchy and user-intuitive, so you can easily create an account and start investing. Also, the platform has its own mobile app to help you track your investments on-the-go.
Features – 3 / 5
The website has excellent investment options and features for beginner investors, including productive resources and funding guides. However, it lacks features compared to other crowdfunding sites that offer portfolio diversification and automatic investments.
Customer Service – 5 / 5
The platform offers accessible customer service where you can get prompt and resourceful responses.
Value for Money – 5 / 5
With Groundfloor, you get a chance to earn investment revenue with as little as $10. This is as cheap as it gets in the real estate crowdfunding industry.
Is Groundfloor Legit?
Wrapping up my comprehensive Groundfloor review, I’d like to make this point clear. Yes, Groundfloor is a legit investing option for beginners looking for affordable crowdfunding opportunities.
You can purchase LROs against loans for fix and flip properties and earn interest on them when the loans are closed. Simply, if you don’t need liquidity and are willing to invest in the property flipping industry, Groundfloor is the ultimate option for you.
Remember, make sure to conduct complete due diligence on the properties you fund from your side before investing. Also, if you’re a newbie, try to understand the concepts of crowdfunding along with the risks involved before you jump on the bandwagon.
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