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Bottom line: Groundfloor – Product Name Only is best for experienced and passive investors, looking to profit from short-term real estate investments. There are no management fees, and it offers shorter investment terms than some competitors. But Groundfloor does require a Groundfloor – Account Minimum minimum to open an account. New investors may also find real-estate investing overwhelming and more expensive compared to other investing strategies. Groundfloor only invests in real estate.
About Groundfloor
Groundfloor – Product Name Only is wealthtech platforms and one of the first real estate investment platforms 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.
The best real estate investing platforms can help you diversify your investment portfolio through investment products, low fees, and useful tools.
Groundfloor is best for passive investors looking to profit from short-term, high-yield private fractional real estate debt investments through notes and SEC-qualified Limited Recourse Obligations (LROs). It offers several notable features, including shorter-term investment terms, a proprietary loan-grading algorithm, automated features, and investment options for borrowers and brokers.
While its passive investing strategy may be suitable for new investors, real estate investing may prove overwhelming for beginners. Moreover, Groundfloor only has a limited catalog of educational content. So beginners needing access to more thorough educational materials should look elsewhere
Groundfloor’s auto-investing feature allocates your money to real estate projects that align with your risk tolerance. Previously this feature was 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.
Groundfloor: Overall Rating
FeatureInsider rating (out of 5)Fees 3.25Investment selection 3.75Access 4.50Customer service 4.00Ethics 5.00Liquidity3.75Overall score3.99
Groundfloor Pros and Cons
ProsConsNo management feesShorter investment terms span from six to 18 months; terms can be 30 days, 90 days, or 12 monthsInvestments return more than 10% on averageGroundfloor – Account Minimum account minimum Though investments have shorter terms, they aren’t as liquid as stocks and other securities
Is Groundfloor trustworthy?
Groundfloor – Product Name Only currently has a B 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, a B is on the higher end 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. For better insight, talk with friends and family that have used Groundwork and read customer reviews.
Ways to Invest with Groundfloor
Self-Directed IRAs
Groundfloor – Product Name Only also lets you invest in real estate through traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and rollover IRAs.
You can fund IRAs in one of three ways:
Contribute using a checkTransfer funds from another IRARollover 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.
Mobile Investing Account
Groundfloor’s 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 a base rate of 4% 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.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.
Investment Types
Groundfloor solely invests in fractional real estate debt investments. 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, 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 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 offers the following loan examples:
Fix and flip loansFix to rent loansNew construction loansReal estate rehab investor loans
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: 6%Grade C: 8%Grade D: 9%Grade E: 12%Grade F: 14%Grade G: 15%
*Note: These are the minimum rates Groundfloor must charge borrowers for each loan grade.
Like the LROs, Groundfloor’s notes (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.
Investment Options
Groundfloor 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 loans with terms from six months to 18 months with amounts from $75,000 to $2 million.
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 600Groundfloor rolls mortgage points into closing costs, you can defer interest payments until the loan repaysYou 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)
Borrowers don’t have to provide interest payments until the loan is repaid 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).
Groundfloor Fees
Groundfloor – Product Name Only requires a Groundfloor – Account Minimum minimum to open an account, which is significantly higher than similar platforms like Fundrise (Fundrise – Account Minimum minimum). There are no Mangement fees, but Groundfloor may charge you additional service fees on your loan.
However, you’ll be charged between 2% and 4.5% interest for loans. Applications for loans are $495, and Groundfloor charges you $1,250 for closing.
On the upside, all fees associated with Groundfloor IRAs are waived through the end of 2023.
Groundfloor Frequently Asked Questions (FAQs)
Can you make money with Groundfloor?
Yes, you can make money with Groundfloor through passive income. Groundfloor historically earns a 10% average annual return.
Is Groundfloor legit?
Groundfloor Finance, Inc. is a legit business since 2015 and is accredited by the Better Business Bureau.
How safe is Groundfloor?
Groundfloor is a safe, legit business that is BBB accredited with a B rating. There are no lawsuits filed against the business.
Methodology: How We Reviewed Groundfloor
We examined Groundfloor – Product Name Only real-estate investing app using Personal Finance Insider’s rating methodology for investing platforms to compare and examine account types, pricing, investment options, and overall customer experience when reviewing investing platforms. Platforms are given a rating between 0 to 5.
Real-estate investing platforms generally offer multiple assets, trading tools, fees, and other resources. Some investing platforms are better for more advanced investors or active investors, while others may better suit beginner investors and passive investors. Groundfloor was evaluated with a focus on how it performed in each category.
How Groundfloor Compares
Groundfloor vs Fundrise
Groundfloor – Product Name Only and Fundrise – Product Name Only both offer real-estate investments for non-accredited, passive investors. But the two platforms differ in asset options, account minimums, and features.
For only Fundrise – Account Minimum, you can open a Fundrise account to invest in REITs, electronic real estate funds, venture funds, and IPOs. Fundrise is also better for traders interested in long-term investments (at least five years), whereas Groundfloor is better for short-term investments and loans.
Fundrise also offers more account options, including joint brokerage accounts and entity accounts.
Read our Fundrise review.
Groundfloor vs Yieldstreet
While Groundfloor is solely a real-estate investing platform, Yieldstreet – Product Name Only also offers multi-class funds, fine art, and short-term assets. Yieldstreet isn’t the best option for serious real-estates investors, but it does have a lower account minimum (Yieldstreet – Account Minimum).
If you want to buy and sell a variety of different assets, particularly alternative investments like art, then Yieldstreet is a better option. Investors solely wanting to trade real estate and take out real estate-related loans are better off with Groundfloor.
Read our Yieldstreet review.
Related Terms
LROs: Groundfloor creates these by financing real estate developers and then converting those loans into fractional real estate debt investments. These investments have terms ranging from six to 18 months.Notes: These are similar to bonds because both investment types allow you to lend to a borrower (e.g., a corporation may issue bonds for fundraising purposes) and receive repayment of both your original investment plus interest. Terms at Groundfloor are 30 days, 90 days, or 12 months.REITs: REITs are publicly listed companies that own income-producing real estate assets. These are also arguably more liquid than Groundfloor’s LROs and real estate notes, since they don’t have investment terms.