- Quite small min. investment of USD 10 and available to non-accredited investors
- Outstanding UX for investment analysis and efficiency tracking
- Automated investment feature
- Clear information required for all loans supported and repaid
- Limited number of offered loans
- Needs registration to browse investment info
- Some assets are "deferred" with no residual cash flow (investors are paid in a lump sum at the end)
- No personal guarantee from the creditor for unpaid loans
Groundfloor is positioned as an online property lender, kind of like "hard-money" lenders widely utilized in residential property rehabilitation projects. Groundfloor goes over the borrower's loan application (just five percent is approved), rates the loan on a sliding scale, and opens it up to the investor base for financing (other platforms pre-fund the loans themselves as lenders, re-selling the loans to investors over time).
Groundfloor started in Georgia, raising more than USD 13 million in venture capital to assist financing their growth, and is now open to investors nationwide as of January 2018.
Forms of Investment Provided by GROUNDFLOOR
This property platform focuses specifically on financing short-term loans for residential 1-4 family developments, counting in 'fix-and-flips' and buy-and-hold developments and refinancing. Many of the early investments have been made in Georgia, but are available across the state starting from January 2018. While they got no preset caps, their loan goal volumes are $75K-$2M at the moment. Curious investors can remember that when it comes to deferred loan investments the greater the sum of the loan, the more investors need to completely finance the loan.
What doing business with GROUNDFLOOR gets you?
Some of the advantages of property investment (particularly debt investment) are the asset being backed by a tangible asset that is eligible to be sold off to recover investor money if anything goes wrong. Yet, as with other property investment platforms for crowdfunding, the investment with Groundfloor is not necessarily backed by the asset. Instead, you will get what is referred to as the "Limited Recourse Obligation" (LRO) which gets you a particular share of the principal and interest payments earned from the borrower on the mortgage. The FAQ says that when you buy the LRO, you are then a creditor. GROUNDFLOOR repays the LRO when the borrower pays back the loan you have invested in.
These kinds of securities are very popular among crowdfunding platforms for property investment, but investors need to be certain to comprehend their limitations. So while certain platforms set up different entities for every asset, when it comes to Groundfloor you, as an investor, are an unsecured creditor of Groundfloor, so if anything happens to the firm, you are in line with other non-secured creditors irrespective of what happens to the actual property you have invested in.
Groundfloor says that they are doing a handful of things to potentially alleviate some of the risk, such as issuing notes through subsidiaries and holding investor funds in separate FBO accounts. Investors need to review the docs in order to comprehend precisely what they are putting their money in.
How GROUNDFLOOR makes money?
Investors do not pay charges. Yes, there are platforms like these that require a "spread" of one or two percent between what the borrower cashes out and the investor gets, but this particular company requires borrowers to pay an origination charge (circa four percent) and a scopeof other administrative and processing charges, aligning their fees with other platforms.
Possible Returns and Cash Flow
Although some of the loans offered by Groundfloor also come with payments once a month, others are "deferred" which means that investors will not receive interest payments every month, instead getting a "balloon" of full interest and principal at the end of the loan period. Although this ensures that the borrower has more cash on hand to fund the venture, it also ensures that creditors lack a valuable tool to track the safety of the venture (regular payments). The firm does offer regular updates on the progress of the project through its asset management department, so investors should look carefully into the form of loan they are investing in (one with monthly payments or one with balloon payments deferred).
Scope of Offers on GROUNDFLOOR
As of now, Groundfloor lists circa 650 financed loans and borrowers have repaid 438 loans for USD 53 million. There are four offered assets to this date, all of which are deferred loans. Investors can pick individual properties to invest in, or assign an allocation through loan grades to invest automatically as new loans become eligible.
Groundfloor's loan browsing and real estate information (and loan tracking performance) interface is great and an stand-out.
Regulatory Structure and Standards for Due Diligence
Groundfloor operates under SEC Reg A+, using "Tier I," which is subject to some state-level reviews (which is why it was only open to investors in a few states). As of January 2018, Groundfloor will begin providing investments under "Tier II" of Reg A+ that doesn't need a state-by-state review. Reg A+ deals must also be licensed with the SEC, through comprehensive proposal circulars, and bid firms are subject to a range of financial disclosure standards.
Groundfloor main features and highlights
- P2P Real Estate Lending