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Groundfloor Review 2024: 10% Returns?

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Real estate is one of the most popular asset classes for creating long-term wealth. It is also an excellent way to diversify your investment portfolio while getting similar returns as the stock market.

Unfortunately, direct investments in real estate properties require significant amounts of money and lucrative deals are usually only accessible to the wealthy.

The good news is that the rise of real estate investment trusts (REITs) and crowdfunding platforms has made it easier to invest in real estate passively. Nonetheless, many platforms and REITs require you to be an accredited investor or have high investment minimums.

Groundfloor aims to change that, as the company allows every investor to participate in real estate deals with as little as $10.

This review will dive deeper into Groundfloor, how the platform works, and its available features. We further look at the pricing structure, customer service, pros and cons, and who should invest in Groundfloor.

Can You INVEST in House Flips with $10? (Groundfloor Investing Review)
Groundfloor

Overall Rating 3.1

The Modest Wallet Overall Rating (Our Rating Methodology)

Bottom Line: Groundfloor is a real estate crowdfunding platform offering its users (i.e. accredited and non-accredited investors) the opportunity to participate directly in real estate investment loans on a fractional basis.

Account minimum

3.5

Account fees

3.0

Investment selection

3.5

Liquidity

3.0

Features and tools

2.5

Ease of use

3.0

Security

4.0

Customer support

2.5

Best for:

  • Long-term real estate investors
  • Accredited and non-accredited investors
  • Investors looking for real estate exposure

Pros:

  • Available to non-accredited investors
  • Low minimum investment
  • IRA accounts available

Cons:

  • No bankruptcy protection offered
  • Significant risks involved
  • Unproven business model

What Is Groundfloor?

Groundfloor is a lending and investment crowdfunding platform founded in 2013 by Brian Dally and Nick Bhargava that opens the doors to real estate for everyone and connects investors with professional real estate developers.

The platform enables investors to participate directly in short-term, high-yield real estate investment loans on a fractional basis.

Investors can create personalized portfolios and make individual investments that align with their investment strategy and risk tolerance. The company believes that everyone should diversify their portfolio and benefit from mitigating risk and realizing higher returns in the long run.

Groundfloor Homepage
Source: Groundfloor

How Does Groundfloor Work?

The overall process commences with the borrowers submitting a “hard money” loan application, which the proprietary Groundfloor algorithm will review, underwrite, and grade.

From there, Groundfloor funds the approved loans upfront and transforms them into a limited resource obligation (LRO) security. After that, the loan is taken live, and investors can invest in these LROs.

Once the borrower repays the loan, Groundfloor distributes the principal as a one-time lump sum plus interest to all investors who invested in this loan.

Account Minimum 

To get started on Groundfloor, You must deposit at least $100 into your account. However, once you’re on Groundfloor, you can allocate as little as $10 to each individual loan plan. If you’re using Groundfloor’s mobile-first Auto Investor 3.0 feature, you could put in as little as $1 per loan deal. 

Requirements To Open an Account

To open an account with Groundfloor, you must supply personal information like your full name, email address, and your place of residence.

Groundfloor also works with the IRA Services’ official individual retirement account management system if you’re rolling over a retirement account like a Traditional or Roth IRA. You’ll need to supply financial info from and to your IRA custodian for a successful IRA rollover. 

Although Groundfloor is open to non-accredited investors, you can submit paperwork such as tax documents if you’re an accredited investor. Again, it’s not necessary to be an accredited investor to use Groundfloor, but you’ll receive extra privileges and opportunities with this status. 

How to Open a Groundfloor Account

Setting up a Groundfloor account takes only a few minutes. Click on the sign-up button on the company’s website and enter some personal information, an e-mail address, and a password. If you qualify as an accredited investor, you can let the platform know and receive additional benefits. 

To qualify as an accredited investor, you must meet one of two criteria:

  • $200,000 in annual income per year for the last two years ($300,000 with a spouse)
  • $1 million in net worth excluding your primary residence

Next, you deposit the funds you would like to invest in real estate projects and transfer them from your linked bank account. The platform utilizes a trusted third-party processor for these transfers.

Groundfloor Create an Account
Source: Groundfloor

Groundfloor Features

Groundfloor doesn’t have many bells and whistles as it focuses solely on its USP, bringing real estate developers and retail investors together. Read on to find out more about their features.

Minimum Investment$100 to open an account ($10 minimum amount allocated to an individual loan)
FeesNo fees for investors
Investment TypesDebt
Investment Terms6-12 months
DistributionsTwo options; 1. Deferred (principal and interest) until the end of the project term, or 2. monthly
Property TypesResidential single-family homes, multi-family homes, townhomes, and condominiums
Account TypesTaxable, Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, and Simple IRA
Availability50 states
SecurityEncryption (AES-256), HTTPS, and SSL/TLS security protocols
PromotionNone
Secondary MarketNo
1031 ExchangeNo
Accreditation RequiredNo
Pre-vetted & pre-fundedyes
SupportContact Form, Phone (+1 404-850-9223) and Email ([email protected])

Groundfloor Loans

The platform assigns all approved loans one of seven grades, ranging from A to G, as well as a corresponding rate of return.

Groundfloor’s Grade A loans are the least risky investments with the lowest default and interest payment rates.

On the other end, Grade G loans carry the most risk but also offer the highest expected return and interest rates. As of this writing, the minimum return rates per grade are: 

  • Grade A: 5%
  • Grade B: 6%
  • Grade C: 8%
  • Grade D: 9%
  • Grade E: 12%
  • Grade F: 14%
  • Grade G: 15%

These are only the rate floors for every grade. For example, high-yield Grade G return rates can go up as high as 26%.

The platform uses different factors such as location, borrower commitment, or skin-in-the-game to grade a loan and assign a rate of return. Groundfloor also looks at the loan size, terms, borrower history, and other factors to finalize the grading. 

Automatic Investing

Groundfloor also provides an automatic investing feature, allowing investors to allocate their money to different loans across loan grades. From there, the platform will take over and automatically invest your money according to your preferences.

Only loans you are currently not invested in are eligible for allocations. You can also use the feature to reinvest interest payments you received from your loan investments. 

Groundfloor Automatic Investing
Source: Groundfloor

Availability

Groundfloor has been allowing investors in all 50 states to invest in short-term loans since 2018. However, Nebraska residents can’t make investments due to state-specific legislation. 

Moreover, investors can’t diversify their real estate investments across all states because Groundfloor is only licensed to finance loans in the following 30 states: Alabama, Arizona, Colorado, Connecticut, D.C., Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Massachusetts, Maryland, Michigan, Minnesota, Missouri, North Carolina, New Hampshire, New Jersey, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, and Wisconsin. 

Referral Program

Groundfloor also offers a referral program. Every investor has a unique referral link they can send to friends and family. Once the referred person signs up on Groundfloor and transfers funds into their account, the recruiting person and the referred person get a $10 investment credit. You will find your unique link in your investor account when you click on “referral program” in the menu.

How Does Groundfloor Work?
Source: Groundfloor

Groundfloor for Borrowers

In contrast to investors, borrowers from 30 states can have up to 4 loans on the platform simultaneously for renovation projects. Terms range from six to 36 months and loan amounts from $75,000 to $2,000,000.

Once they finish their funded project, they either sell the property to pay back the loan or hold the property for rental purposes after refinancing it. 

Borrowers are also the party who has to pay all the fees on the platform, investors don’t have to pay any fees.

Limited Recourse Obligations 

Groundfloor’s signature offering is its Limited Recourse Obligations (LROs), which give non-accredited and accredited investors direct access to real estate debt.

Each of these debt securities first goes through the US Securities and Exchange Commission (SEC) for processing, and Groundfloor uses its proprietary algorithms to assign each of these LROs a different risk status.

The “limited” aspect of LROs refers to the limited power creditors have to seize collateral (in this case, real estate) if the borrower fails to repay their borrowed funds. Anyone who buys an LRO through Groundfloor receives “first lien” status, which means they’re first in line to receive compensation should a borrower default on their loan.

If borrowers pay off their LRO in full, Groundfloor sends the principal and interest payments to each investor participating in this debt obligation.

Groundfloor Notes 

First introduced in beta in 2020, Groundfloor now offers its Real Estate Notes to non-accredited and accredited investors as an alternative to its standard LRO offerings.

These fixed-length investments are used to fund Groundfloor’s capital lending ventures, and they’re secured using pools of loans that Groundfloor originated but has yet to formally list as LROs.

Groundfloor also describes this product as similar to “publicly-issued, non-traded secured debt,” and these Notes offer investors a more predictable way to earn passive income thanks to their fixed duration.   

Groundfloor IRAs

If you’d like to invest some of your retirement savings into real estate debt, it’s possible to rollover a current IRA into Groundfloor’s platform and use funds for products like LROs.

The primary benefit of rolling over IRA funds to invest on Groundfloor is taking advantage of the tax breaks in your retirement plans. For example, if you have a Traditional IRA, you still get tax deductions on your contributions through Groundfloor’s self-directed IRA. 

Currently, Groundfloor allows investors who have any of the following IRA types to transfer funds into a self-directed IRA portfolio:

  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • 401(k)s
  • SIMPLE IRA

Educational Resources 

If you’re starting on the “ground floor” with your real estate investing knowledge, you can level up your expertise on Groundfloor’s official blog.

On this portal, you’ll find helpful tabs for “Real Estate 101” and “Groundfloor 101” to help you understand the basics of putting money to work in real estate and navigating Groundfloor’s platform.

This blog also includes helpful articles on the latest company news and reports — as well as special project spotlights — so you can stay in the know about the latest offerings and updates on Groundfloor. 

Mobile Apps 

In late 2022, Groundfloor introduced a mobile app for iOS and Android devices to make it easy to track your portfolios while on the go.

With either of these apps, you can review your investments, transfer funds, and explore analytics on your returns to maximize earnings potential. Although Groundfloor’s app is relatively new, the development team says it’s working on adding helpful new features every month, including automatic notifications and push alerts.

Currently, the Groundfloor app has an average 4-star rating with over 100 reviews on both Google Play and the Apple App Store


Groundfloor Performance 

Groundfloor advertises an average yearly rate of return of 10% for its clients, but there is an asterisk next to this estimate.

If you scroll down to the fine print, Groundfloor explains this 10% figure is based on “8 years of historical returns” plus “current available investments,” and the range of returns can be between 4% – 14%.

Also, Groundfloor doesn’t account for losses due to loan defaults in this calculation.   


Groundfloor Pricing and Fees

Investors don’t have to pay any fees to sign up to the platform, browse listings, and invest in their deals of choice.

The reason is that borrowers pay between 2% and 4.5% of interest fees on the loan principal. They also pay $1,250 in closing costs and a $250 application fee. This means that returns will not be diminished by any fees.

Moreover, the minimum investment is just $10, one of the lowest minimums in the real estate crowdfunding space. As a result, investors can easily spread their risk over multiple deals without having to shell out thousands of dollars. 


Groundfloor Security

All loans on the Groundfloor marketplace are qualified by the U.S. Securities and Exchange Commission (SEC). This provides a higher degree of protection and makes the investments subject to increased oversight. Besides, Groundfloor investments are secured collateral and investors are the first in line to be repaid if the property never sells. 

Moreover, Groundfloor uses a secure encryption partner to transfer funds from investors’ bank accounts to the platform. These funds are then held in your name and are FDIC-insured until invested.

The company uses industry-leading AES-256 encryption standards to secure your data, the same standard used by banks. Moreover, communication is encrypted and secured by HTTPS and SSL/TLS.

Groundfloor Funding Investments
Source: Groundfloor

Groundfloor Customer Service

You can reach the Groundfloor customer service by phone between 9 am and 5 pm EST or via e-mail and the contact form.

They have dedicated phone numbers and e-mail addresses for investor support, borrower services, and asset management.

Although there are some negative reviews concerning the platform, Groundfloor users are generally satisfied with it.


Groundfloor Ease of Use

Groundfloor has a straightforward desktop interface and plenty of support lines (including a customer service phone number) to help investors who are running into any issues.

Although Groundfloor’s apps are new, they give clients another simple way to interact with the platform, and it helps that both apps have solid scores on Google Play and the App Store.

Groundfloor has been an accredited business with the Better Business Bureau (BBB) since 2015 and has a “B” rating. Plus, according to Trustpilot reviewers, Groundfloor is a solid company with an average score of 4 stars and over 350 reviews. 

However, Groundfloor has 1.88 stars out of 5 from customer reviews on the BBB’s portal and 20 formal complaints over the past three years.

Most of these negative comments focus on issues like transferring funds from Groundfloor or losses due to loan defaults. On the positive side, Groundfloor responds to most of these complaints with details on the inherent risks of investing in LROs as well as information on attempts to solve transfer issues.


Groundfloor Pros Explained 

  • $10 minimum investment: As long as you have $10, you can start building a real estate portfolio on Groundfloor. This low entry barrier makes real estate exposure more accessible to retail investors, and it gives users the freedom to allocate a tiny bit of their portfolio to this sector if they want it to be a small part of their financial strategy. 
  • Open to non-accredited investors: Although Groundfloor welcomes accredited investors, you don’t need to fit this status to take advantage of Groundfloor’s products. Non-accredited investors can access many of Groundfloor’s unique selling points, including its LROs and Notes. 
  • Zero fees for investors: Instead of charging investors fees to fund real estate debt, Groundfloor collects its fees and closing costs from borrowers. This competitive strategy means you don’t have to factor in any extra expenses eating away at your investment. 
  • High deal flow: Groundfloor is constantly financing loans with prospective clients and typically refreshes its offerings monthly. Even if you miss an attractive LRO or Note, chances are you’ll have plenty of other opportunities in the near future. Also, you can keep track of Groundfloor’s investment activities with its official blog reports. 
  • Automatic investing is supported: If you don’t have the time to review the finer details of Groundfloor’s deals, you could set your investing schedule on auto-pilot with an Auto Investor Account. Using this advanced feature, you set the risk parameters for your portfolio, and Groundfloor’s algorithms allocate your funds to the appropriate loan categories. 
  • Investors have complete control over their investment choices: Unlike investing in REITs or privately managed real estate accounts, Groundfloor investors can choose the loan deals they feel most comfortable investing in. Also, with Groundfloor’s LROs, investors have first lien priority to recover partially lost funds in the case of a default.  
  • Deals are color-coded and graded according to their relative risk level: Groundfloor has a straightforward, lettered grading system to help investors understand each loan’s potential risks and returns before committing to fractional ownership. This color-coded scheme makes it simple to gauge the riskiness of a loan beforehand to make informed investing decisions. 
  • Allows IRA investments: Groundfloor makes it easy to take advantage of the tax benefits from retirement accounts with IRA rollovers. Whether you want to fund your accounts with Roth IRAs, Traditional IRAs, or 401(k)s, the team at Groundfloor will help you through the rollover process and transition your account into a self-directed IRA. 

Groundfloor Cons Explained 

  • Loan defaults are part of the business model: A significant risk with investing in Groundfloor’s loans is the potential of a default. Although Groundfloor does its best to warn investors of the likelihood of this scenario with its grading system, there’s always a chance even “highly-rated” borrowers don’t pay their loans and investors lose their principal. 
  • No bankruptcy protection: Associated with the risk of default, Groundfloor investors don’t have special bankruptcy protections if their borrower doesn’t make the agreed-upon payments. Investors need to feel comfortable taking on this risk when putting money to work on Groundfloor’s platform. 
  • Updates on loans only monthly: Although Groundfloor is constantly pursuing deals with borrowers, you won’t see these new opportunities in real-time. Instead, Groundfloor typically updates its latest offerings once per month, which can be a nuisance if investors are on the fence about certain loans and want to wait before committing. 
  • No diversification within real estate asset classes: Groundfloor gives non-accredited investors access to the real estate sector, but it focuses on debt deals for residential developments. If you’re more interested in other aspects of real estate investing (e.g., commercial properties), you may not find the diversity you’re interested in with a Groundfloor account.
Groundfloor Loans
Source: Groundfloor

Groundfloor Alternatives

While Groundfloor is open to everyone, you might not want to invest only in house flipping deals. Therefore, we have listed two other platforms below:

Groundfloor vs. Fundrise

Another crowdfunding platform offering non-accredited investors the chance to participate in real estate is Fundrise. The entry-level Starter Portfolio also starts at just $10 and allows automatic investments. But that’s where the commonalities end.

With Fundrise, investors invest in commercial and residential real estate investment portfolios instead of investing directly in private fix-and-flip deals with Groundfloor. Moreover, Fundrise charges investors an annual advisory fee of 0.15% as well as an annual asset management fee of up to 0.85%, making it 1% per year. In contrast, investors don’t pay any fees on Groundfloor.

Fundrise offers five account levels that unlock different features such as IRA investing, a customized portfolio strategy, or access to private REITs. However, these account levels require a minimum investment of at least $1,000. Read our full Fundrise review to learn more.

Groundfloor vs. Roofstock

Roofstock follows a different real estate investment approach. The platform allows all types of investors to directly invest in turnkey single-family rental homes using property management services that handle operations.

Investors can also invest in custom portfolios that are similar to non-public REITs and give you more diversification than investing in a single home.

Investors can browse the listings on the marketplace and make offers based on preferences. When an offer is accepted, the platform charges a fee of 0.5% for the contract value or $500, whichever is higher.

Once you own the property, you will earn rental income. You can also resell the property on the platform. Some properties are also eligible for 1031 exchanges. Read our full Roofstock review to learn more.

GroundfloorFundriseRoofstock
Our Rating

3.1

4.4

4.1

FeesNo fees for investors1.0% per year0.5% purchase price
Account Minimum$10$10$0
PromotionNoneAdvisory fee waived (*12 months)None
HighlightAccess to real estate investment loans on a fractional basisAccess to private real estate dealsInvest in real estate with a focus on single-family rental properties
Best ForReal estate lendersLong term investorsRental property investors

Compare Groundfloor

Find out how Groundfloor stacks up against the competition.


Who Is Groundfloor Best For?

Groundfloor is suitable for all accredited and non-accredited investors who want to diversify their portfolio with real estate debt investments and can sustain the risks that come with real estate investing

The platform is especially useful for non-accredited investors as they are usually excluded from other real estate crowdfunding platforms. Moreover, beginner investors who want to get their feet wet and retail investors with small portfolios benefit massively from the low $10 minimum investment.

Ultimately, investors who want to have full control over their real estate investments instead of investing their money with a fund manager (REITs) or in a pre-built portfolio will prefer Groundfloor over their competition.


Notable Groundfloor Updates And News 

  • Groundfloor mobile app launches: Groundfloor released its mobile app in beta on both the Apple App Store and Google Play in late 2022. While this app focuses on essential features to start, such as transfers and portfolio management, Groundfloor’s team plans to introduce more features to this mobile service in the succeeding months. Also, if you have any suggestions or complaints about Groundfloor’s app, the company welcomes feedback via email to [email protected].
  • Support for USDC stablecoin: In another 2022 blog post, Groundfloor announced it accepts the USD-pegged cryptocurrency USDC as a viable form of investment. So, any crypto-savvy investors who hold USDC on their Ethereum wallets can use it on Groundfloor’s platform to invest in real estate deals. 
  • Auto Investor 3.0: Groundfloor now has a third generation of its automatic investing tool called the Auto Investor Account.” Unlike the standard Groundfloor platform, this automatic account is mobile-first and uses data from Groundfloor’s investors to create a hands-off loan investing experience for clients. Also, instead of investing $10 in a loan, Groundfloor’s Auto Investor Account lets users allocate as little as $1 per loan according to its pre-built diversification parameters. 

Groundfloor Review FAQ

Below you will find frequently asked questions and our answers concerning the Groundfloor investment offering.

Is Groundfloor Legit?

Groundfloor was founded in 2013 and is a legit company. Their executive team is skilled in real estate, financial services, and technology and has more than 100 years of combined experience.

The crowdfunding platform offers a high volume of new deals every month and is transparent about the fact that default loans happen (they are part of the business model to maximize returns).

However, this also led to a few complaints and raised questions about the due diligence process of the platform.

Who Can Invest with Groundfloor?

Groundfloor is open to every investor who can spare $10 to invest on the platform ($100 to open the account), no matter if accredited or non-accredited.

This setup was by design as the platform revolutionized real estate investing and made it possible for everyone to participate in real estate investment opportunities.

However, accredited investors who meet the criteria can check a box when signing up to receive additional benefits.

What Is the Minimum Groundfloor Investment?

Investors can start investing on Groundfloor with as little as $10, but you will need $100 to open your Groundfloor account.

This is one of the lowest investment minimums in the real estate crowdfunding space.

The company believes that everyone should be able to use real estate to diversify an investment portfolio. Whereas investors have to shell out thousands of dollars on other platforms, they can use the same amount and distribute it over hundreds of different deals. 

What Are Typical Groundfloor Returns?

Groundfloor states that their actual average annualized returns to date are 10.5%. Their typical loans returned about 10% per year for six to 12-month terms.

Keep in mind that the platform doesn’t charge its investors any fees, which you would otherwise have to deduct from the stated returns.

Does Groundfloor Have a Mobile App?

Yes, Groundfloor has a mobile app for both iOS and Android users. They also have a website optimized for mobile devices.

Borrowers looking for funding as well as investors looking for investment opportunities will find the platform easy to use.

Is Groundfloor Considered a REIT?

No, Groundfloor is not a REIT. The reason is that investors don’t have to cede control of their capital to a fund manager who invests for them and decides on the risk/reward ratio.

Instead, investors have complete control over the deals they want to invest in, can browse the listings themselves, and deploy their money according to their strategy and risk tolerance.

By investing in multiple deals, investors essentially become their own fund managers and create their own REITs.

In A Nutshell

  • Minimum Investment: $10 to invest ($100 to open an account)
  • Fees: No fees for investors
  • Promotion: None
Groundfloor

on Groundfloor’s website


Final Thoughts

Groundflloor is one of the few crowdfunding platforms that are open to non-accredited investors. In addition, they provide short-term deals that don’t lock up your money for years and have investment minimums of just $10 per deal, which is perfect for diversification and lowering your risk.

Allowing everyone to invest directly in private real estate deals without having to bring thousands of dollars to the table is still relatively unique in the real estate crowdfunding space. If you aren’t accredited and don’t want to invest in REITs, it’s worth checking out Groundfloor.

However, investors can only invest in house rehabbing projects but not commercial properties such as rented-out apartment blocks or office buildings. If you want to diversify your money across multiple commercial real estate assets or are an accredited investor with the ability to invest in bigger deals, make sure to also look into other real estate crowdfunding platforms.

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