Groundfloor vs Fundrise 2023: Which platform is right for you?

Disclosure: This is a testimonial in partnership with Fundrise & Groundfloor. We earn a commission from partner links on Modest Money.

As people continue to move their money into real estate investments more and more new real estate investing platforms come to market.

Platforms such as Groundfloor and Fundrise now give individual investors easy access to private residential and commercial real estate investments.

Here are some comparisons between Groundfloor and Fundrise, two of the most popular real estate platforms.

Let’s look at some comparisons:

Minimum Investment	$10	$10
Available Assets	Debt investment for Fix and Flip projects	Debt, Equity and Preferred Equity
Returns	Over 10% annually on average	10.1% (Average annual returns)
Fees	None	1% Total
Current Promotion	More Info	More Info
Modest Money Overall Rating	4.5 rating based on 5 ratings	4.5 rating based on 5 ratings

What is Groundfloor?

Groundfloor is a unique real estate investing platform founded in 2013 by Brian Dally and Nick Bhargava. Unlike traditional platforms that cater to institutional investors, Groundfloor targets individual, self-directed investors. Even those with just $10 can begin their investment journey here.

The platform’s main function is to provide loans for single-family and multi-family real estate projects. These loans are usually short-term, designed for investors to buy, renovate, and then sell properties for a profit. If they choose to keep the property, they typically refinance the Groundfloor loan immediately.

One of Groundfloor’s notable features is its willingness to finance properties that banks usually avoid, especially those in poor condition. Instead of relying heavily on the borrower’s credentials, Groundfloor offers loans based on the potential value of the property.

This approach leads to higher interest rates than traditional banks, but with much shorter terms.

For investor guidance, Groundfloor ranks loans from A to G based on risk. Factors like the borrower’s investment, experience, and involvement in the project are taken into consideration. Investors can diversify their funds across various loans, combining both high and low-risk options for a balanced investment.

While Groundfloor doesn’t charge its investors, they generate revenue by charging borrowers origination fees and closing costs. These fees range from 2% to 4% of the loan amount. The interest repaid by borrowers goes directly to the investors.

In the event a borrower defaults, Groundfloor has a two-step approach. Firstly, they try to resolve the default by imposing a higher interest rate until the borrower can repay. If this fails, the property is sold off, and the proceeds are distributed to investors according to their share. Although there’s always a risk of loss, the collateral-backed nature of Groundfloor investments offers a layer of security.

To start investing with Groundfloor, one needs only $10. After registering and linking a bank account, investors can easily choose and invest in loans, categorized by their risk level for convenience.

What is Fundrise?

Fundrise is an influential player in the online real estate investment platforms landscape, providing both accredited and non-accredited investors a unique approach to real estate investing.

Started in 2010 in Washington D.C. by the likes of Ben Miller and his colleagues, Fundrise’s claim to fame was its innovative approach to real estate crowdfunding.

Distinguishing itself from platforms like Groundfloor, Fundrise zeroes in on equity investments in commercial property rather than short-term debt investments in residential ones. Their signature offering? eREITs (electronic Real Estate Investment Trusts).

Think of eREITs as a digital evolution of the traditional Real Estate Investment Trust. Unlike regular REITs traded on the stock market, eREITs aren’t available on secondary markets, making them more of long-term investments.

One of the major draws of Fundrise is its ability to provide an affordable option to the average investors. With a mere initial investment of $10, everyday investors can dive into the real estate market, which typically demands significant upfront capital.

Investors can enjoy a diversified portfolio, minimizing risk levels and potentially amplifying returns. Fundrise ensures that the properties under its umbrella are meticulously chosen. They focus on acquiring real estate property at prices lower than their perceived value, then leveraging their expertise to enhance their worth over time.

This approach, combined with their comprehensive investment strategies (from conservative to aggressive), allows investors to align their investment journey based on risk tolerance and investment objectives.

A significant advantage is the platform’s transparency. Their annual asset management fee is 0.85% and an advisory fee of 0.15%. But, it’s worth noting that investments come with an investment horizon of about 5 years.

This is a result of the illiquidity of eREITs, making them more suitable for investors who have a longer investment horizon and a penchant for real estate deals that could yield higher returns in the right circumstances.

In conclusion, for those embarking on their real estate investment journey and seeking a blend of real estate investment options without the complexities of property management or the demands of huge initial capital, Fundrise could be a worthy contender.

Groundfloor Vs. Fundrise: Determining Factors?

There’s no doubt Groundfloor is one of Fundrise’s biggest competitors. It’s hard to split them but, there are three main factors to consider when comparing apples with apples.

Here’s how Groundfloor vs Fundrise compare below.

Factor 1: Investment Options

Groundfloor Investing Options

Groundfloor is a real estate crowdfunding platform that provides short-term residential real estate debt investment opportunities. These are usually for properties that banks do not typically finance.

Investors can get started with Groundfloor and start buying and selling properties for a profit in a short amount of time.

These include single family homes, townhouses, multi-family homes, and condos.

Groundfloor bases each high-interest rate loan on the potential of each property. Each real estate loan will be ranked based on risk using its A-G risk scale.

The lower risk loans will be ranked A, while the riskiest loans will be ranked G.

You can read the full review on Groundfloor finance here.

Fundrise Investing Options

Fundrise investment choices range from single-family properties to commercial real estate via REITs (real estate investment trusts).

They typically offer long-term, illiquid investments. This means there is a higher chance of strong returns.

There are different types of investments available to invest in, including conservatively-managed ones and aggressive ones. With regular updates, you won’t need to add any extra money for investing.

It is possible to start an investment for as low as $10.

All you need to do is choose your desired portfolio management approach. After that, the Fundrise team will manage your investment portfolio.

That’s it, you’re done.

Sit back and let Fundrise continue to look for and buy new assets for your diversi­fied portfolios.

You can read an in-depth review of Fundrise here.

Factor 2: Cost

Groundfloor Doesn’t Charge Any Fees

Groundfloor doesn’t charge you any fees. Instead, you will pay interest on the loan principal.

Groundfloor Costs

Groundfloor doesn’t charge any upfront costs for its loans. Borrowers don’t need to worry about paying any additional charges.

You are required to pay interest fees on the loan principal.

Fundrise Costs

With Fundrise, you pay a yearly fee of 1%. There are no additional hidden costs and there is no frontload fee with Fundrise.

Factor 3: Performance

Looking at a platform’s return history can be a great way of choosing which to go for.

But, no platform can guarantee fixed returns and past results never guarantee future earnings.

It really varies depending on the industry and the volatility of the markets. Here’s an overview of their historical performance.

Groundfloor Performance

According to Groundfloor, investors averaged a 10% annualized return in a 6-18 month time span.

Currently, Groundfloor has an average annualized return on its portfolio of 9.98%.
Learn More About Groundfloor

Fundrise Performance

There is no guarantee of returns from Fundrise, but their past performance shows Fundrise is legit.

For a better understanding of expected returns with Fundrise, here is the average annualized return over the past few years.

• 2021: 22.99%
• 2020: 7.31%
• 2019: 9.16%
• 2018: 8.81%
• 2017: 10.63%

Learn More About Fundrise

Groundfloor vs. Fundrise: The Bottom Line

Both Groundfloor and Fundrise are great for accredited and non-accredited investors looking to build a real estate portfolio.

Those who are comfortable with alternative investments and willing to take on higher risks will benefit from using Groundfloor.

For beginners, the low barrier to entry is a good stepping stone into the real estate market.

If you are someone looking for an alternative to REITs, you will enjoy what Groundfloor has to offer.

The low minimum investment amount with Fundrise will open new opportunities for those who do not want to spend a lot of money investing in real estate.

Fundrise is convenient for all, especially those with a long-term investment horizon.

If you like a little more control over your investments, go with Fundrise.

FAQs

Is being an accredited investor necessary to invest in Groundfloor or Fundrise?

No, both Groundfloor and Fundrise welcome non-accredited investors to invest with their platforms.

Between Groundfloor and Fundrise, which is more beginner-friendly?

Fundrise stands out as a beginner-friendly option due to its straightforward and intuitive interface. They provide eREITs for selection and feature distinct investment levels, enabling investors to enhance their contributions and benefit from additional features with each level. It caters well to those new to real estate investment.