Is Groundfloor The Best Real Estate Crowdfunding Investment?

Jeremy BiberdorfBy: Jeremy Biberdorf

October 22, 2023October 22, 2023

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Dipping your toes into the world of real estate investment doesn’t require a vault of cash anymore. Thanks to innovative real estate crowdfunding platforms, opportunities once reserved for the elite are now accessible to many.

These platforms not only unlock doors to larger projects but also handle the nitty-gritty – from paperwork to property management. With the added bonus of mobile apps, investing has never been more convenient.

One name that keeps popping up in this real estate crowdfunding industry is Groundfloor. Their unique approach lets you fund loans for private developers instead of buying property equity directly.

Many are asking, “Is Groundfloor the best Real Estate Crowdfunding Investment?” Well, to help answer that and provide more insights, keep reading this Groundfloor review. If you’re curious about diving into real estate, it might just be the guide you’re looking for.
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What is A Real Estate Crowdfunding Investment?

Real estate crowdfunding is an innovative approach that marries the traditional realm of property investment with the digital age’s power of collective financing. At its core, it involves pooling funds online from a diverse group of investors, allowing them to collectively purchase property or a stake in it. But this isn’t just about real estate.

The concept springs from the broader crowdfunding movement, which empowers creators, entrepreneurs, and visionaries to present their initiatives online and gain financial support from a vast audience. Through platforms that harness online communities and social networks, crowdfunding democratizes finance.

It brings investment opportunities to those who might have struggled with conventional funding routes, promoting a sense of community and shared purpose. For potential investors, real estate crowdfunding presents an enticing way to delve into property markets, diversifying their portfolios without the barriers of traditional real estate investment.

What Is Groundfloor?

Groundfloor, launched in 2013 by Brian Dally and Nick Bhargava, has quickly positioned itself as a standout platform in the world of real estate crowdfunding. Notably, it offers a distinct edge regarding liquidity. Many crowdfunding investments often lock in funds for extended periods, sometimes over five years.

In contrast, investments with Groundfloor typically see repayments within a brisk 4-12 months. But what makes Groundfloor possibly the best Real Estate Crowdfunding Investment? Beyond just pooling funds for property acquisitions, Groundfloor specializes in high-yield, real estate-secured debt. It serves as a hard money lender, extending fix-and-flip loans to ambitious real estate developers.

For those looking to invest, the platform presents a curated selection of residential real estate projects, from fix-and-flip operations to new constructions and stable buy-and-hold properties.

Groundfloor Investment Choices

Investors have the flexibility of short-term loans, ideal for both budding developers and seasoned investors looking to broaden their portfolios. A standout feature is Groundfloor’s support for Self-Directed IRAs, encompassing traditional, Roth, and SEP IRAs. Funding can come directly from checks, other IRAs, or even from established retirement plans like 401(k)s.

Their mobile app, Stairs, modernizes the investing experience. Starting at just $1, investors can dive in without the burden of fees and can expect quick withdrawals. Groundfloor diligently grades each loan from A-G based on risk, ensuring transparency for potential investors. Grade A represents safer bets with modest returns, while Grade G is riskier but potentially more lucrative.

What sets Groundfloor apart is its operation as a lending marketplace, not a traditional REIT. With a team rich in real estate know-how, they convert loans into Limited Recourse Obligations (LROs).

This method provides investors a share in both the interest and principal payments of specific loans. Investors earn from the interest Groundfloor levies on developers, showcasing a unique approach compared to typical equity-based platforms. After investing, regular project updates keep stakeholders in the loop. Once projects culminate, either via sales or refinancing, investors receive their due share of interest and principal.

Groundfloor Pricing & Fees

When it comes to pricing and fees, Groundfloor stands out in the crowded real estate crowdfunding landscape. Impressively, investors are not burdened with any fees. That’s right: Groundfloor charges absolutely no investor fees.

Instead, the platform generates its revenue directly from borrowers. Those seeking loans can expect to be charged a fee, which typically falls between 2% to 4.5% of the loan’s total amount. On top of that, a $495 application fee is applied.

For many investors, used to platforms extracting regular fees, this approach by Groundfloor is a breath of fresh air. It’s important to note that while there are no management fees, Groundfloor might levy additional service fees on certain loans.

Is Groundfloor The Best Real Estate Crowdfunding Investment?

Determining whether Groundfloor is the premier real estate crowdfunding crowdfunding platforms boils down to individual objectives. Groundfloor presents a convenient platform that boasts respectable returns, making it particularly attractive for those dipping their toes into real estate investing for the first time. However, with potentially higher returns comes increased risk.

If you have a risk appetite and are eyeing better yields, Groundfloor might align with your investment strategy. Notably, their investment threshold is quite low, requiring only $10 to kickstart a project.

Groundfloor’s LROs (Limited Recourse Obligations) offer a captivating avenue for investors. If you can forgo immediate liquidity and are intrigued by the idea of indirectly participating in fix and flip ventures, Groundfloor’s offerings might resonate with you.

Additionally, their newly introduced Groundfloor Notes provide an element of liquidity, with some terms spanning a mere 30 days.

If Groundfloor sounds like an intriguing choice to diversify your portfolio, Click Here to learn more or get started today.
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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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