Groundfloor is a financial technology and real estate investment platform that offers real estate-backed investments approved by the U.S. Securities and Exchange Commission to both accredited and non-accredited investors. The platform uses passive investment strategies to make it easy to access a variety of real estate projects.
Business Insider’s personal finance team compared Groundfloor to leading real estate investment platforms and found it to be a leader in automated real estate investing. However, its expensive and high-risk options make it less suitable for inexperienced investors.
Pros and Cons
Groundfloor Pros
- No fees for investors
- Short-term investment options
- Investments offer an average of 10% return
- Available to non-accredited investors
Groundfloor Cons
- Although investments have shorter terms, they are not as liquid as stocks and other securities
- You can lose money if the loan is not repaid
- Offers only real estate loans
- Limited educational resources
Overview
Groundfloor is a leading real estate investment app for experienced investors that allows them to allocate their funds across a variety of short-term, high-yield, private fractional real estate debt investments through U.S. Securities and Exchange Commission-approved bonds and limited recourse obligations (LROs).
The lack of management fees and automated diversification make it more attractive to those looking for short-term investment options. Groundfloor offers an automated investment account to generate long-term passive income, which can be suitable for intermediate to experienced investors.
Groundfloor also offers automated fractional real estate investments with its Flywheel Portfolio, which requires a minimum investment of $100. In general, investing in real estate can be overwhelming for beginners, even with the best mortgage platforms. While Groundfloor’s automated trading capabilities make investing in real estate easy, it can still be extremely confusing and risky for inexperienced investors. It is also more expensive than traditional investment options.
However, Groundfloor can be a great complement to a traditional investment portfolio, as it only offers real estate-backed investments. Investors looking for access to multiple asset classes should consider another investment platform.
Ways to Invest
Here’s how to invest in real estate with limited capital through Groundfloor.
Groundfloor invests exclusively in real estate partial debt with maturities ranging from 30 days to 36 months. The company offers limited return obligations (LROs), bonds, and a portfolio of fly-backs. Limited return obligations (LROs) are debt securities backed by an underlying real estate asset with an expected yield of 8% to 15%.
Standard bonds and refinancing loans are loans with a bond-like repayment structure and a term of 30, 90, or 12 months. They are backed by a portfolio of loans originated by Groundfloor that have not yet been funded as LROs on its platform. Bonds offer lower yields than LROs (5.75% to 7.50%), but also lower risk.
Flywheel Portfolio is Groundfloor’s latest innovation, allowing investors to automatically split their investments down to a fraction of a cent. It offers greater portfolio diversification and liquidity, with yields ranging from 9.5% to 14.5%.
Groundfloor Mobile-First Investing
The Groundfloor mobile app makes it easy to invest and track your investments. You’ll get a dashboard, automatic reinvestment features, savings goals, and portfolio forecasts to help you predict future balances.
The Portfolio Overview feature lets you track your investments, accrued interest, and annual returns, as well as see the total number of loans you’ve invested in. The Payment Allocation feature shows you the principal paid off, interest earned, and average return earned.
Groundfloor Self-Directed IRA
Groundfloor allows you to invest in LROs, Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, and Transfer IRAs. Forge Trust is the custodian of Groundfloor IRAs.
Groundfloor’s automated investment feature allocates your money across a variety of real estate projects, with investment returns ranging from 7% to 14%. Additionally, Groundfloor is waiving IRA fees through June 2025.
Groundfloor Flywheel Portfolio
Groundfloor’s Flywheel Portfolio is the platform’s newest fractional real estate investment offering. It allows investors to instantly diversify their portfolios across hundreds of short-term real estate loans with a simple and straightforward approach.
Participants receive monthly payments as their loans mature, with a targeted total return of 9% to 14.5%. New loans are added to the portfolio every six months. All Flywheel investments are liquidated or repaid within 36 months to ensure reliable liquidity for investors.
To invest in the Flywheel Portfolio, you only need $100 to get started. A 0.25% quarterly asset management fee applies.
Groundfloor for Borrowers
Borrowers can apply for loans ranging from $75,000 to $2,500,000 with interest rates ranging from 2% to 4.5%. To become a borrower, you must be an active LLC or corporation. Additionally, Groundfloor only accepts single-family residential real estate projects (1 to 4 units), and the property must be located in a state where Groundfloor actively lends, according to their website.
There are a few other things to keep in mind:
- The minimum property value is $50,000.
- You need a credit score above 640.
- Groundfloor includes mortgage points in closing costs; you can defer interest payments until the loan is paid off.
- You can get up to 100% of the loan value and up to 70% of the value after renovations (ARV represents the ratio of the loan amount to the value of the property after all renovations), depending on your experience.
Groundfloor’s deferred payment option allows borrowers to pay no interest until the loan is fully repaid. While the company also offers a monthly payment option, the deferred payment option allows you to defer interest payments until the end of the loan term. This option may be more attractive to real estate developers who prefer not to pay monthly interest.
Fees
A minimum down payment of $10 is required to start investing. Groundfloor’s partial real estate investment portfolio has a minimum investment of $100 (plus a 0.25% quarterly asset management fee). Groundfloor only charges borrowers fees, so investors do not pay any trading, management or account fees.
Groundfloor charges borrowers service fees. Loan interest rates range from 2.00% to 4%. The loan application fee is $495, and Groundfloor charges a $1,250 closing fee.
On the plus side, all fees associated with Groundfloor IRAs are waived through June 2025. IRAs require a minimum initial balance of $25,000.
Trustworthiness
Groundfloor has a B+ rating from the Better Business Bureau (BBB). BBB ratings range from A+ to F and reflect the agency’s opinion of the quality of a company’s interactions with customers.
Groundfloor is also BBB accredited, which means it meets the agency’s standards for trustworthiness, including honesty, integrity, responsiveness, and security.
The agency also considers the age of the company (including its type of business), customer complaint history, licensing and government actions, and advertising issues before assigning ratings.
Groundfloor has not had any recent lawsuits or scandals.
Alternatives
Here you can see how Groundfloor compares to other leading real estate investing apps.
Why You Should Trust Us
We analyzed Groundfloor’s real estate investing app using Business Insider’s investment platform rating methodology. We compared and examined account types, pricing, investment options, and overall customer experience when rating the platforms. Platforms are rated on a scale of 1 to 5.
Real estate investment platforms offer a wide range of assets, trading tools, and other resources. We evaluated Groundfloor by focusing on its performance in each category.
