Review of real estate investment on the ground floor 2021
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- Groundfloor offers real estate debt investments to unaccredited, accredited and non-US investors.
- Investors won’t have to pay a fee, but you’ll need at least $ 10 to get started.
- The ground floor is ideal for passive investors looking to profit from investments in short-term, high-yield private real estate debt.
- Click here to open an account with Groundfloor.
Is Groundfloor right for you?
Founded in 2018 by Brian Dally and Nick Bhargava, Groundfloor says it’s the first real estate investment platform offer investments in real estate notes qualified by the SEC (under SEC A + regulations). It serves unaccredited investors, US-based and non-US based individuals, and accredited investors (accredited investors are individuals with a minimum net worth of $ 1 million or an annual salary greater than $ 200,000).
The ground floor is ideal for passive investors looking to profit from investments in short-term, high-yield private real estate debt. It offers several notable features, including shorter investment terms of six to 18 months (many platforms, like Fund raising and Diversyfund, require a minimum of five years), a proprietary loan rating algorithm, automated features and investment options for borrowers and brokers.
Not sure if Groundfloor is right for you? Read on to see how it compares to other real estate platforms.
How does Groundfloor compare?
If you are looking to earn monthly income from single family rental properties while using the help of a Roofstock property manager, the Roofstock platform might be right for you.
The ground floor, on the other hand, is ideal for investors looking for low cost real estate investments with more than
Ways to invest with Groundfloor
Limited Recourse Bonds (LROs) and Notes
Groundfloor says it currently supports investments from personal accounts, limited liability companies, trusts, accounts for the benefit of (FBO) and IRA. When it comes to investment types, the company offers two choices: LROs and Notes.
This is how it works. Groundfloor offers financing to real estate developers, or borrowers, who need financing for “fix-and-flip” real estate projects. After making the loan (which typically ranges from $ 75,000 to $ 1 million), Groundfloor works with the SEC to convert the loans into qualified LROs or fractional real estate debt investments.
As long as you meet the required minimum $ 10 account, you can purchase these investments in any of the states in which Groundfloor lends. According to its website, Groundfloor is the first lien on every loan (meaning it’s the first to be repaid if the borrower defaults), and each loan is backed by the real estate project (s). ) underlying (s). These investments bring in 10% on average.
Groundfloor also gives you the power to decide how much to invest in each private home loan, and the company uses a proprietary scoring algorithm that rates loans using an AG rating scale. The company says Class A loans have lower risk, lower expected returns, lower expected credit losses, and lower interest payments.
Class G loans, on the other hand, come with higher risk, higher expected returns, higher expected loan losses and higher interest payments, according to the Groundfloor website. If you’re not sure how the interest rates vary for different notes, consider Groundfloor’s minimum lending rates:
- Category A: 5%
- Category B: 7%
- Category C: 9.5%
- Category D: 13%
- Class E: 16.5%
- Category F: 20%
- Class G: 24%
* Note: These are the minimum rates that Groundfloor must charge borrowers for each loan note.
Like LROs, Groundfloor Notes (Notes are real estate debt investments that use a repayment structure similar to obligations) are also short-term investments, but he indicates that these investments are secured by a pool of loans originating from Groundfloor that have not yet been funded as an LRO on his platform.
Its notes are generally available in terms of 30 days, 90 days or 12 months. These products offer lower returns than its LROS, but they also offer less risk and shorter durations, according to Groundfloor.
Finally, if you are more of a hands-off investor, Groundfloor also offers an automatic investing feature that allocates your money to real estate projects that match your risk tolerance. Its automated features were previously only available to accredited investors through the Anchor Investor Program, but now accredited and non-accredited investors can take advantage of the tool.
Groundfloor also allows you to invest in real estate through traditional means, RothIRA, SEP, SIMPLE and rollover. In fact, the investment app is currently waiving all IRA fees until the first quarter of 2021. Groundfloor says it will offer investors 90 days notice before resuming its regular IRA fees.
You can fund IRAs in one of three ways:
- Contribute by check
- Transfer funds from another IRA
- The rolling money of a qualifier pension plan like a 401 (k) or 403 (b)
These retirement accounts are available for both individuals and businesses. It’s important to note, however, that you will only be able to invest in LROs and Notes.
Offers to borrowers, brokers and shareholders
Groundfloor also offers investment options for borrowers, brokers and shareholders.
If you are a borrower or real estate developer interested in repairing and reversing real estate projects, Groundfloor offers terms of six, nine and 12 months with loans ranging from $ 75,000 to $ 1 million. The rates on these loans start at 5.5% and Groundfloor does not require borrowers to have minimal transaction experience.
To be eligible, you must operate as part of an LLC or an active corporation. Additionally, Groundfloor only accepts projects that are single-family residential properties (with 1-4 units), and the property must be located in a condition in which Groundfloor is actively lending, according to its website.
There are just a few other things to note:
- You will need to have a credit score above 600
- Groundfloor rolls mortgage points in closing costs, you can defer the interest payment until the loan is repaid
- You can receive up to 100% loan / cost and up to 75% loan on value after repair (VAR is the ratio of loan amount to property value after all repairs are complete)
The reason borrowers don’t have to pay interest until loan repayment is due to Groundfloor’s true deferred payment option. Although the company also offers a possibility of monthly payment, the deferred option essentially allows you to defer your interest payments until the end of your loan. This might be a more attractive option for developers who don’t want to pay monthly interest.
When it comes to its broker offerings, the investment app’s Preferred Broker Program offers real estate brokers the ability to negotiate loans with Groundfloor for clients interested in investing (Groundfloor also has a benchmark broker offering that gives brokers one point for each client they refer).
On the shareholder side, Groundfloor’s partnership with SeedInvest offers investors the possibility of buying shares of Groundfloor itself.
Is the ground floor trustworthy?
The ground floor currently has an A + rating with the Better Business Bureau. BBB ratings range from A + to F and reflect the office’s opinion of how a business interacts with its customers. Therefore, an A + shows a high level of customer reliability.
Before issuing notes, the office also takes into account the time spent by a company in business (including the type of company it is), history of customer complaints, licenses and government actions. , as well as advertising issues.
But its ratings do not absolutely guarantee that a business will be reliable or successful.
This is why it is important to also do your own homework before creating an account. Groundfloor’s record shows that it has closed two complaints in the past three years.