Real estate investing can feel inaccessible to many investors. The high down payment requirements, monthly mortgage payments, and property management can turn an exciting opportunity into a financial burden. Some investors want the benefits of real estate investing without the time commitment or the risk of making beginner mistakes. Groundfloor can help. The real estate investment firm gives investors exposure to debt securities tied to real estate assets and has a team of professionals that will do all of the work for you.
What is Groundfloor?
Groundfloor is a real estate investment firm that lets accredited and non-accredited investors buy fractional shares of real estate debt securities. The firm seeks short-term investment opportunities that can deliver high yields for investors. Groundfloor claims they have delivered consistent 10% historical returns for investors.
The company focuses on debt notes for residential properties. Groundfloor can help you reliably generate monthly income from various real estate investments. The low investment requirements make it easier to spread your money across several investment opportunities instead of tying up your cash into a single asset. Unfortunately, the latter scenario is common for real estate investors, but Groundfloor investors have an easier time diversifying their portfolios.
Some investors are savvy enough to fix and flip properties. These investors want to find great short-term opportunities but may not have enough capital to acquire the property. Groundfloor can also help under this scenario and act as a hard money lender for individual investors.
You will need a 640 FICO score or higher to qualify for a loan. Borrowers can take out a loan that ranges from $75,000 to $750,000 for a property valued at $50,000 or higher. These hard money loans have 12-18 month terms which emphasize this financing is only for fix and flip investments. Interest rates start at 7.50%, and you do not need a minimum number of transactions to qualify for a loan.
Groundfloor recently celebrated its 10th anniversary and has made the Inc 5000 List three years in a row. The company also recently surpassed $1 billion in investments and was named one of the best places to work by Built In. Groundfloor has been qualified by the U.S. Security & Exchange Commission.
What are Fractionalized Real Estate Investments?
Fractional real estate investments give you partial ownership over a real estate property or debt instrument instead of full ownership. Obtaining partial ownership makes it easier to get exposure to the investment since fractional shares require less capital.
You won’t have to put in a high down payment to start receiving cash flow from real estate properties.
How Does Groundfloor Work?
Groundfloor offers fractional shares of debt securities like notes and LROs that are tied to real estate. These assets benefit from successes in the real estate market and can deliver consistent cash flow for investors. While other firms let you invest directly into properties through REITs, Groundfloor gives you indirect exposure that can outperform REITs.
The best analogy is to think of yourself as the bank collecting mortgage payments. LROs and real estate notes give you that position. As long as the payments continue to come in each month, Groundfloor will distribute the returns to investors. If payments slow down, the note holder (i.e., Groundfloor) can foreclose on the property, obtain ownership, and flip the property for a profit. Groundfloor can deliver yields much higher than big bank savings accounts without any fees or maximum balance requirements. You only need $10 to get started with Groundfloor.
Groundfloor Suite of Products
Groundfloor offers multiple investment opportunities for consumers who want to earn more from their money. These are the suite of products you can expect to find in Groundfloor.
LROs
LRO stands for Limited Recourse Obligation. These assets are debt securities tied to the performance of real estate loans. Groundfloor holds first lien positions on several loans, and if the borrowers make loan payments, the LROs will reward investors with cash flow. Groundfloor submits these debt securities to the SEC for qualification. Investors can choose which projects to invest in and how much capital to allocate to each project they want to pursue.
Notes
Real estate notes are debt securities that derive their value from an underlying property. These notes allow you to function as the bank and receive mortgage payments from the borrower. Groundfloor will manage the note and do all of the hard work, and then distribute the proceeds to investors.
Each Groundfloor Note offers different terms, interest rates, and minimums. The flexibility in these requirements can help you select notes that fulfill your criteria. These debt securities have short-term maturity dates, offer stability, and have yields much higher than Treasury bills.
IRA
Individual retirement accounts provide investors with tax advantages as they build wealth. You can choose between a traditional IRA or a Roth IRA. Traditional IRAs have tax-free contributions and lower your taxable income. However, withdrawals and capital gains from a traditional IRA will get taxed. Roth IRA contributions get taxed, but your withdrawals and capital gains are tax-free.
Groundfloor lets investors create IRAs through the firm’s partnership with Forge Trust. Groundfloor does not charge an annual fee for its IRAs and lets investors choose from the following types of accounts:
- Traditional IRA: Tax-deferred retirement savings
- Roth IRA: Pay taxes on your contributions, but withdraw money tax-free
- SEP IRA: Tax-deferred retirement savings for self-employed individuals and small business owners
- Simple IRA: Tax-deferred incentive match plan for employee
- Rollover IRA: Traditional IRA that you can rollover to a Groundfloor IRA
- Self-Employed 401(k): A retirement plan funded with after-tax dollars. These retirement accounts are for individuals who are sole proprietors and have no employees.
Groundfloor Account Offerings and Features
Groundfloor has several account offerings and features that can help you grow your wealth. Here’s what you can expect.
Earn
Groundfloor offers notes that let you earn 4% – 8% interest with set repayment dates. You can earn up to 200x the interest of banks and avoid fees. Notes do not come with maximum balances, and you can decide whether you want to withdraw or reinvest when you get repaid.
Invest
Groundfloor lets investors diversify their portfolios with various assets. Each investment opportunity only requires $10 per investment, but you can put more money into these assets for higher potential returns. You don’t have to pay any fees to invest, and there is no maximum balance. Investors can earn 10% average returns and generate consistent cash flow.
Borrow
Investors can borrow money from Groundfloor for short-term investment opportunities, such as fixes and flips. You don’t need to have any previous experience as a flipper to capitalize on these loans. You can borrow any amount between $75,000 and $750,000 for a 12-18 month term. You need a 640 credit score or higher to qualify for a loan and must use the capital to acquire a property that is worth at least $50,000. Payments get deferred, so you have more time to fix up the property and sell it for a profit.
What are the Benefits of Groundfloor?
Groundfloor can provide steady cash flow for investors who want to outperform Treasury bills and the broader market. Groundfloor has delivered 10% average annual returns for investors while delivering a hands-off experience. If you do not want to go through the hassle of owning real estate and finding real estate notes on your own, Groundfloor can help.
Where Does Groundfloor Stand Out?
Groundfloor stands out for its real estate notes and the ability to put these assets into retirement accounts. Through a retirement account, you can get several tax advantages while giving your investments time to compound before you retire. Groundfloor tends to deliver a 10% annualized return for investors and generate reliable cash flow.
If you have money in the bank earning interest and not doing much for you, Groundfloor can be a great option. You can pursue additional investment opportunities, advance in your career, and pursue other opportunities while your notes generate passive income. The firm’s notes yield up to 200x times the interest you will find on a typical savings account.
Should You Save and Invest with Groundfloor?
Groundfloor offers options for consumers who want to save and invest. The company offers a healthy mix of both options and refers to this style as Savesting. Groundfloor offers the reliability of a savings account with the returns you would expect to find from investment opportunities.
Start Savesting with Groundfloor
Groundfloor has several debt securities and financial products that can increase your wealth. The company has low minimums and no maximums. You won’t have to worry about fees and can generate steady cash flow from your investments. You can create a Groundfloor account here to get started.
