Updated May 5, 2024 12:43 PM PT

GROUNDFLOOR Review

By Andrew Fitzgerald
Read more about GROUNDFLOOR
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At Groundfloor, you can earn up to 10% annually from short-term real estate investments. Plus, you only need $10 to start. Read on.

5-point scale (the higher, the better)

Pros and Cons

  • No investor fees
  • High historical returns
  • $10 minimum
  • Risk of default
  • Debt investments only (no equity)
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Bottom Line

Crowdfunding platform for passive investors looking for short-term real estate debt investments

Lending your money can be a great way to gain passive income. You receive interest based on a fixed term, and the collateral secures your investment.

Thanks to Groundfloor's fractional real estate loans, even new investors can start lending money to borrowers for profit.

In this review, learn how much you can earn in Groundfloor and how it works.

What is Groundfloor?

Groundfloor is a real estate peer-to-peer lending platform. Investors fund the real estate loans issued by Groundfloor to borrowers and, in return, they receive interest payments.

The minimum investment at Groundfloor is only $10. It is open to both accredited and non-accredited investors.

Groundfloor, founded by Brian Dally and Nick Bhargava in 2013, has shown strong performance, as reflected in the stats below:

Number of investors250,000+
Average returns to date10+%
Total interest earned by investors$12,693,868 / $54.6M(all time)
Total investment volume$1.3B (all time)
Total loans originated / closed4,879
Average loan size$223,000

How Does Groundfloor Work?

Groundfloor originates real estate loans that you can fund as an investor. Borrowers use the money to renovate or build houses, which they then sell to repay the loans.

As borrowers repay the loan, you earn interest. Each loan has a fixed interest rate and a term of just 12 to 18 months.

Here are the 3 types of offerings in Groundfloor for investors:

  • Groundfloor LROs (Limited Recourse Obligations)
    Invest in loans backed by a real-estate asset as collateral. In case of a default, you're the priority for repayment as first lien.

    The average return for LROs is over 10% annually. [1]

  • Groundfloor Notes
    Receive fixed coupon payments periodically and get your principal at the end. Enjoy the combined benefits of saving and investing with this passive investment.

  • IRA
    Add real estate offerings to your retirement account for diversification and enjoy tax benefits.

    Minimum opening balance: $25,000

You can either select individual loans or use the Auto Investor Account. When you automate your investments, your money is automatically diversified across all loans available for funding.

How Groundfloor's Loan Process Works

Here's a quick look at how Groundfloor's loan process works:

  1. The borrower submits a loan application. Every loan goes through a stringent underwriting process.

    The loan grade Groundfloor assigns depends on many factors, like:[2]

    • Loan-to-value ratio
    • Location of house
    • Quality of valuation report
    • Borrower experience
    • Borrower Commitment
    • How much skin-in-the-game the borrower has

  2. Groundfloor gives the borrower an initial payment (called pre-funding) so they can start the project.

  3. Groundfloor then converts the loans into securities with the Securities and Exchange Commission (SEC). Once qualified, the public can start investing in them for only $10. You're actually investing in a Limited Recourse Obligation (LRO).

  4. During the project, Groundfloor carefully monitors the progress. They try to resolve problems if anything goes off-track.

  5. When the project is complete, the house is put on the market. The borrower uses funds from the sale to pay back the loan in full. Groundfloor then distributes that to the investors.

Earning Money on Groundfloor

You can earn up to 10% annually on Groundfloor with a well-diversified portfolio based on its historical returns.[3]

As there is a fixed repayment date for loans, your actual earnings will still depend on when you invested in the loan. The earlier you invest in a new loan, the more you maximize your returns.

Below is a sample calculation of how much you can earn with a $1,000 initial investment, assuming 10% annual returns with varying investment periods.

Days from Investment Date until Repayment DateCapitalOverall Interest Earned
90$1,000.00$25.66
180$1,000.00$50.32
270$1,000.00$74.97
360$1,000.00$99.63

With the Auto Investor Account, you may start to see repayments in as little as seven days. This is because you are investing across dozens or even hundreds of projects simultaneously.

Learn in detail how each Groundfloor loan's interest amount is calculated here.

Fees

Groundfloor does not charge its investors any fees. This sets them apart from other real estate crowdfunding platforms.

They instead make all their money from the fees they charge their borrowers. Fees for borrowers are:[4]

  • 2.75% to 4% of the amount of the loan
  • $495 application fee

Is Groundfloor Worth It?

Yes, because Groundfloor's 10% annual returns is comparable to the stock market. Investors are also not losing any money on fees.

While high returns also mean high risk, loans at Groundfloor are backed by the actual property as collateral. This may lower the risk of you losing all of your principal.

Groundfloor also makes it easy for beginners to diversify their portfolio with its automated investing.

Groundfloor referral bonus: Groundfloor's referral program gives both you and your friend a $10 bonus as soon as they transfer and invest money into their account. There is no limit to the number of people you can refer.[5]

Withdrawing Profits in Groundfloor

Groundfloor pays the interest of investors either monthly or lump-sum at maturity, depending on the terms of the deal.

In general, once borrowers repay their loans, you earn interest. Your profits are paid out in your investor account.

If you are using the Auto-Investor Account, you need to set a passive income target to withdraw. This will temporarily stop auto-reinvestments until that amount is reached.

However, some loans may get extended if the borrower fails to pay on the agreed maturity date. Since they're given more time to finish the project, you get a higher interest rate as compensation.[6]

What happens when a loan is in default Groundfloor? In the event of default, Groundfloor has a legal claim to the property plus the borrower's personal wealth. So the risk of losing all your principal is low.

Borrowing Money in Groundfloor

Groundfloor is not only for investors. You can also borrow money here for your real estate projects.

Here are the projects that Groundfloor can help finance:

  • Fix & Flip
  • Fix To Rent
  • Rehab Investor
  • New Construction

Borrowing at Groundfloor means you can enjoy competitive pricing, terms of up to 16 months, rolling points into closing, and no interest payments for a deferred loan.[7]

To get started in borrowing funds, fill out this pre-application form.

Groundfloor Pros & Cons

Pros

  • No investor fees
  • High historical returns 10+%
  • Short term investments (12 to 18 months)
  • Starts at $10
  • Ability to automatically invest and diversify
  • Open to all investors (don't need to be accredited)
  • No prior real estate knowledge required with automated diversification

Cons

  • Risk of default
  • Limited to debt investments (no equity)
  • No diversification opportunities outside of residential real estate

Is Groundfloor a REIT? No, Groundfloor is not a REIT. You're not investing in a fund of real estate projects. Instead, you are investing in individual loans to borrowers. Groundfloor offers 10x higher yields than REITs.

How to Start Investing on Groundfloor

Ready to earn with Groundfloor? Simply follow these steps to start:

  1. Create an account
    Sign up and create an investor account.

  2. Fund your account
    Link your bank account and fund it with at least $10. Processing your deposit might take about 3-5 business days.

  3. Enjoy automatic investing
    Automatically and instantly invest your funds as soon as they reach your account with Groundfloor's mobile app. You can also opt to invest from your desktop or mobile browser.

    The Groundfloor app, available on iOS and Android, allows you to see:
    • Your accrued interest
    • The total loans you're invested in
    • Details of your returns
    • Your average realized returns and more

  4. Receive payments
    Get either monthly or deferred interest payments after project completion. Receive your money back in a lump sum once the borrower has repaid all the principal and outstanding interest.

    See repayments in as little as seven days with Groundfloor's Auto Investor Account.

Groundfloor is open to investors in all 50 states except for Nebraska residents (due to state-specific legislation).[8]

Groundfloor also allows non-US investors to invest on the platform. The minimum for international investors is $5,000.[9] After creating an account, you have to contact Groundfloor to transfer in funds.

Next, learn how to set up your auto-investor account in detail.

Automated Investing in Groundfloor

If you prefer true set-it-and-forget-it investing, set up your Auto Investor Account in Groundfloor with this guide.

  1. Enable Auto Invest
    Go to "Account Settings" and enable the Auto Invest option.

  2. Set up a recurring transfer schedule
    Choose between weekly, biweekly, monthly, or semimonthly transfer schedules.

  3. Curate your portfolio
    Enter how much you want to invest in each loan.

  4. Let Groundfloor invest for you
    Your funds are automatically invested whenever new loans go live, including the repayments you've received.

New auto-investments have a 48-hour cancellation period.[10]

Remember that your earnings are also automatically reinvested in new loans. If you want to withdraw funds, set a passive income target, and repayments will temporarily stop auto reinvesting until that target is met.

Is Groundfloor Legitimate and Safe?

Yes, Groundfloor is a legitimate platform. To date, Groundfloor has surpassed $1.3 billion in retail investment volume and $1.1 billion in investor repayments.[11]

Each loan offering is also filed with the SEC. Plus, all Groundfloor loans are backed by the actual property.

While there is always a significant risk involved in alternative investments, Groundfloor's stringent underwriting process reduces that risk for investors.

Groundfloor is currently rated B at Better Business Bureau.[12]

Is Groundfloor FDIC insured? When you transfer funds to Groundfloor, the cash is held at partner bank and will be FDIC insured up to the federal limit. However, once they are invested into loans, they are no longer FDIC insured.

Customer Support

For investor-related queries, you can reach Groundfloor through the below:

Email: support@groundfloor.us (Mon to Fri, 9 am-5 pm EST)
Phone: 404-850-9223

For concerns regarding its borrowing services, check out the latest contact information here. For the FAQ, visit this website.

Customer Reviews

Here's some of the feedback that Groundfloor has received, starting with the positive ones from Trustpilot:

Relax, it's a debt position.

Many of the complaints I see on here are due to late payment and extended loan status. Extended loans have been the most lucrative section of my overall Groundfloor portfolio. If the borrower has my money, they're on the clock, I'm getting paid...

...I made 9.3% in 2023 on Groundfloor. The key is to DIVERSIFY into as many loans as possible. They make it very easy to do so with $10 minimums per loan on their desktop site, and $1 minimums per loan on their mobile app "Groundfloor Investor"

Their auto investor account on mobile is great for someone who wants completely passive income and maximum diversification.

- Silvercrest Research, Jan 2024

I have invested in Groundfloor for a little over a year. In that time I averaged between 11-12% return on my investment. As yet I have not invested in a unit that has gone through foreclosure, but it will happen sooner or later, which is why Groundfloor strongly encourages you to invest smaller amounts into many loans. One thing to note is that a loan may go longer or shorter than the time stated in the loan. You still get the interest the whole time, so not a huge concern for me. If you have savings in a bank drawing pennies a year in interest, this should be something you look into as a part of your investment portfolio.

- Russell, Sep 2022

However, it does have some bad feedback as well:

I've invested well over $500,000 on dozens and dozens of properties and in note funds since 2018. Several investments have defaulted, to which I accepted the risk. However, Groundfloor has no regard for their investors it has taken 3+ years and they still can't even bother to provide updates. Is it too much to ask for an update? I'm sitting on $30,000+ of money owed. Why do I have to send 20 emails to get any info? Sloppy sloppy company, and I would definitely avoid investing any money you aren't comfortably able to lose.

- Justin, May 2023

I invested with a play money of $1,000 just to test the water, starting late July 2021. Their platform allocated the funds to 33 Notes each of them worth $30. I tried to put the funds in most conservative options to mitigate the risk. Fast forward after approximately two years, I've got only $950.44 which includes the Principal plus interests of 30 Notes. I'm currently sitting on 3 Default Notes (worth total nominal value of $90) with no certain time frame to recover my funds. Given the high inflation rates in past two years, I've not even been able to restore my original $1K and underwater more than algebraic sum of -$49.56. I think they need to revise their underwriting criteria before offering the loans to investors. There are certainly much stronger and more robust Crowd Funding Platform out there. On my part it was a Pilot Project with a small fund to check these folks. They certainly failed.

- Ray Systematic, Jul 2023

Despite the conflicting reviews, Groundfloor still has a rating of Great (3.9/5) at Trustpilot, where 64% are 5-star reviews.

How It Compares

Groundfloor is unique since it mainly offers debt securities, not equity, but it's not the only real estate investment app out there.

Fundrise
Fundrise is perhaps the most popular real estate investing platform. The minimum to start is only $10 and it's open to everyone.[13]

Your money is automatically invested into a diversified portfolio of real estate projects across the US. You get a mix of commercial and industrial, debt and equity projects.

It also offers a hands-off approach to real estate investing, similar to Groundfloor, where you can set your investments and leave them to grow over time.

Both platforms boast historical returns of around 10%. But Fundrise's investor fees (~1%) are higher.[14]

Fundrise is meant to be a long term investment. But it does have an early redemption program (with a small fee), so there is some liquidity.[15]

Arrived
Arrived also lets you invest in residential homes, but it works differently from Groundfloor. Instead of lending money to borrowers, you actually own a little piece of a house. The minimum is only $100.

The idea is for investors to pool funds to invest in a rental house. Arrived will take care of the tenants, property managers, and maintenance. You don't need to worry about the day-to-day stuff.

You'll earn money from the rental income (approx. 3.0% to 7.7% annualized[16]), plus from the appreciation of the property itself.

Since this is an equity investment, expect to hold your investment for 5-7 years. There's no early redemption program yet (though it's in the works).

Arrived Homes has a 1% annual management fee. There's also a property management fee that's 8% of the rent.

Bottom Line

Groundfloor is legit. They are one of a few crowdfunding platforms that offer real estate-backed debt instead of equity. The 10% returns are on par with many equity real estate investments.

They offer all this with no investor fees, very low minimums, and no accreditation requirements.

But as with all investments, there is risk. The biggest risks are defaults (or even foreclosure). But having the actual house as collateral will reduce your losses.

References

  1. ^ Groundfloor. LROs by Groundfloor, Retrieved 4/17/2024
  2. ^ Groundfloor. Groundfloor's Loan Grading Factors, Explained, Retrieved 05/01/2024
  3. ^ Groundfloor. Invest in Real State, Retrieved 4/17/2024
  4. ^ Groundfloor. Does Groundfloor charge me fees?, Retrieved 04/30/2024
  5. ^ Groundfloor. The Investor Referral Program: Refer Your Friends and Earn Bonuses!, Retrieved 4/18/2024
  6. ^ Groundfloor. A Walkthrough of Groundfloor's Asset Management Process, Retrieved 4/18/2024
  7. ^ Groundfloor. What are the benefits of borrowing with Groundfloor?, Retrieved 4/18/2024
  8. ^ Groundfloor. Do I have to be an accredited investor to invest with GROUNDFLOOR?, Retrieved 05/01/2024
  9. ^ Groundfloor. Does GROUNDFLOOR allow investments from non-US residents?, Retrieved 05/01/2024
  10. ^ Groundfloor. Now Available: Automatic Investing, Retrieved 4/18/2024
  11. ^ Groundfloor. Groundfloor announces 2023 results, surpassing $1.3 billion in retail investments and $1.1 billion investor repayments , Retrieved 4/18/2024
  12. ^ BBB. Groundfloor Finance, Inc., Retrieved 2/4/2023
  13. ^ Fundrise. Minimum Initial Investment, Retrieved 05/01/2024
  14. ^ Fundrise. What are Fundrise's fees?, Retrieved 05/01/2024
  15. ^ Fundrise. Can I redeem at any time?, Retrieved 05/01/2024
  16. ^ Arrived Homes. Historical Performance, Retrieved 05/01/2024
GROUNDFLOOR

Invest in Real Estate with $10

Learn More
The minimum investment amount is only $10. (Though most transfer $100 for better diversification; subsequent transfers can be for any amount)

  • Short-term real estate investments lasting just 12-18 months
  • Open to non-accredited investors
  • No investor fees
Fundrise

Invest in Real Estate with $10+

Start Investing
  • Only $10 minimum investment
  • Get a diversified portfolio of real estate projects across the US
  • Open to all investors
Arrived Homes

Invest in Rental Homes with $100+

Get Started

Browse rental home investments for free. No bank account required

Yieldstreet

Online Alternative Investments

Explore Alternative Investments
  • Exclusive access to private market investments
  • Wide range of alternative investments like art, real estate, legal financing, and more
  • Goal-based investing for growth or income
  • Minimums starting from $10,000

Write to Andrew Fitzgerald at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

Fundrise, LLC ("Fundrise") compensates CreditDonkey Inc for new leads. CreditDonkey Inc is not an investment client of Fundrise.

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