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Investing Through GROUNDFLOOR: A Beginner's Guide

Hello and welcome to GROUNDFLOOR! We are happy you have decided to join us as we continue to open up access to private real estate debt investments for everyone. Whether you are a seasoned pro or a brand new investor, we thought it would be helpful to provide an overview of our platform, how it works, and how to get started investing.

How GROUNDFLOOR Works: A Brief Overview

GROUNDFLOOR is an innovative wealthtech platform that gives everyone the opportunity to begin building wealth through real estate investment opportunities. Our platform allows investors like you to create their own custom portfolio of fractional shares of real estate projects, without having to go through a preexisting REIT or fund. We believe you should have the ultimate say in which projects to invest in and how much to invest in each project, meaning your portfolio can be completely tailored to your own unique financial situation and risk tolerance. Best of all, our low investment minimum of $10 per project ensures you always have the option to diversify your funds into as many or as few projects as you like.

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Real estate developers apply for financing through GROUNDFLOOR. Our team combines over 100 years of collective real estate experience with a proprietary grading algorithm qualified by the U.S Securities and Exchange Commission (SEC) to underwrite and assign a risk grade to each approved loan. Then, GROUNDFLOOR closes and funds the loans. 

Once loans are funded, GROUNDFLOOR creates investment securities (LROs) based on the loans, and files the securities for SEC qualification. Investments are released on our platform for individual investors to invest in on a fractional basis, with as little as $10. Once the loan is repaid to GROUNDFLOOR, investors in the LRO receive principal and interest repayments, which they can withdraw at any time or reinvest into more LROs. 

For more information about our model and how we are different from other real estate investing companies, please refer to this blog post. Now, let’s get into how you get started as a GROUNDFLOOR investor.

Getting Started: Linking Your Account And Your First Funds Transfer

To get started investing, you must first link your GROUNDFLOOR Investor Account to your bank. Here is what the initial steps of this process looks like:

Linking A Bank Account - Step 1Upon creating an account, you will be directed to enter your personal information so our third party payment processor can verify your identity.Linking A Bank Account - Step 2Next, you will be asked to add a funding source for your account. Linking A Bank Account - Step 3You have the option of instantly linking your bank account via Plaid, or manually entering your bank account information.

GROUNDFLOOR works like an online brokerage. You deposit funds via transfer from your bank account. Deposits may take three to five business days to appear in your Investor Account. Once deposited, the funds are held in your name (not GROUNDFLOOR’s) and are FDIC-insured until invested. 

In addition to transferring funds in as you go, you can also set up an automatic funds transfer schedule to ensure you are ready to invest whenever new loans are released on the platform:

Funds Transfer Options

You have the option to transfer in funds as you go or set up a recurring transfer schedule.

Investors are also able to invest tax-advantages savings in GROUNDFLOOR LROs through a GROUNDFLOOR self-directed IRA

Investing: Our Loans, Grades, Rates, Terms, and Payment Structures

Once your bank account is linked and you have investable funds in your GROUNDFLOOR account, you can begin investing in GROUNDFLOOR loans.

As mentioned above, our team directly originates all the loans that are offered for investment on GROUNDFLOOR. This means we take the initial application, order background and credit checks, order and review appraisals from our approved providers, and analyze the borrower’s renovation plan to arrive at an assessment of the project’s likelihood for success. When we’re satisfied, we pre-fund the loan with our own capital so work can get underway while we next clear the investment through a regulatory disclosure review process conducted by the U.S. Securities & Exchange Commission (SEC).

GROUNDFLOOR loans are graded for risk and yield according to our SEC-approved proprietary grading algorithm, and are visually distinguished in our Investment Portal using a color and alphabetical risk grade hierarchy from A to G, and with corresponding color indicators that range from Green to Red. Low risk, lower-yield loans are graded A, B, and C while the high risk, higher-yield loans are graded D through G. Most loans offer yields from 7.5 to 14% and terms from 6 to 12 months. Check out the image below to see how the grading system is represented on the available investments page:

Available Investments Page-1

Interested in learning more about the loan grading factors we employ? Click here to read our blog post.

GROUNDFLOOR offers two types of loan payment structures: deferred payment and monthly payment. With a deferred payment loan structure, borrowers defer all loan payments until the end of the loan term; monthly payment loans, on the other hand, require borrowers to make monthly payments towards the loan. Interest payments to investors are tied to a borrower’s contracted payment structure -- as borrowers make payments on their loan (whether each month or at the end of the loan term), investors receive their repayments. 

As such, investors on our platform can always choose whether to invest in a deferred or a monthly payment loan structure. Some investors prefer to receive regular interest payments, while others are content to be paid at the end of the term, since that’s usually within 12 months.

Click here to read a blog post that details the repayment structures for deferred vs. monthly payment loans. 

Investor Updates And Repayment

Throughout the term of a loan, our Asset Management team tracks the progress of each project, processes requests for draws against the loan balance, and, when necessary, works with borrowers to resolve issues when they arise. During this time, the team provides regular updates to investors in each loan, so investors will always know the status of their investment(s).

Click here to read a detailed walkthrough (including case studies) of our Asset Management team's careful monitoring and management procedures. 

Click here to read an in-depth case study on how our Asset Management team handled a loan that fell into default to achieve an ultimately successful resolution. 

Now, the thing we’ve all been waiting for: getting paid. One attribute that makes GROUNDFLOOR unique is our short holding period compared to other investments. Almost all GROUNDFLOOR loans have terms less than 12 months, which means you get your money back faster. Sometimes loans run into trouble -- either because a term of our loan agreement with the borrower has been violated (a “default”) or because extra time will be required to complete renovations and a sale or refinancing (a “workout” or “default past due” -- also known as a maturity default). You can see statistics on how often this can be expected in regularly-performed analyses of loan performance on our blog and in our ongoing monthly regulatory filings.

Click here to read a recent analysis of loan performance broken out by grade.

Click here to read our latest diversification analysis, which looks at the weighted average of returns realized across all of our repaid loans to date.

Repayment of principal occurs shortly after a borrower sells or refinances the underlying property he or she has rehabbed. Once GROUNDFLOOR has collected, we issue a repayment to our investors automatically. You will receive an email and/or text notification of repayment, at which point you may reinvest in a new loan or withdraw your funds. And, of course, you can always monitor your account status and performance on your Investor Dashboard.

Click here to read a detailed explanation of how GROUNDFLOOR calculates your investment return.

And there you have it: a quick, end-to-end overview on how investing with GROUNDFLOOR works. For more in-depth information and answers, please visit our FAQ page or contact us anytime by email at support@groundfloor.us.

Emily Johnson

Content Manager

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