I just discovered Groundfloor, which is a crowdfunding platform for people who want hard money for deals. Obviously you can participate as a lender or as a borrower. I'm considering using it both ways: to fund my first deal as well as to put in a little small cash as a lender on several deals to see how the process works.
Does anybody have any good or bad experiences with Groundfloor?
I did some research into them after seeing one of their deals go bad. Their SEC filings say say something like "our auditors have expressed serious concerns about our ability to continue as an ongoing concern" and that the founders were taking pay cuts to keep the company solvent.
@Account Closed it's important that investors do their research and we actively encourage reading our offering circular before investing with us. It's important to correct and add context to the facts as you represented them here.
While it is true that in Q4 2017 management took a voluntary pay cut in order to reduce expenses, we restored salaries in March 2018. This was a temporary measure we took ahead of last year's equity raise.
Secondly, for context I would encourage you to consult the securities filings of almost any unprofitable startup company (famously for a long time, Amazon.com for one). That boiler plate language can be found from auditors on not only our financials dating back to our inception, but on those of many other now-successful companies who have filed regulatory disclosures over the years (even after IPO). By contrast, issuers or portals who are not open to non-accredited investors (as Groundfloor is) don't disclose anything (much less audited financials) about their financial position or the risk factors of investing with them. If they did file/disclose, it's very likely their auditor would say anything different than they have said about us.
Indeed, the very nature of an early stage startup is such that anyone should indeed have "serious concerns about [its] ability to continue as an ongoing concern." Startups are risky, but Groundfloor is now six years old, with five negative annual going concern opinions filed by our auditors, over 40 employees, sufficient funding via the thousands of investors who benefit from our product and have chosen to become shareholders as well, and very real prospects for creating a highly unique, profitable, successful and valuable company.
Consider the risks, and invest (or not) accordingly. But don't be scared off by scary-sounding boilerplate.
Co-Founder & CEO
I just lost $2K on a $2.5K investment on one of their deals in Chicago. Offsets whatever I have made from other investments. Doubt I will be adding any money and may start pulling the balance. One of the issues that has always bothered me about sites like this is that I'm sure they require personal guarantees from the borrowers yet see no evidence of pursuing judgments or collections against the individuals
Hi. First of all, I'm glad the Co-Founder of Groundfloor actually responded. I have already responded through another thread about my lending experience already, but here are my thoughts.
I have been lending on GF for about a year. As of this moment, I have participated in 59 loans (see screenshot below).
I have had a few late payments, but no loss yet.
I would say I made a rookie mistake early on by investing too much money into a few loans. I've spent some time to gradually shift that to a much more diversified approach. I would say most of my loans are now between $500 to $1000 each.
I would say most of the loans I've participated in have not gone the entirety of the loan periods (i.e. pay back early). I personally prefer the monthly interest payments more. It makes me feel like I am compounding / reinvesting ... makes the whole experience more interesting because you are paying more attention and studying the opportunities.
I definitely do appreciate the updates I get from borrowers.
One recent observation: I am unsure if the government shutdown had anything to do with this or if this is just a seasonality thing ... but I feel like batches of loans came rapidly after the government shutdown was lifted ... and also maybe there are borrowers who have been working on their projects during the Winter and just need a loan to finish their projects. I feel like the quantity of loans is outpacing the availability of capital (lenders)?
All in all --> I am enjoying my experience on GF. I recognize that the housing market can change depending on locations. Ultimately you have to do your own research and make some educated choices. Start small and scale up.
@Sin Hang Lai , what was the average pay back time? (How quickly did you have your money back on each deal on average?) Is the interest paid back annualized (1/12th of 9% per month)?
@Kyle Wilson, interest is paid back annualized. Pay back time varies so widely. For example, I recently invested in a few loans. Like I said before, the last few months there have been a flurry of activities ... I sense it is either borrowers just trying to finish up a project OR they are purposely borrowing more money in advance for their next project ... meaning they are probably about to sell that property, take the profit + the amount borrowed to go on to the next thing they are working on. Why am I saying all this? Because there have been loans where I invested in ... those houses are already fixed up, on the market, and have pending offers. So when I see that ... let's say the loan was supposed to be for 12 months, I expect that to be paid back FAR earlier - which I don't mind ... because even if those loans might not be rated as A or B ... I feel like that house is at the finish line and the loan should be safe regardless of the letter attached to the loan.
One thing I should add ... which is something I just recently thought about. With Groundfloor, there is the disclaimer that you can make UP TO 10% return regularly. That assumes loans go to full maturity I believe.
GF has a great user interface and there is a section that shows you the "repaid investments" (i.e. the amount you loaned out and got back) vs. "net earnings" (i.e. interest).
So when I divide net earnings by repaid investments, my current return is 5.13%. (PRE TAX)
Some people might look at that and be disappointed with expectation vs reality. I personally still think is great vs. what you can do with cash.
I hope that helps a bit. A friend of mine just started on GF, he decided to start with $2K to try and I think that's a good idea to just try with a little money.
@Sin Hang Lai , I work at the company in question and it looks like there may be a bit of confusion as to how investment returns are calculated. I sent you a PM explaining the process - hopefully that helps to clear it up!
Appreciate @Emily Johnson for clarifying how returns are calculated.
Hi guys, in case my info could be helpful, here we are. After some long time reading I became an investor and a shareholder around February 2018.
I consider GF as a decent platform to diversify investment needs. Meantime, I consider diversification inside GF loans as a crucial point to be successful with GF. What's good: collateral and a short term (practically 2-12 mo) investment group, plus GF grows fast! What's bad: you've never known when new loans are going to be available; the pause is from 3 days to 2-3 weeks, while money sleeps on the account without any benefits for me. But at the end of the day I can live with it, and I hope the team will offer us some simple compensation for sitting money in the future.
First year of investment is a hardest one (as per my opinion). You have to regularly find money to deposit. After about a year repayments helps a lot to fill a tank.
Good luck to all of us!
Check on my info below (I mostly invest from 20 to 500 in a single loan):
All the Defaults Repaid:
Honestly, I'm a little surprised so many people on BP are using websites like Groundfloor to park their money. There are thousands of flippers on BP. Skip the middle man! Talk to those flippers. Skip the fees, as the flippers for 10 - 12%, 3 - 4 points, and if you do 3 loans per year your return is 19%+.
If you do three loans, you're not very well diversified. Groundfloor allows you to spread the risk over 100x the number of loans with that same amount of capital, does all the underwriting, closing and asset management work, and charges no investor fees.
I honestly have one question. I've been looking around their website and one thing I haven't seen anything about is a down payment. I know with most Hard Money Lenders they require a 20% down, but I don't see any indication of that on GF, can anyone confirm whether or not they have one for sure?
@Lawrence Snells Did you find any information regarding down payments through GF? I’m also interested.
I believe what is pretty commendable and is quite a reflection of standing behind your service/offering, is how the CEO of a pretty prominent start-up in the Real Estate community, has actually conversed here with the forum amid some backlash. I like it.
As with anything in RE, there are pros and cons. It sounds like there are definitely riskier, and less exciting investments (safer) than GroundFloor out here. When you analyze too too much, you generally are going to miss the boat, or non-boat. Get your due diligence, and either pis*, or get off the pot. RE is no place for scared men/women. Know your appetite.
Hi there - GROUNDFLOOR employee here. We have several programs available for all types of investor experience levels, which range from 80%-100% LTC. The down payments required depend on the program and the investor in question, but can range from 0%-20%.