Groundfloor: Getting started...
- What is Groundfloor
- Getting your $10 referral bonus at sign up
- The different types of loans offered
- What you can expect
What is Groundfloor and what is Real Estate Crowdfunding?
GroundFloor is a real estate crowdfunding platform. Great, what does that mean: In crowdfunding many people provide money to meet a target goal for a project. Groundfloor works with real estate projects like fix-n-flips to provide short term, high-yield debt, secured against the real estate as a first position loan[1]. There are many platforms out there that do the same so why would you use Groundfloor vs other platforms? First you need to be an "accredited investor" to join other platforms. That means you need to make more than 200k if single and 300k if married just to join. Next you'll need a lot of money to invest. Most platforms have very high miniums anything from $5,000-25,000 minimum per loan buy in. The Groundfloor minimum per loan buy in is just $10. As of writing this the average platform returns annually are 12%[2].
How to get your 10$ referral bonus
If you're new to Groundfloor and don't have an account yet, use this referral link when you sign up and you and I will both get a 
Note: As you can see from the picture, right now the referral bonus is $20 for the month of September 2019.
Different types of loans offered LRO's and Notes
Currently Groundfloor has multiple debt products but they fall under two main categories LRO's and Notes.
LRO's: There multiple LRO or Limited Recourse Obligation Products[1] "Anchor Investor Loans", "BRRR Loans" and "Funding Now". You won't see "Anchor Investor Loans" unless you become accredited. An LRO (Limited Recourse Obligation Products) is basically a debt security that is submitted to the SEC. Each loan is backed by the underlying real estate asset(s)[1] The LRO's are the loans that you can invest as little as $10 in. LRO's come in different Rates, Terms, ARV's, Purposes, Positions and Terms. I recommend reading everything you can about the loans so you can get familiar with how you want to select loans moving forward. You can even use sites like Zillow, Trulia, MLS and LoopNet to look at comps.
Notes are short term 30-90 day loans with lower return rates that are issued and secured by the assets of Groundfloor Real Estate 1 LLC which is owned by Groundfloor Finance, Inc. basically the Notes are used to buy more loans to then sell on the platform. Here's how it works: Groundfloor gets new loans it then screens. They will pre-fund the loan and submit them to the SEC to convert them into LRO's to be sold to us, the Investors. There growth is restricted by the capitol they have to pre-fund new loans. If they only had 10K for pre-funding they would only have 10K in loans to sell on the platform. Companies use several methods (such as, selling stock or borrowing) to raise capital. So Groundfloor could have gone to the bank or issued bonds or sold stock to raise it funds but instead it has come to us, the investors. This is smart for several reasons, but for me I was able to double my account size because now I could buy loans with very short terms (30 days) and get relatively high returns 4%. I moved 50% of my emergency fund into the short term loans and went from earning less than 1% percent to earning 4%.
What can you expect
If you want to see how I pick loans check out this article "How I pick Groundfloor loans".
After you've signup using the link and transferred money in your account you should see a referral bonus that you can also use for investing. You can see the available loans by clicking "Invest" button at the top right.
Most loans are grad "C", there aren't a lot of grade "D" loans and I have only bought one grade "E" loan because they are very rare and get bought up very quickly.
As of writing this, the average platform returns annually are 12%[2], In the past my personal returns have been a little higher than average because only 25% of my portfolio contains A&B grade loans. As you can see the average A loan only return 6.5% annualized. Currently my returns are much lower because I have so much money invested in the shorter term loans at 4%.
Once you lend the money you can't get it back until it's repaid; some borrowers repay early, some repay on time, some pay late. I invest in Groundfloor for the cash flow, I can spread my investments over as many loans as possible and buy loans each month to increase cash flow. Groundfloor has been my highest returning passive investment to date 9/12/2019.
If your looking for quick cash flow then avoid the balloon payment loans and focus on loans with monthly payment terms. I personally like the balloon payment loans because of the compounding interest but you won't get a cent until the end of the loan. In my experience the average loan repays in about 7.5 months.Cons:
Unfortunately there isn't a good way to separately look at returns of LRO's vs Notes. The more Notes you buy the lower your returns will be.
Unfortunately there is no automated investing, it would be nice for people like me who want to buy a little of every loan.
Unfortunately Groundfloor uses AVR as opposed to LTV which is less accurate and less subjective and doesn't require fortune telling.
Defaults You seriously need to set some realistic expectations about defaults.. Some borrowers will default, for me it's not that big of a deal. I'll do a separate blog on why I feel that way.
References
[1] www.Groundfloor.us © 2019 What is an LRO and what am I actually investing in?[2] www.groundfloor.us © 2018 Thousands of investors are earning an average return of 12%.
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