Groundfloor Review

Groundfloor Ratings at a Glance

Most people realize that investing in real estate to generate passive income is a good idea. However, relatively few investors do it. Ask them why, and you will likely hear a combination of “I’m not an accredited investor” or “I don’t have $25,000 to buy into a deal” or “I can’t lock money up for years.”

On the other side of the equation, if you were to ask real estate developers and home flippers what keeps them from closing more deals, you’ll get a combination of these responses: “The high vacancy rate means the bank won’t lend on it” or “The property is not fit for occupancy” or “The bank says I’m over-leveraged.”  

That’s where Groundfloor comes in. This unique investment platform seeks to bridge the gap between investors and those seeking capital by offering high-yield, secured fraction real estate loans with small contributions from both accredited and non-accredited investors. Not only does Groundfloor welcome non-accredited investors, it's got buy-ins as low as $100. It even has a mobile app where investors can experience hyper-fractionalization down to fractions of a cent through their new Flywheel Portfolio.

So, to sum it up, Groundfloor offers investors a chance to fund loans with short turn-around times and high dividends. All of this begs the question, is it too good to be true? 

How Does Groundfloor Work?

Groundfloor’s business model is fractional real estate debt investments. Groundfloor acts as a lender to developers in need of short-term funding to complete renovation or new construction projects. Developers and builders who are having difficulty accessing capital — or want shorter terms than a traditional loan — can apply for a real estate project from Groundfloor. Then Groundfloor’s team analyzes the subject property and works with the would-be borrower to make sure the property meets Groundfloor’s requirements and the borrower has a proper budget for the proposed loan. 

Groundfloor’s loan business model has tremendous appeal for both investors and borrowers. First of all, most investors can’t even buy into secured offerings like real estate loans without accreditation. Secondly, the few such opportunities available to non-accredited investors have holding periods of several years. Groundfloor can turn around profits for investors in a matter of days. On the borrower side, the opportunity to get access to funding without having to commit to a long-term loan is equally enticing. 

Most investors are accustomed to paying fees and just accept them as a necessary evil of investing. They would, of course, like those fees to be as low as possible, but they expect to pay them. It should come as a relief to investors that Groundfloor has extremely low investor fees. 

Historically, Groundfloor did not charge fees to its investors. With the launch of their Flywheel Portfolio in October 2024, because of its industry-leading fractionalization and diversification opportunities, there is now a nominal fee for investors that is paid through your account’s repayments. (Meaning no upfront costs, think of this as an asset management fee).

The fee is 0.25% of the disbursement. It’s important to remember that Groundfloor’s historical performance has yielded 10% across its portfolio. Thus this fee is still just a small amount to access these types of real estate returns that you couldn’t otherwise access.

Groundfloor is astoundingly easy to use. Sign up is simple, and so is funding the investment account. As noted above, Groundfloor accepts both accredited and non-accredited investors; however, it uses a verification process for those claiming accredited status.  

Groundfloor has a mobile-first approach to make real estate investing as simple as possible. With the Auto Investor account, your funds will automatically invest into their Flywheel Portfolio which is composed of 200-400 loans at a time. This instant diversification can help you see repayments as little as seven days. 

All in all, it’s an incredibly user-friendly platform that both investors and borrowers will have no trouble navigating. The steps are to sign up for an account (via the mobile app or a browser), link your bank account and then transfer in a minimum of $100. That’s it. Then you are automatically and fractionally invested into a pool of hundreds of loans. There are no fees to sign up. The entire process takes minutes.

What are you actually investing in?

Groundfloor’s default investment offering is the Flywheel Portfolio. This product was rolled out in October 2024 based on years of investing experience across thousands of different loans and understandings of investor behavior. The Flywheel Portfolio is qualified by the U.S. Securities and Exchange Commission. Structurally, it is a REIT but comes with benefits that are not traditional for most REITs.

The Flywheel Portfolio combines 200 – 400 short-term real estate loans into a single investment portfolio. This innovative approach greatly reduces risk and offers more stable and consistent returns. With the Flywheel Portfolio, investors get the added benefits of:

• Weekly disbursements as loans repay
• Instant diversification into hundreds of loans
• Set-it-and-forget-it, real estate investing

The makeup of the Flywheel Portfolio consists of a variety of Groundfloor’s loans, which they originate and asset-manage internally. Most of these loans are issues to experienced developers who are flipping homes, building new construction homes or refinancing for long-term holds or rentals. Importantly for investors, Groundfloor usually is in first-lien position on these loans, meaning they are backed by the underlying asset of the home itself. This lowers the default risk for individual investors, and if and when there are defaults, the return on that property can actually even be higher than agreed upon terms. 

The main point for everyday investors who want a passive income strategy is that Groundfloor is doing all the work for you. Each Groundfloor investor’s funds are automatically diversified  meaning you can invest $100 and have those funds dispersed into hundreds of projects at once minimizing your risk and maximizing your diversification. Because you're invested into so many projects at once through your Auto Investor account you’ll also start to see repayments weekly. 

And if you’re still stuck on how this is different from a traditional REIT, the Flywheel Portfolio offers consistent cashflow, higher-yields, shorter-terms, planned liquidity, a closed structure, low minimum, and thorough diversification. You don’t need to know the ins and outs of every loan but below is more detailed information about what you’re investing into.

• LROs - debt investments
• Limited Recourse Obligation (LRO)
• A debt security that Groundfloor submits to the SEC for qualification on our platform. Groundfloor typically holds a first lien position on each loan, and each loan is backed by the underlying real estate asset(s)
• Groundfloor prefunds the loans
• Types of projects

• Purchase and Renovation
• A project type in which an individual or investor purchases a property with the intention of renovating and improving it. The renovation may include cosmetic updates, such as painting and flooring, or more extensive renovations, such as adding additional rooms or updating plumbing and electrical systems. This type of project typically requires a significant amount of planning, budgeting, and coordination with contractors and designers.
• Refinance-Rehab
• A project type in which an individual or investor refinances an existing mortgage on a property with the intention of using the funds to complete a renovation or rehabilitation of the property. This type of project can allow for lower interest rates and a longer repayment period, and may provide more flexibility in terms of budgeting and project timelines.
• Refinance-Cash Out
• A project type in which an individual or investor refinances an existing mortgage on a property and takes out a larger loan than the current mortgage balance. The additional funds can be used for any purpose, such as financing a renovation, paying off debt, or making other investments. This type of project can provide access to cash that may not be available through other types of financing.
• New Construction
• A project type in which an individual or investor builds a new property from the ground up. This type of project typically requires significant planning, design, and construction work, and may involve working with architects, engineers, and contractors. The project may be a residential or commercial property, and may involve the construction of a single unit or multiple units.

An investment platform that seeks to ingratiate itself to non-accredited investors needs to have a strong commitment to investor education. After all, if potential investors can’t get answers to simple questions like “How does this work?”, the likelihood of signing up and investing is basically zero.  Groundfloor realizes this need, and its investor education platform is a strong one. 

As with most platforms, a “Learn” tab appears at the top of the landing page. Scrolling the mouse over that tab reveals 4 sections: Frequently Asked Questions (FAQs), Support, Blog and Education Hub.  Clicking on the blog will take users to the “Foundations” blog, which has over 100 different blog posts investors can choose from. Topics covered include the following:

• Company news and updates
• Facts, figures and analyses
• Groundfloor 101-basic breakdown of the site and how it works
• Borrower and project highlights

One of the best sections is the Groundfloor Investment Wizard, which is a great simulation that allows investors to estimate how their investments could grow based on a “conservative,” “moderate” and “dynamic” investment strategy. Needless to say the “dynamic” strategy is the one with the most potential risk and reward. However, the real jewel here is the opportunity for investors to get an idea of how they can grow their money with Groundfloor. 

The FAQs section of the learning tab is equally well thought out. It’s particularly nice that this section opens with a search bar that allows potential investors to just type in their individual inquiry. This feature saves from having to scroll through dozens and dozens of answers unrelated to the question. Another strong point of the FAQs page is the way questions are grouped into several categories, which include:

• How to invest self-directed IRAs in Groundfloor
• Current lending guidelines
• Company information
• Investor breakdown on how Groundfloor works
• Account settings with basic information about setting up the Groundfloor account

Perhaps the only thing keeping this from being a 5-star section is the lack of video lessons. With that said, it’s hard to imagine a question an investor could have that’s not answered in the investor education section. In cases where that does happen, Groundfloor has a live chat option with an actual person and not a bot, which is also a huge plus for new investors. 

Although funding real estate project loans is Groundfloor’s main focus, it’s not the limit of its offerings. Groundfloor also sells shares in its own notes and shares in convertible debt notes. These stock sales typically happen every other year.

When it comes to the core of its business model — real estate project loans with low buy-ins — Groundfloor has an impressive array of offerings in markets all over the country. Some have terms as short as 6 months, which gives investors room to grow wealth without locking their money up for extended periods of time. Add that to the fact that the minimum buy-in for these loans is only $100 and that you’re auto diversified across hundreds of loans at once, and it becomes easy to give Groundfloor a 4.5 star rating for its offerings. 

Having offerings with short hold periods and low buy-ins is all well and good, but it means nothing if they don’t grow wealth for investors. Groundfloor has a solid track record with an average 10% return on its investment offerings. Bear in mind that this is an average rate of return on all its loans, and past performance is no guarantee of future success. Every individual offering has a different risk grade and expected return, and risk of loss is always present. However, the solid return ratio speaks volumes about the quality of Groundfloor’s offerings.

• $100 Minimum
• 10% Actual Returns to Date
• 1.6 Billion in Retail Investment Volume (as of February 2025)

Groundfloor regularly publishes a Diversification Analysis, a report showing the loss ratio and rate of return based on the number of different loans an investor has in their investment portfolio. Based on the data, diversification across multiple loans has historically resulted in greater overall returns and a lower loss ratio.

Source: Groundfloor website

Groundfloor isn’t a typical online platform that marries you to a desktop computer. While you can use a desktop or mobile browser, it has a mobile-first approach as we mentioned earlier. You can easily set up an account and set up your first one-time or recurring transfer in a few clicks.

The Groundfloor mobile app, which is available for iOS and Android, lets you see a complete overview of your entire Groundfloor portfolio, including your accrued interest, details of your returns, your average realized returns, and more. It also offers multi-factor authentication so you can feel confident knowing your account is more secure.

Groundfloor offers low buy-ins, hyper-diversification, short hold periods and high yields for non-accredited investors on offerings that are secured by actual real estate. That just about says it all. When it comes to opening the world of real estate investing up to the everyday investor, Groundfloor knocks it out of the park. It’s a well designed platform with a rock-solid business model and a strong performance history. Any investor looking to dip their toes into real estate investing would be well advised to experiment in Groundfloor’s pool. It probably won’t be long before they dive in head first.

Frequently Asked Questions