Groundfloor (styled all caps as GROUNDFLOOR) is an American real estate lendingcompany. It was the first real estate crowdfunding company to achieve SEC qualification utilizing Regulation A+ since the regulation became operable through the JOBS Act, becoming the only such marketplace open to non-accredited investors.
GROUNDFLOOR was purposely built to serve self-directed investors instead of institutional ones. Its marketplace provides short-term, high-yield returns backed by real estate. Typical loans return 12 percent annually on a six-to-12-month term. The minimum investment is $10. Through January 2017, the company had funded 417 loans and sold more than $54 million in securities. It also closed a $5 million Series A round, bringing its total financing to $7.5 million.
Video Groundfloor
History
GROUNDFLOOR was founded in Raleigh, North Carolina, in February 2013 by Brian Dally (who launched Republic Wireless) and Nick Bhargava (contributor to the JOBS Act). In March 2014, the company raised $300,000 from angel investors in the region. After raising $1 million in seed funding, GROUNDFLOOR moved its headquarters to Atlanta because of the Invest Georgia Exemption (IGE) which allows state residents to invest in crowdfunded projects regardless of their investor accreditation status.
A crucial breakthrough for the company came on 31 August 2015, when it became the first real estate crowdfunding company to achieve SEC qualification utilizing an amended Tier 1 Regulation A offering, better known as Regulation A+, since the regulation became operable through the JOBS Act on 19 June, becoming the only such marketplace open to non-accredited investors. The company opened investing in California, Illinois, Maryland, Massachusetts, Texas, Virginia, Washington, Georgia and the District of Columbia as a result of their SEC qualification in the fall of 2015.
By late October, GROUNDFLOOR tripled daily investing volume and sold out every loan originally listed. By December, the company had funded 54 loans and sold more than $3 million in Limited Recourse Obligation securities. It also closed a $5 million Series A round, bringing its total financing to $7.5 million. The round was led by Fintech Ventures, a $100 million venture capital investment fund focused on innovation in non-bank lending, savings and smart payments, managed by Serguei Kouzmine. GROUNDFLOOR announced it would use the money to expand its business beyond the present nine states where it operates.
Since 2015, Groundfloor has experienced rapid growth in its offerings to investors and in loan origination volume and infrastructure.
2016 Groundfloor surpasses $10 million in origination volume in the first time in a single year.
In March 2017, Groundfloor announced it had teamed up with IRA Services Trust Company to launch its tax deferred real estate investing. The platform revealed it will immediately begin to invite investors to its website to fund their accounts directly through their 401(k) and IRAs.
Following its IRA announcement, Groundfloor entered into a whole loan purchase relationship with Direct Access Capital (DAC), a specialty finance company focused on providing liquidity to non-bank lenders of short term residential backed business loans. That partnership marked Groundfloor's first institutional partnership and enabled the company to scale its loan origination volume and expand its product offerings over the next year. As a product of that partnership, Groundfloor launched its new monthly interest payment investments allowing its users to invest in both deferred and monthly payment loans to further diversify and add monthly income yield to their portfolios.
To meet the loan origination volume commitments under the DAC partnership and in response to overwhelming investor demand, Groundfloor launched a brand new Loan Origination Network for mortgage brokers and third-party originators interested in tapping additional real estate loan opportunities. The company has opened up its innovative real estate financing platform to brokers nationwide who now have the opportunity to provide customers with low cost capital for fix and flip projects.
In November, Groundfloor began to invite investors on its platform to take part in an online public offering. The company began taking indications of interest in Groundfloor equity in mid-November with plans to open up the offering to the general public in 2018.
2017 saw record growth at Groundfloor across all key metrics.
- Investor Activity: The number of investments on the platform grew by 100%, from 25,602 in 2016 to 52,153 in 2017
- Loan Originations: Loan origination volume nearly doubled to over $30 million on 210 loans originated. Average loan size increased by $17 thousand to almost $145 thousand.
- Interest Paid: Repaid over $1.6 million in interest to Groundfloor customers in 2017--an increase of over 6X over 2016--delivering a 12.83% average rate of return on over $20 million in principal across 159 loans.
In January 2018, Groundfloor announced its nationwide launch. After only being available to investors in 8 states and Washington D.C since 2015, Groundfloor's nationwide launch opens up self-directed, high-yield investments to over 200 million investors across the country. The qualification for nationwide availability marked the first time the SEC had qualified an offering of securities related to individually secured real estate loans.
In February 2018, Groundfloor's offering of equity in the company itself was qualified by the SEC. This online public offering opened access for individual investors to benefit from participating in a growth-stage venture capital class investment opportunity, in addition to participation in the company's real estate loans. The offering was opened for investment by accredited and non-accredited investors nationwide on February 21, 2018.
Maps Groundfloor
Platform
GROUNDFLOOR was purposely built to serve self-directed investors instead of institutional ones. It provides short-term, high-yield returns backed by real estate. Typical loans return 12 percent annually on a six-to-12-month term. While investments on other platforms require a minimum investment of $5,000, with Groundfloor, the original minimum investment was $100. In November 2015, GROUNDFLOOR 2.0 was introduced, reducing the minimum investment even further, to $10.
The website enables borrowers to showcase their projects. There is an aggressive pre-screening process for borrowers. The site targets small residential-development projects. If the project is selected for funding, community members can make loans to the borrowers. Groundfloor uses a proprietary loan grading algorithm in addition to application review to assign a loan a letter grade and corresponding rate. Loan terms generally range from six to 12 months and financing can be in a senior or junior position. At the loan maturation, the borrower repays GROUNDFLOOR, which in turn repays the investors their principal investment plus earned interest.
Interest rates, which vary between 7 and 26 percent, are determined by an algorithm, based on criteria such as property valuation, location, the borrower's experience and how much of their own capital the borrower is investing in the project. The note structure is similar to Lending Club and Prosper. However, GROUNDFLOOR loans generally have shorter terms, higher interest rates and are secured by real estate.
In October 2015, GROUNDFLOOR introduced two new tools that expand peer-to-peer lending of real estate: quick comparison of loans and in-depth analysis of loan grading factors.
See also
- Crowdsourcing
- Disruptive innovation
- Peer-to-peer lending
References
External links
- Official website
Source of article : Wikipedia
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