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How does GROUNDFLOOR work?
How does GROUNDFLOOR work?
Joey avatar
Written by Joey
Updated over a week ago

GROUNDFLOOR is a unique financial product for individual investors that allows non-accredited and accredited investors alike to participate directly in real estate investment loans on a fractional basis. We open the door to short-term, high-yield returns backed by real estate. Borrowers have access to more flexible, faster, and cheaper capital and investors earn more by having access to short-term, high-yield investments offering returns of 8.5% to 26%.

It all starts with the borrower. A real estate investor, who we call a borrower, secures a loan through GROUNDFLOOR rather than a traditional bank or a hard money lender to finance a residential real estate project. That borrower submits a loan application and we review and underwrite the loan using our loan grading engine. After review, the loan is assigned a loan Grade A through G and a corresponding rate where Grade A loans are the least risky, with the lowest rate of return and Grade G loans are most risky, with the highest rate of return. Grade A loans generally offer returns of 5.5% and Grade G loans generally offer returns of 26% with each letter grade offering a rate in that in range.

Our Borrower Services Team works with the borrower to tailor the loan to meet the needs of the project. The loan is then underwritten and assigned a grade and interest rate. We have filed an offering circular with the Securities Exchange Commission (SEC) through which we sell securities. The proceeds of these securities and the performance of these securities are tied to the individual loans we decide to originate. If we decide to put a loan up for funding, we amend our offering circular with the details of that loan. When that amendment is qualified, the loan may be taken live for investment. "Qualification" by the SEC is not an endorsement of our investments, and no government or agency has passed on the merits of our offering.

You can browse the summary view of loans funding on our site or view more information on each loan's detail page. You decide when, how much, and where to invest. Investing is simple and efficient. You fund your GROUNDFLOOR Invest Account in any amount you choose and can invest after your funds post in 4 to 5 business days.

Once a loan is fully funded, a closing is initiated with the borrower. The loan closes, the borrower draws money according to a schedule, and completes the renovation or rehab project. The property is then listed, sells, and eventually closes. At closing the borrower repays investors via GROUNDFLOOR. A lump sum of principal invested plus interest earned is deposited into your GROUNDFLOOR Investor Account. The balance in your GROUNDFLOOR Investor Account can be withdrawn or reinvested in other projects.

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