You’ve probably seen “Fix and Flip” shows on home channels. It seems like every doctor’s waiting room has one of these channels on nowadays.
Fix and flip projects are a good example of the type of project we lend to. We also lend for new construction projects. These are small businesses, often individuals or couples who improve properties in their neighborhoods. They invest money, blood, sweat, and tears to transform rough houses into beautiful gems. Their stories are every bit as exciting as you see on TV.
Before Groundfloor came along over 10 years ago, these types of projects were mostly funded by “hard money lending”. This is lending done by an ultra-wealthy individual who knows a particular real estate market really well, and is able to write the large $200,000+ checks to fund projects in their area. Hard money lenders typically charge interest rates of 16% or more. Banks typically don’t lend to these types of projects — they prefer the slow and steady 30-year mortgage lending type of financing.
Here's where you come in: You are investing in these loans.
Your investment is helping disrupt the hard money lending industry. We originate the loans and collect origination and servicing fees. You invest in small fractions of these loans, and you get to keep ALL of the interest! Basically, you get to be a hard money lender without any of the hassle. And without needing $10 million to get started!
The loans carry a high interest rate — typically 9 to 14%. Our historical average over all loans, including losses, is around 10%. The terms on the loans are relatively short — typically only 6 to 18 months. This gives you great cash flow because loans are continually repaying and putting your money back to work.