Well as you might have been able to tell from my featured image I am cutting ties with Groundfloor. I do not know if this will be forever but I am not investing in Groundfloor for the foreseeable future.
What is Groundfloor?
Groundfloor is a really cool concept that brings investors (lenders) and borrowers together in order to flip or rehab properties. This is one of the best sectors of the peer to peer (p2p) lending space largely in part because the the loans are backed by a piece of real estate.
Groundfloor allows you to invest in a “loan” for as little as $10 allowing even those with humble investments amounts to diversify over many different loans. This is one of the lowest points of entry into the p2p lending space that you will find.
The returns are decent on the platform, not the best but certainly they outperform many other platforms out there today. The platform also allows you to search for the time horizon that meets your needs. For me I search for the highest return with the shortest amount of time remaining on the loan. I prefer the higher rates but like to cycle my money more often so, I appreciate the flexibility.
There are some good aspects to the site and I do not want to completely flame them as a company. I do feel that for some reason, either the platform is too large or is not properly managed they fall short in two key categories.
Communications from Groundfloor is mediocre at best. I continue to watch the properties (virtually) that I invest in. I track the progress and I watch them on the different real estate sites. I track the listing prices as well as any reductions. In some instances I see the reduction in listing price before there is an update on the platform.
Due diligence is really the responsibility of the investor but that being said there are some things investors need to rely on Groundfloor for. Things such as who the borrower is and their past performance which is reported on the platform. I believe that this makes Groundfloor one of the better sites in that they have the ability to report the past performance (with Groundfloor) on the site. I am curious about the reporting since often times the platform will indicate that the borrower has completed X number of projects although there is no further information in relation to the timeliness of the completion. The borrower could have completed four projects but three of them could have gone past the maturity date. There appears to be no way to verify the timeliness of payments.
In closing I am still a huge fan of the platform’s concept and the structure seems sound. I am just concerned that some of the borrowers may be more of a mom and pop operation who may not be able to deliver on the timeline indicated on the site. At least the handful of loans I have invested in have had small issues meeting the maturity date.
I do not want to group Groundfloor in the same category as Prosper but my success rate is starting to look pretty similar to what I had experienced on Prosper, and I am sticking to “B” rated loans and above.
You will have to determine for yourself whether or not Groundfloor will work for you and allow you to achieve your investment goals. Right now Groundfloor is being shelved as there are better opportunities available to me right now.