Way back in January, I described my experience with Groundfloor real estate investing. In this post, I just want to update you on my performance and share with you some of my process for selecting properties to invest in on Groundfloor.
Even with the financial turmoil of the COVID-19 pandemic, my experience with Groundfloor remains positive. I’ve now invested in 197 different property loans and 7 Groundfloor notes. The short-term notes are a new investment option provided by Groundfloor in 2020. My guess is they were added to address a cash crunch when the pandemic first started. The three note terms currently offered include a 1-month, 3-month and 12-month note with 2%, 4%, and 8% interest rates respectively.
I took advantage of these short-term note options when I was a bit uncertain as to residential real estate market in the early spring. I did not anticipate how strong the single-family detached residential market would be in 2020, especially in suburban markets. There is strong demand by folks trying to leave urban apartments and/or looking for more space now that folks are social distancing and working from home.
My actual returns to date have been 9.7% on the real estate loans and 4.4% on the repaid notes. Of the 197 property loans, 35 have defaulted. That comes out to a 17.8 percent default rate which is slightly higher than the 16% default rate I had back in January of 2020. As of November 30, 2020, I have earned $2,965.60 from Groundfloor.
My current investment selection process has involved finding loans for suburban residential properties that are local markets with rising prices by checking Zillow. I also check the properties for floor risk by using the new FloodFactor score. Flood risk is changing with climate change and a floor can substantially increase the risk of default even when the properties are properly insured. Finally, I prefer borrowers that have used Groundfloor before and have repaid their prior loans. I’m sure my strategy could use improving and it is likely to change as I gain more experience and market conditions change.
If you are interested in Groundfloor, feel free to ask me any questions about my experience in the comments section below.
Disclosure: I get a small commission for new accounts opened via the affiliate link for Groundfloor above.