As with any investment, real estate loans aren’t risk-free. Instead, exposure to risk must be approached thoughtfully and managed carefully. That’s a shared responsibility -- for us as an issuer of securities and for our investors as well. Learn from Rich Pulido, senior vice president of lending, capital markets and risk management, how GROUNDFLOOR maximizes recovery on under performing fix and flip loans.
Among the many New Years resolutions people make, resolving to spend less and save more ranks up there with shedding those holiday pounds. If building your portfolio is on your list, Groundfloor can help. Read on to learn how, in our first post in a series of tips to get more out of Groundfloor in 2017.
There's a buzz around Groundfloor HQ this month that resembles our earliest days as a new startup launching its first loan three years ago. The excitement of scaling up to launch 20 loans for investment in 10 days stretches to every part of the company, from the loan officers who work with our borrowers, to the software developers who build and maintain our website and backoffice, and everyone in between.
As those of you who've been with us the longest know, we've worked hard to deliver "more loans in more places." It's long been the #1 feature request we receive. Some companies might sacrifice quality to grow quickly and meet that demand, but not us. Instead, we did the opposite. We accepted slower growth while building a team and process that focused on finding better quality loans instead. Meanwhile, many would-be investors patiently sat on our waiting list while we invited as many as we thought we could accommodate.
Our efforts to build loan volume took time. Throughout 2016 we improved the practical application of our underwriting process. We added new personnel with decades of lending experience and tested new ways to drive efficiencies in our lending process. We continued innovating to refine our unique application of securities law that first took private lending public in over a year ago, while not one competitor managed to replicate that feat. New borrowers signed up as word spread, and we started getting to know them and identify how we could win their business within our stringent guidelines.
It's working. As 2016 comes to a close, we now receive and process over 500 loan applications each month. Over the last three months, our data shows that less than 5% receive initial underwriting approval. Only half of those survive due diligence to close. Borrowing from Groundfloor requires meeting a high bar for the borrower and the project alike. Yet by the end of December we project that we will have offered more loans for investment in one month than we were able to offer over the course of any three month period before. We're very proud of those results and look forward to building on them in the months to come.
We have one more related update to share. You may notice a new addition to the disclosures on some of our loans pertaining to the advancement of funds to borrowers. The specifics of these advances are typically reflected in the topmost bullet point of the Project-Specific Risk Factors section (see image below). These advances are a form of bridge loan that we now offer to borrowers for certain projects.
This may be important to you and reflective of our progress in two respects. First, adopting this new funding technique helps attract the best borrowers. After all, they have the most options for where to take their business. They value speed and simplicity and can select their lender accordingly. Our ability to advance funds helps us to better meet their needs. Second, the funds to make these advances are provided by a new institutional financing partner with deep real estate lending expertise. Our underwriting processes and standards had to withstand their critical assessment for us to earn a 7-figure credit approval. That's an important vote of confidence in the professionalism and capabilities our lending operations team.
To close, even as we celebrate with gratitude for the progress of 2016, we know there's still much more to be done with Groundfloor in the new year. None of it is possible without the customers and partners who believe in our vision and trust us with their business. So thank you. We appreciate your confidence and look forward to serving you for a long time to come.
In the coming weeks, we plan to publish some additional details and information about our lending operation. Watch this space. In the meantime, we invite you to write us at email@example.com or comment below with any questions, feedback or suggestions.
Today we’re proud to announce that Groundfloor has been selected to present at Venture Atlanta 2016, the South’s premier event for connecting technology innovation and investment capital. The event will be held November 2-3 at the College Football Hall of Fame in Atlanta.
We’re one of just 16 venture stage companies chosen from a large pool of applicants. It’s an honor to represent the region’s most innovative tech businesses. In a sea of “real estate crowdfunding” startups based in Silicon Valley and elsewhere, we’re still the first and only platform of our kind. Only Groundfloor offers access for non-accredited and accredited investors alike to participate in high-yield private real estate lending. This innovation was born in Atlanta, raised on Secretary Kemp’s innovative Invest Georgia Exemption, and we are now taking it nationwide.
During the two-day event, presenting companies and conference attendees will engage with regional as well as national venture capitalists, investors and other key players in the current technology ecosystem. Now entering its 16th year, Venture Atlanta has helped launch more than 350 companies and raise more than $1.8 billion in funding to date—a number that continues to grow. The conference provides an invaluable experience for entrepreneurs resulting in funding, national investor exposure, unparalleled relationship building and mentoring by successful technology executives.
Presenting as an early stage company in 2014 served as important springboard for Groundfloor. At that time, we had just five employees, had raised just over $1.0 million in seed capital and had not yet achieved $1 million of loan origination volume. What a difference two years has made: Since then we’ve grown to over 20 employees, added $6.5 million of investment capital, and originated over $14 million in loans. We appreciate and look forward to the opportunity to take part in the Venture Atlanta conference again.
Yesterday, we celebrated a significant milestone by announcing a significant expansion.
First, the milestone. It was just one year ago that Groundfloor became the first-ever (and still only) real estate lending marketplace to be qualified by the Securities and Exchange Commission. We joined Lending Club and Prosper as the third issuer ever authorized to allow non-accredited investors in the United States to participate in the funding of high-yield loans.
Since then, our community of lenders has more than tripled. Early adopters are using Groundfloor to take control, building self-directed portfolios of loans they choose rather ceding control to a REIT or fund manager, and paying dearly for the privilege. Together during this year we’ve funded over 100 loans for $12.5 million in aggregate. Our underwriting standards practices are stronger than ever, and our discipline to restrain growth to a manageable level has paid off: Our lenders have earned average annual rates of return of approximately 14 percent, with no loss of capital on over 40 loans successfully repaid to date.
Second, the news. Groundfloor remains in a limited release while we prepare to open our doors fully in the new year. In the meantime, we’re ready to expand by doubling our lending footprint, which will now extend to 23 states.
Why? First and foremost, to supply more loans sooner--without lowering our standards. Before starting our nationwide expansion a year ago, funding five loans for $250,000 took us a full month. Just last night, at 5pm ET, we did that in 15 minutes with 142 lenders getting in on the action. Our investors have been ready for us to expand, and now are our lending operation is ready too.
We continue taking steps to bring Groundfloor to more investors, to continue opening up more capacity for everyone to participate and to ensure there are enough loans to go around. Today’s news is a helpful step in that direction, and one that signals confidence in the lending operation we’ve built in 2016. Stay tuned for more exciting developments on the horizon--more features, more loans, and more geographic expansion. One year in, we are as fired up as ever and continue to appreciate your continued interest, support and trust.