Today we’re announcing our second property to be crowdlended in Georgia via GROUNDFLOOR, along with an important improvement to the way we offer our loans to investors. These developments are significant for two different but very much related reasons.
Nick and I started GROUNDFLOOR with an uncompromising focus on creating new and better financial products available to all, with no exclusions based on income or
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wealth. We set out to serve unaccredited investors. Traditionally, by contrast, finance has started at the top. Afterall, so the thinking goes, that’s where the “smart money” is. Life is good at the top of the market. Accredited investors are indeed easier to serve through existing regulations, do have more money to invest and surely have their own distinct problems to be solved.
We think the non-accredited 98% are what the “crowd” in “crowdfinance” is all about. That’s why we’re innovating in Georgia now, rather than coordinating millions of dollars in transactions between financially powerful parties nationwide and leaving the true crowdwork for later. Our announcements today are born of that pioneering effort. We launched. We listened. We learned. (And, we’ll continue to do so!).
For example, we gleaned that having one loan offered at a given rate is better than the flexibility afforded by having two (one with a set rate, and the other being priced by auction). Developer Pat Gilroy’s 748 Charles Allen multifamily renovation is now offered as a single one-year secured loan rather than two different loans. The offered rate (currently 8.75%) decreases as funding commitments increase, rewarding those who act to get in on it first.
We also validated and learned more about investors’ interest in allocating investments amongst a variety of assets and terms. Over the coming weeks and months, we’ll fulfill that demand with geographic diversity, new categories of real estate, a range of loan terms and different
capital structures. Today’s introduction of developer Rick Tuley’s group of rental townhomes in Woodstock, GA is a first step in that direction. In addition to being our first property of this type, the loan will be our first to feature profit-sharing. It pays interest over a five-year term, plus a bonus at the end based on the increase in property value.
Profit-sharing on a loan is the kind of benefit that, previously, only sophisticated institutions or accredited investors could negotiate for themselves. Consistent with our original mission, we’re excited to offer it to everyone. To our knowledge, no one has ever done that before, certainly not in real estate. Will it work? We think so, and will undoubtedly make adjustments along the way as we did with our first version of an auction rate construction loan. Time, in conjunction with continued innovation at the forefront of true crowdfinance, will tell.
Have an opinion or reaction to share with us? Email us anytime at founders@groundfloor.us, or use the commenting feature to this blog. We look
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