Hi Everyone,
I have previously written about my experience with Groundfloor which is a crowdfunding platform that focuses on high yield bridge loans for fix and flip projects. These loans can be risky and one should only invest what they can afford to lose but for the right investor it can add diversification to their portfolios and earn an attractive yield.
So far I have been fully repaid on 250 of the loans I have made and my average return has been 10.7% annualized which is a very nice yield for loans that have 12 month terms but after further analysis of the loans that have been repaid have been paid back on average over 9 months.
I definitely would not recommend putting large portions of your portfolio in these types of loans as they can be risky hence the large return. We still do not know how they will perform in a recession or economic downturn. The loans are secured by the underlying properties but you still could lose your entire investment. The nice thing about Groundfloor is that the minimum investment per loan is only $10 which means you can diversify your risk into many loans in markets all over the country which reduces risk further.
If you have a large enough portfolio a small percentage allocated to Groundfloor loans or similar type of loans from other platforms or investment offerings could be a great way to earn a high yield while adding diversification. Another great way to hold these assets is in an IRA as the interest is all taxable and if you are in a high tax bracket holding them in a tax advantaged account such as a self-directed IRA may be advantageous. Groundfloor does offer a self directed IRA product but I have not utilized this yet so I do not have any insight into the fees or ease of setting this up. If you are looking to but assets like this in an IRS Groundfloor may be a good solution.
Disclaimer: I have approximately $3,000 invested in Groundfloor loans and an additional $900 in the companies private common stock. I am also not a financial advisor and this article is not investment, accounting, tax or legal advice and is purely for informational purposes only. All investors should research an investment and make an informed decision based on their individual situation.