In six months, the home’s renovator will pay back those individuals with 8% interest on each loan. The private investors’ money funded the project instead of a bank.
While some start-ups await the Securities and Exchange Commission’s promised rules for allowing non-accredited investors to participate in crowd-funding, Raleigh, N.C.-based Groundfloor is working within existing state laws to get a head start.
Today, it announces the expansion of its Georgia pilot to Illinois, Pennsylvania, Arizona, Massachusetts and Virginia, where regulators have authorized the company to solicit residents to participate in its deals around the nation. Georgia approved intrastate crowd-funding in 2011.
Founder Brian Dally says his platform will now be available to 47 million Americans. It’s the first major milestone in a plan to expand real estate crowd-lending nationally.
Dally believes the timing is perfect. Real estate crowd-funding leader Realty Mogul raised $9 million from investors in March to expand its platform for accredited real estate investing. The Washington, D.C., site Fundrise has successfully crowd-funded commercial real estate in Virginia. At least 20 platforms are operating in the real estate business today.
But Dally says Groundfloor is unusual in that its mission opens real estate investing to the general population. The minimum investment is $100, and the maximum is $2,000. Terms are six months to several years, the investment is secured by the real property, and there’s an aggressive pre-screening process for developers. The site targets small residential-development projects.
“We think this is a revolutionary concept for personal finance,” Dally says. “This is a steady, tangible way for ordinary people to make good returns on their money, a new class of product that didn’t exist yesterday.”