Atlanta-based real estate wealthtech platform GROUNDFLOOR has announced the launch of a new program designed to make sure that capital for residential real estate development keeps flowing during the COVID-19 crisis.
“Real estate is dependent upon the free flow of capital,” GROUNDFLOOR co-founder and chief executive officer Brian Dally tells Hype. “We’re rewarding individual investors for stepping into the gap left by private equity, debt funds, and other institutional investors who have been margin-called or otherwise frozen into stasis,” says Dally.
“We continue to hear of institutional capital providers who are pulling back as they suffer from market power being exerted over them by their suppliers, or seek to exert market power over the lenders or investors they supply. In some cases, investing and lending platforms are suspending redemptions or pausing operations altogether,” Dally adds.
The result, he says, is a threat of constricted liquidity that could delay real estate development and purchases. When capital markets dry up and stop financing real estate investment projects, he adds, it forces real estate developers to pause their operations and renders them unable to purchase, renovate, build, or sell new projects.
“GROUNDFLOOR is an important counterweight to these forces,” Dally asserts. “Even though the real estate market has slowed, people are still looking for places to live, and will be more than ever on the other side of this,” says Dally. “We’ve always believed that capital markets were broken, and so we were built for moments like this.”
Dally and co-founder Nick Bhargava started GROUNDFLOOR in 2013 in the wake of the Great Recession five years before. The idea behind the company was that private capital markets should be open to individual investors, regardless of financial status.
The new program allows investors to earn a bonus of 4 percent in interest for 90 days in certain investments made retroactively since February 26th and continuing through May 31st, at the earliest. More than 60 loans currently funding qualify for this program, in addition to future loans slated to be funded in the coming weeks.
“As a result, we are not reliant on traditional financial institutions for our lending capital, and can continue financing deals and offering new investments on the platform, even in times of crisis,” says Dally, noting that more than 80 percent of GROUNDFLOOR’s lending capital comes from individual investors who make minimum investments of $10.
The $10 minimum is designed intentionally to lower the barrier to diversification, giving anyone the ability to build wealth in real estate in a relatively safe way.
Anyone can open a free investor account by visiting the company’s website. Once an investor links a bank account, that investor can start investing in loans that have pre-funded various real estate projects.
And Dally sees brighter days for real estate investment ahead, if this new program has anything to do with it.
“COVID-19 is a national health crisis that instigated a financial crisis in parallel. When all of this is over, the U.S. will be even more under-housed than it was in 2019, providing astute investors and real estate entrepreneurs who act now more opportunity than they had when the market was running hot.
“We’re here for that.”
