Groundfloor makes it possible for everyday people like you to tap into the rewarding world of real estate investing. You don’t need to be a millionaire or a seasoned property guru. With Groundfloor, you’re empowered to grow your wealth brick by brick.
Category
🗞
NewsTranscript
00:00 Brian Daly from GroundFloor, CEO and co-founder, hanging out.
00:04 So without further ado, let's go ahead and bring Mr.
00:07 Daly on the stream.
00:09 Brian, hey, I'm well.
00:12 Good. Glad to hear it.
00:13 Where are you joining us from?
00:15 I can't tell from the background. It could be anywhere.
00:17 You can't tell it's Atlanta, Georgia.
00:19 Oh, of course.
00:20 How you know, I can see the Brave Stadium right there over your shoulder.
00:23 For sure.
00:24 So tell me, I guess, before we get started,
00:27 just a little bit about GroundFloor brief, you know, overview.
00:32 GroundFloor is a 11 year old investment platform
00:37 that was started in the wake of the 2012 Jobs Act
00:40 to open up private credit in real estate
00:44 to everyone on a fractionalized basis.
00:47 We've done one point three billion dollars in investment volume on the platform,
00:51 serving over 250,000 retail investors now.
00:56 And we generate a return on that private credit in residential real estate
01:00 that has historically been around 10 percent and with higher interest rates
01:04 is now something more like 12 percent.
01:07 Wow. Yeah.
01:08 We formatted it in a really interesting way that I think says a lot
01:11 about the future of where real estate investing and private market
01:14 investing is actually going.
01:15 So excited to get into that.
01:17 Yeah, I'm excited to get into that, too.
01:18 And I mean, before you hopped on, Kevin and I were just talking about,
01:21 you know, mortgage rates and interest rates
01:23 is now a good time to invest in real estate.
01:26 Depending on the market, where you are in the capital stack
01:29 and the asset class within real estate.
01:31 Yeah. The thing I think I've learned about real estate
01:35 now in over a decade of running the company is
01:38 it's important to pay attention to where you are in the capital stack,
01:43 what local market you're in and which asset class.
01:46 So we, you know, I think if you're in the if you pick the right spots. Yes.
01:49 All right. And then how does I mean, GroundFloor,
01:54 how does GroundFloor differentiate itself from other investment platforms
01:58 and what advantage does it offer
02:00 to investors seeking alternative investment opportunities?
02:04 Look, the traditional platforms and in fact, even a lot of new platforms
02:09 are selling a false alternative.
02:13 They tell you that either that if you want access to alternative real estate
02:16 or other alts, that you have to participate in some fund structure,
02:22 which we learned from public market investing,
02:24 that funds, mutual funds, REITs are an outmoded way to invest.
02:29 So, first of all, that's the first false alternative.
02:32 You don't have to invest in a fund and pay the fund manager to allocate for you
02:36 and pay the fund manager to underperform relative to the market averages.
02:41 That's exactly what we learned in public markets.
02:43 And it's also true in alternatives.
02:45 And the second falsity that they tell you is that,
02:49 you know, you've got to put in a high minimum investment or you have to,
02:54 if you're not participating in their fund, you've got to invest five thousand,
02:59 ten thousand, twenty five thousand per deal and take that risk.
03:03 Neither of those are true in today's world.
03:07 And we have built a platform that's very different
03:10 from the traditional platforms and pays that off.
03:13 Got it. So, I mean, you're saying basically I like student
03:17 housing as a specific sector in real estate instead of going to find a fund
03:22 that's managing properties or whatever and investing in that fund,
03:27 which is then going to take a fee.
03:28 I'd be better off going to invest in these properties directly,
03:31 which something like Ground Floor is helping you do.
03:33 Well, actually, what I think you'd be better off doing is indexing into.
03:38 OK. And the difference between an index and a fund is active management
03:41 versus passive management.
03:43 So, for example, our space isn't student housing.
03:46 Our space is single family residential real estate property that, you know,
03:49 that, you know, invest investment property.
03:51 We allow you to index into that asset class a dollar at a time.
03:56 So you can very quickly via our mobile app, you put one hundred dollars
04:00 into our mobile app, you can get started.
04:02 You'll have a portfolio of about one hundred properties right away.
04:05 And these loans repay very, very quickly.
04:08 So the cash flow, you know, last year
04:13 on a monthly basis right now, we're repaying sixteen,
04:16 seventeen million dollars a month to investors out of an asset base
04:20 of about three hundred million.
04:22 So the loans repay and generate a lot of cash flow.
04:26 And because you're diversified, you're not waiting to get liquid
04:29 on on one big investment in a property or worse yet, waiting for the fund manager
04:34 to allow to redeem your you to redeem your shares.
04:37 So I think, yeah, as soon as somebody offers fractionalized interests
04:42 in student housing, I think you should index into it.
04:44 All right.
04:45 We could we could fractionalizing and indexing is the future.
04:48 That's the way.
04:49 And the false alternative that you have to pick and choose and participate
04:53 in some crowdfunding scheme, five or twenty five thousand dollars at a time
04:57 is false, as is the falsity that you have to go invest in a fund.
05:03 Got it. And I really appreciate you kind of, you know, talking about
05:07 some of these falsehoods that are are commonly, you know, I guess, known
05:10 or understood by people that that want to get into real estate
05:14 as an alternative investment.
05:16 Could you discuss any recent developments in terms of ground floors,
05:20 like new offerings or market reach that are that are, you know, particularly
05:24 noteworthy? Absolutely.
05:25 We started off with first lien residential real estate debt,
05:28 and that's great, like I said, because it pays off quickly
05:31 and it pays a really high yield, 10 percent historically average of 12 percent.
05:34 Now, we've now expanded into more more parts of the capital stack
05:39 and more use cases.
05:40 So a couple of years ago, we expanded into new construction.
05:43 For example, you can now buy equity and co-invest
05:47 with an investor who is purchasing, you know, fix and flip
05:52 or doing a new construction project.
05:55 So that's new.
05:57 That's fractionalized equity investing.
05:59 We've done rental properties.
06:00 We've done new construction.
06:02 We've done we've done some cash flows on commercial property.
06:05 So we're we're now fractionalizing more types of real estate
06:09 and we're fractionalizing it, you know, at different parts of the capital stack.
06:13 So it's I agree.
06:14 It's an exciting time to be entering into alternatives.
06:17 It's the it's the vanguard of of where investing should be.
06:21 And we think of ground floor as building what for private markets and real estate,
06:25 what Charles Schwab built in discount brokerage starting in the 70s.
06:30 And I think it's an exciting time to be doing that.
06:33 So how does ground floor I mean, when you're looking at some of these
06:36 new opportunities, how is it, I guess, way different investment opportunities
06:40 and say, OK, this is what we want to go into versus, hey, we're going to avoid
06:44 student housing because only idiots like Aaron over there wants to invest in those.
06:48 Well, look, we we have the philosophy that indexing wins.
06:54 OK, so we are providing tool sets to index into these asset classes.
07:00 What that means is we're not like an active manager that's picking and choosing
07:04 deals and trying to tell you, oh, this one's a good deal.
07:08 You know, the problem with crowdfunding in general is that you say it's a good deal.
07:14 It happens to be the deal you got.
07:15 And which is it?
07:16 Is the deal you got and it's a good deal?
07:18 How do I know?
07:18 How do I know?
07:19 And how much time is it going to take me to know?
07:22 And if I'm indexing in, I don't worry about that.
07:25 Right. So our approach is highly algorithmic.
07:28 We have a 174 page offering circular that's on file with the SEC.
07:32 We have audited financials come back eight years.
07:34 You can do your own diligence and see exactly how we underwrite algorithmically
07:39 in order to help you index into this asset class.
07:42 And that's a very different philosophy from passive management
07:46 or from active management.
07:47 It's a more passive form, much like what ETFs and index funds did in public markets.
07:52 That's the future of real estate investing for the overwhelming majority of people.
07:58 And I just like it is, it's what's happening in public markets
08:01 for the same reasons, really.
08:03 I mean, I should also mention because of that model,
08:05 we don't charge an investor any fee.
08:08 You can't find a fund manager in alternatives or real estate
08:12 that doesn't charge a fee.
08:13 If if if you are, if we're making 14 percent on a loan,
08:17 you are making 14 percent.
08:19 How do you guys make money?
08:21 We make money as a capital provider when we index into this asset class
08:24 and we have deals that meet the criteria.
08:27 We make money at the time we provide the capital from the investor
08:30 and they're happy to pay it because if they're really good
08:34 at developing single family property, if they're really good at it,
08:38 they're making 30, 35, 40 percent return on equity.
08:41 Even if they have to pay high origination points and high,
08:44 high rates of return, high interest rates, they don't mind.
08:47 Right. It doesn't matter because it comes out in the wash for them.
08:49 Got it. Well, what trends do you foresee shaping the alternative
08:54 investing landscape over the next decade and how is ground floor
08:57 positioning itself to adapt and thrive?
08:59 So first of all, there's a whole new wave of people coming into this asset class.
09:04 The younger you are, Bank of America Research says
09:08 the more likely you are to view alternatives as the way to save
09:11 for your future and to invest rather than public markets. Right.
09:15 So first of all, there's a whole new wave of people
09:17 that want to interface with a new way.
09:19 These people, we give you the flexibility to pick and choose
09:23 and set up your own rules and and basically build your own ETF.
09:26 Right. You can do that on ground floor.
09:28 But we also provide a really slick and easy auto investor account
09:33 where you can just download an app and it ought of the robots invest for you.
09:37 Keep it rolling and keep generating cash flow and returns for you.
09:40 And I think that's the future past is prologue.
09:43 Right. What happened in public markets is going to happen in alternatives.
09:46 Passive investing, index investing is going to win.
09:50 You know, I'm sorry to say it to my friends who are fund managers,
09:53 but fund managers and their high fees and their lockups of your money
09:58 via their redemption policies are going to the dustbin of investing history,
10:02 just like they did with mutual funds in public markets.
10:06 That's my take.
10:08 I do see a question from MD in the chat.
10:11 He's asking about what about commercial to residential conversions?
10:14 Is that something that ground floor would ever get into?
10:17 I think that's a really interesting space.
10:20 The research we've done says there's a there's a lot of nuance to that business.
10:26 There's a lot of nuance around zoning.
10:29 There's a lot of nuance around the product development,
10:31 and it's pretty market specific.
10:33 So it's not a place that we're playing.
10:36 You know, that's a place where if you want alpha in there,
10:38 I would go find an active manager and I would invest in their fund,
10:41 you know, to do that.
10:43 Or I would I would crowdfund into a property if you have a thesis around that.
10:47 But I don't think that category is ready for indexing yet.
10:50 And I think indexing is what the overwhelming majority of people can
10:53 and should be doing.
10:54 I run up on the clock here.
10:57 Last question. Looking ahead.
10:59 What are future plans and goals for ground floors, product roadmap?
11:02 And how do you envision the company's role in shaping the future of real estate
11:06 investing?
11:07 We are going to take our model and continue eating away at more capital
11:12 markets, just like we did in private credit for real estate investment
11:16 that you can take it to the bank.
11:18 We're going to be in more categories, index, enabling people to index
11:22 into real estate alternatives.
11:24 We are going to do that in a lot of different innovative ways.
11:28 And, you know, look, we're one of the we're one of the earliest
11:32 to have tried this with a reggae offering that we qualified in 2015.
11:36 We're on the bleeding edge of the regulatory.
11:38 We're on the bleeding edge of the user experience.
11:41 And I think we are where the market's going.
11:43 And we just have to take that model to more categories.
11:45 And I think people who like our shareholders,
11:48 we have 7000 shareholders who own a piece of the company.
11:52 In addition to investing on the platform, I think that army
11:57 is going to take us into a lot of new markets and a lot of new, exciting
12:01 investment products.
12:02 Got it. Well, we've been on the line with Brian Dally, the Jack Bogle
12:06 of real estate investing, the CEO and co-founder of Ground Floor.
12:10 Thank you, Brian, for coming on Benzinga's real estate webinar.
12:13 I hope we get to catch up soon.
12:14 Maybe next time you guys have some big news,
12:16 we'll bring you back on the show and talk about it.
12:18 Love to do it. Thanks.