Groundfloor Finance review: Fix and Flip with NO Monthly Payments

Hey everybody, Toby Potter here, Global Integrity Finance. Today we are in Dallas at LeverageCon at the Real Estate Expo, and I want to tell you, today has been nothing short of amazing. We've had over 500 people registered for this. I don't know how many sponsors and vendors are here. The room has been packed, the energy has been high, and we have just been going, going, and going. But right here, right now, we have a special privilege, honor to speak with Andy with Ground Floor.

Yes, sir.

Is that right?

That is correct. Happy to be here.

Met this gentleman earlier. He's here, he's going to share what this— about who he is, what he does, and and why you need to be doing business with Groundfloor. Andy, thanks for being here, buddy.

Happy to be here. You're totally right. It's been an amazing day. Uh, yeah, I'm with Groundfloor Finance. We are an investment platform first and foremost, but what we are as a lender is a lender that, uh, allows our borrowers to take out loans without paying us a single dollar. Not $1 in fees, not $1 of monthly interest until they are done. So literally they can go the entire duration of the loan without making a single payment. Any fees that we have are rolled into the loan. And so nothing is paid until the exit.

We're going to back that bus up. So let me make sure I fully understand it in the audience. Yeah. So I'm going to borrow $200,000 on a purchase. Yes, sir. $75,000 on a rehab.

Yes, sir.

And I'm not going to pay any closing costs.

Well, every fee, all lender fees are rolled into the loan.

So it's all lender fees. I got to pay third-party fees. Correct. Okay. And then I don't have any payments for 12 months. Correct. Right.

You know, when some lenders say they don't have any monthly payments, that's because there's some sort of interest reserve or that they're bringing, you know, a certain amount of prepaid interest to closing. That's not the case with us. We're truly deferring a whole year of interest. So if you pay us back in 7 months, we'll just add 7 months of interest to the final payoff. Yeah.

So, so I borrowed $275,000 and I don't now have a $325,000 loan. I still have the $275,000 because you didn't roll in all those payments. Correct.

And it's not like the— some people hear what we do and they think, oh, well, does that mean my loan amount is going to continually be increasing?

Right.

Is that my interest is compounding on it? On top of the balance?

No.

The loan amount is the loan amount. That doesn't change. The only thing that gets added on top is the interest at the end of the loan.

So when I go to pay off, whether it's 6 months, 9 months, 10 months, 12 months, You calculate the amount that's owed, correct? Which is your payment and your points.

Correct.

And then you pay that off at closing. So I have a $295,000 payoff as an example. Correct. Right. Yeah. That's amazing.

And look what I tell people, whether you're paying at the end of the loan or monthly, it all comes out the same, right? The ROI for the project is going to be the same. Our borrowers love the fact that they don't have to worry about money going out the door during the renovation. And it allows our clients to grow their business in a way that they never would have been able to.

Cash from their pocket.

Right. So, you know, our programs are designed for people who want to do volume. If you're doing 3, 4, 5 projects at a time, that would be really hard if you were having to make 3, 4, 5 monthly payments every month. But the fact that we defer all that, it allows our clients to grow their business in a way that they never would have been able to had they been making monthly debt service on all those loans.

Elephant in the room. You guys don't get paid if it defaults.

Is that a question? So, look, you're totally right. I mean, it's absolutely a riskier position as a— for us as a lender.

As an investor, I got no skin in the game. And, and now things got a little bit tough. You know, we came in there, the contractor, like we talked on the panel, the contractor, you know, didn't perform the way he thought. He's adding in his fees or he's jacking up the cost. And now I got to come out of pocket.

You know what?

I still want to do this deal because my profits you know, minimize. I'm out, and I, I got no skin in the game. Well, I didn't say you didn't have any skin in the game.

I mean, yes, we do have a 100% program, okay, but the majority of our loans do still, do still require down payment, okay. But you're absolutely right, it does put us in a riskier position as a lender from compared to a lender that's collecting fee points at closing compared to one that's collecting monthly payments.

Absolutely.

Um, I didn't say we're the cheapest lender in town.

Um, but I'm telling you, I'll pay for that.

Yeah, exactly. I'll pay for that.

If you're—

if all you care about is is finding the lowest points, we're probably not going to win that deal. If low down payment and no monthly payments is a priority, which it is for most hard money borrowers, we win almost every time.

Well, as we always talk about, cash is king.

Exactly.

And the more I keep in my pocket, the more control I have over situations. And what I talk about that is, so if I'm not having to upfront 6, 9 months interest reserves or anything like that, and another project comes up, I got cash to go take that thing down versus having all invested in this project. Correct. So it gives me the ability to be flexible as deals pop up.

It absolutely does. You make a good point about the risk, though. It's certainly putting us in a riskier position as a lender. I do think that's reflected in our, in our points. But yeah, it allows, like I was saying and like what you were saying, it allows somebody to— that's one more deal that a borrower can go do.

Right, right.

That's one more project. And so they'll gladly —or pay what we charge.

What you were talking about, we got 3 or 4 projects going. I now don't have, let's just say, $1,500 a month for each one. So now I got $6,000 that's not coming. But life happens. Car breaks down, medical emergency. But now I got $6,000 still available to go take care of life while the projects keep going. And I don't have to determine, do I make my mortgage payments on our fix and flips, or do I take care of my family? So that gives a lot of flexibility in that also. You're absolutely right.

And to that point, what I love so much about our program Beyond everything else, it puts us on the same side of the table as our borrowers. Yeah, we're all on the same team. Our goals are aligned. We're not getting paid until they get paid. And that puts us on the same team. And I think it leads to a very mutual beneficial outcome. True partnership. Exactly. It's a true partnership.

You know, when you have multiple partners on an LLC, nobody gets paid until that deal flips out. You guys just kind of join that LLC in a way. Yeah, in a, in a back doorway.

I know what we're all, we're all rowing in the same boat.

We're all going to ensure the success and profitability because none of us going to get a dime until this deal flips out. Exactly. I love it. How long you guys been around?

We have, we are going on year 12 right now. Wow. So yeah, we started back in 2013, I believe, and so 12 years strong. Um, and what's really cool about what we do is the loans that we originate end up on our investment platform. So literally you anybody with $10 or more can go on our website, look at all the loans that we have funding, invest as little as $10 in a loan, and whatever the borrower's paying, the investor is earning that interest. So when the loan repays, the, the investor that invests in the loan gets their money back plus their share of the interest that's accrued. Right, right, right. So every loan has thousands of investors in it. Um, it's a really— and that model is what allows us to do the no monthly payments. Yeah. As our investors know, they're not getting monthly payments. It allows us to—

so all their dividend is deferred till the end. Exactly. So they're just compiling that dividend. Exactly. Once it sells out, then they get paid their investment plus their interest earnings on the deal. Bingo. So, uh, uh, what state you guys in?

Uh, we're in 36 states. Pretty much any state that you would think about, we're in, except for New York, Michigan, Louisiana, Mississippi, South Dakota. Yeah, those states. Yeah, no, none of those. But Yeah, the other big ones. Yeah, pretty— not in Alaska or Hawaii.

Alaska, Hawaii, California. Yep. Nevada. Yep. Utah. Arizona. Yep. Wow. You got the ugly states in there.

Yeah, we make it work.

Where are you guys located?

Our headquarters are in Atlanta, Georgia.

Atlanta, which is amazing. Love, love it.

Greatest city in the world. Love it.

So other than that amazing program, do you work with brokers, with direct investors? Who do you work with? We work with both.

We have a truly amazing broker program. One thing that we do, and correct me if I'm still waiting to be proven wrong here, I have never met a lender, another lender that does this. Not only do we roll in all of our points, but we are the only lender that I know of that actually will roll in broker points into the deal. So the broker gets paid at closing, right? But instead of having to bring that fee to the closing table, their fee is just tacked on to the loan amount. So just less money out of pocket. But you guys front the money. We're out. Yeah, so we're like, yeah, we're just, uh, rolling the broker points into the loan. Yeah, broker gets paid at closing. It's just less money the borrower has to bring to the table.

I can tell you, 30 years in the space, you're the only one that does that.

I've been yet to be proven wrong.

You're the only one does that shit, and I'm telling you, that's ballsy. I'm telling you, um, you know, I'm a pretty aggressive, uh, you know, out-of-the-box thinker. You would have come to me and said, hey Toby, we're going to start a company and And this is what we're going to do. I'm going to say, I don't know what you're smoking, but if you're not going to share that with me, I can't get on board with you because that's some funky shit right there. It works.

We've been going, I mean, look, 12 years.

Exactly.

Yeah, it's not like we would still be here if it wasn't working.

No, no, you've been through COVID, you've been through the high interest rates, you've been through some of the turbulence. So if you're still around, then the shit's working because it's not— your defaults are too high, your investors are going to stop investing. You ran out of money. Yep. If that was the case. Holy cow.

Not only have we not run out of money, but we recently just completed a securitization of a bond. And so it's quite the opposite.

No, you're growing. Yeah. Blown up.

Wow. What I've told a bunch of people, there's a lot of great lenders here this week.

Yeah.

I don't think Ground Floor is— I'm not saying we're better or worse than any of them, but I do know that we're different. We are certainly offering something unique in the marketplace.

Interviewed 13 people today, and I'll tell you, you are the most unique unicorn in the room today. That's on record. The unicorn. The unicorn. I'm telling you. And I've, I've been in this place for 30 years. I've heard some stuff that's going on. I'm like, that's pretty unique. That's pretty different. But I get it. This right here takes the cake. If I had a trophy, if I had a plaque, I had an award, you would get it.

I haven't even told you about our second, our full stack. We didn't.

I know, because you caught me off guard.

I'm like, we got to stop right here. I told you about our 100% financing.

So now let's leave it at that for now. Roll it out. Yeah.

So for experienced borrowers who have 4 or more completed projects in the past 5 years, that's another way we're unique. Most lenders only look back 2 to 3, right? We look back 5 and a 680 credit score. We offer what we call full stack financing where, you know, our loans are capped at 90% LTC. If so, the borrower can bring their 10% contribution to closing or if they meet that criteria and the deal meets certain criteria, we can offer a second lien position loan to help cover the down payment. Uh, so with the second lien, it ends up in a lot of situations us covering 100% of the deal. Jeff mentioned that in there.

Yeah. Yeah. And I, and he mentioned it and I kind of mentally took a note and was going to circle back around, but yes, he talked about that. So now is this inside your platform or is this an outside third-party second lien? No, it's us. It's inside you. Yeah.

So why not do the— our investors, the investors on the platform Can't get enough of them because they're getting paid 18%.

I was going to say 18%. I got that right. Yeah.

Our investors eat them up. Yeah.

So we got a 10% second at 18% to be paid off at closing. Now you're at 70% ARV.

The primary loan, the first lien loan can never breach 70% of the ARV. Yeah. Okay. But a lot of people think that's inclusive of 12 months of payments, but it's not. So you don't have to factor in the deferred payments when, when coming up to the 70%.

So we're just looking at the base loan. It's not going to exceed 70, but when it's all said and done, you may be at 73, 74 because of the deferred payments and points.

And when you factor in the second lien, it could be even higher.

Okay. All right. Wow.

Where's the unicorns?

I mean, I'm thinking, how do I move over here to ground up now? We're going to close our doors, open up another branch.

We have a great— we do a lot of fix and flips. We have a great ground up new construction program also. Same criteria as, you know, no payments, non-Dutch interest. So they're only paying interest on what they borrow.

All fees rolled in. Yeah. Now, DSCR, do you guys do DSCR? We do.

So it's a newer initiative for us. Yeah, we do. It is something we've started doing.

Yeah. But you can't put those on your platform. So those got to be sold off.

Correct. Yeah. And so, yeah. Exactly. I focus more so on the RTL side. DSCR is not really my world, but you are right. We can't put those on the platform. Investors don't want a 30-year hold on. No. Yeah, yeah.

But I mean, they're liking that 6, 9, 12-month payback.

Yeah. All the loans on the platform are 12-month payback.

Yeah, but they get done sometimes, get done sooner for sure. So if I put in $100,000, $250,000 on a deal, I mean, I may be turning that 2 or 3 times a year because I just keep rolling it in. Correct. So I may turn that into a million-dollar investment each year, return on money.

Yeah, yeah, yeah. Check out the platform, Groundfloor.com. It's a really— it's even though I work on the lending side, the investment platform is what drew me to this company. I think it's the coolest idea ever. The whole crowdsourcing to fund real estate loans. It's, it's a great concept. If you go, you can invest in individual properties. We have a program where you can kind of spread across all of the loans in our portfolio. You can, you can basically give us, lend us lending capital. We call them our notes, where if you just want to give us lending capital to use as we need, uh, I think more like a pool fund, correct?

Yeah.

So like if you want to give us a 90-day note, we'll pay you, uh, 7% on that. Yeah, yeah. And that's, that's just, you get your money back at the end of 90 days. A lot of great options.

Amazing. How does everybody out there listen to this find you guys?

So groundfloor.com is the website you go to for our investment platform. I believe if you go to Ground Floor Lending, that's if you're an investor looking to borrow money from one of your projects, that's the website to go to.

Okay. Yeah. And then you guys are in Georgia, branches anywhere else, or is everything done out of Georgia?

We have an office in Wichita, Kansas as well. That's where Jeff is based out of. Yeah. But, you know, we're a very remote company. We have, we have staff all over the country, right? Yeah. Our main headquarters are in Midtown Atlanta.

So when we're underwriting, processing, funding, it's all out of Atlanta?

Uh, our processing team is actually mostly out of the Wichita office. Wichita? Yeah. Okay. But we all work together.

All right. Yeah. I'm telling you guys, I've been in this space for 30 years. 30 years. I've had 13 interviews today. I've had some really unique, uh, insight and understanding of the evolution of hard money lending. But if I had a plaque, if I had a trophy, it'd have to be about 6 foot tall to give to these guys because they have the shit. Um, this is amazing. This is a great program.

You guys, you had that trophy.

I wish you— I wish I did too. Now I'm like, how, man? How do I not award you guys for the unicorn in the room that has an amazing program that you guys are just—

I mean, that's, that's okay.

I can't say enough, and I'm, I'm usually never tongue-tied. Yeah, so, uh, look them up, get with them. I guarantee you this, Global Integrity Finance is going to work with them. and we're going to send them some shit because I can't touch this. And I've been doing this for a long time, uh, one of the biggest, one of the fastest growing in the industry. But that is the new unique shit that will change the needle, move the needle in our industry. And I guarantee you, if you're looking to get into real estate investing and you're looking for leadership, partnership, fundings, this is it right here. Because these guys are a proven track record. Love them. Thank you so much, sir, for being on here, buddy. Appreciate it so much. Thank you.