• Apr. 26, 2017, 8:15 pm

GROUNDFLOOR seeks to bring transparency, trust to retirement investing with GROUNDFLOOR IRA

When one out of every three Americans has nothing set aside for retirement and another 23 per cent have less than $10,000, there is something wrong with the current state of retirement savings in this country.

Actually there are a few things wrong, but one that can be addressed is trust, GROUNDFLOOR cofounder and CEO Brian Dally said.

The GROUNDFLOOR IRA addresses that, Mr. Dally said during an interview at LendIt 2017 in New York City. Launched this spring, the GROUNDFLOOR IRA allows ordinary investors to devote funds from their retirement accounts to real estate.

Brian Dally

Brian Dally

Public markets are not considered to be a viable, fair or safe place to invest by many people, Mr. Dally said. While that is only sometimes the case, it has contributed to a growing desire people have to self-direct their retirement funds.

“With the GROUNDFLOOR IRA we’re going to allow people to participate in short-term, high-yield real estate-backed loans and build portfolios of those in their IRA,” Mr.Dally said, while adding current yields are more than 10 per cent on average.

An early challenge was finding a custodian with a sufficiently well-described set of APIs to integrate with GROUNDFLOOR’s technology, Mr. Dally admitted.

“A true technology company is hard to find in the IRA space,” Mr. Dally said. “In general what we found was most custodians had the capacity to integrate but didn’t have the technology to integrate.”

The solution was provided by IRA Services Trust Company, who worked with GROUNDFLOOR to provide the right blend of technology to offer GROUNDFLOOR investors, many of whom invest between $10,000-$20,000.

“If our investors were investing hundreds of thousands of dollars and this was an accredited investor platform, maybe we could justify custom platforms and additional manual processes, but we have a more mass market focus,” Mr. Dally said.

Investors won’t be starved for choice, Mr. Dally added. GROUNDFLOOR has tripled their loan originations and now offers between 20 and 30 loans every month.

It’s taken plenty of hard work to get to this point, Mr. Dally said. After raising a $5 million round in 2015, GROUNDFLOOR set to work work building their technology and their team.

Back then they were a victim of their own success in a way. Loans often sold out in minutes, creating an eBay-style environment where timing was key. Now the pipeline is wide enough to allow SDIRA owners enough time to consider each opportunity.

Credit the oldest and best way for that pipeline’s growth, Mr. Dally said. Repeat borrowers are returning to GROUNDFLOOR for the third, fourth and fifth time. Those people, along with the knowledge of where to find the good leads, have produced healthy deal flow.

Mr. Dally said GROUNDFLOOR has found great success in second-tier urban markets where their is a healthy mix of deals and lending capital. Such markets feature plenty of millennials transitioning to home ownership.

“There’s enough markets and its’ a large enough country where there’s always going to be lending opportunities,” Mr. Dally said.

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