It was a strong year for real estate crowdfunding platform GROUNDFLOOR and 2018 is shaping up to be much the same, co-founder and CEO Brian Dally said.
The biggest takeaway Mr. Dally has from 2017 is the growth in retail investment, which he said stems from the strong performance of GROUNDFLOOR’s loan portfolio. In July the company released the analysis of the earnings of 2,700 portfolios on the platform. Plotting the performance of each one on a graph was illuminating.
“It looked like how your finance professor tells you it should,” Mr. Dally said.
If one properly diversifies they should see returns of 12-14 per cent, making GROUNDFLOOR an attractive option for the non-accredited investor.
“It’s really satisfying to see the product’s working,” Mr. Dally said. “Because of that performance we were able to lay the groundwork for some of the things we have planned.”
In September GROUNDFLOOR announced a new $100 million partnership with Direct Access Capital, the first time the platform has partnered with an institutional investor.
“We’re aiming to do $100 million in loans and that is good news for the retail investor,” Mr. Dally said. “It’s proof our platform is doing well, the investors audited our past performance and were fine.”
The funds will help attract more loan opportunities, but not without some help, so GROUNDFLOOR hired Debora Valentine as its new VP of sales to build out its loan origination network. Ms. Valentine will hire a sales team and expand the broker network in the hopes of tripling or even quintupling GROUNDFLOOR’s volume.
“Debora spent a decade at a large mortgage company, starting with them from 0 to billions of dollars in originations,” Mr. Dally said, while adding Ms. Valentine specializes in building networks of third-party originators. “The real estate investors we serve use brokers because it’s efficient.
“She’s making a huge difference here.”
As he looks at the broader market Mr. Dally notices an interesting shift. As cheaper deals become scarce, entrepreneurs are shifting to larger renovations that add value. With a larger percentage of opportunities involving buying at fair market value and working to add additional value, it becomes harder for the inexperienced person to enter the industry.
But people are still entering and if you pick the right ones early on you have sown the seeds of a long-term business relationship, Mr. Dally explained. To help the new entrants, GROUNDFLOOR is considering developing additional educational components beyond its blog.
There is also a strong nationwide demand for urban infill housing as people seek to live in first and second-tier urban areas, Mr. Dally said.
“They’re seeing the same thing we’ve seen in Atlanta (GROUNDFLOOR’s home base) for a while,” Mr. Dally said. “There are always some parts of cities with commercial districts that have residential components, ones that are walkable and have a combination of office and retail.
“People want to live in those areas.”