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By Faith Ashmore, Benzinga
The world of investing looks drastically different than it did in the 1980s and it will likely look different in 2030 than it looks right now. One of the biggest changes is who is investing and what they are investing in. The Robinhoods (NASDAQ: HOOD) of the world have, in many ways, successfully democratized stock trading. Investment is no longer relegated to wealthy individuals with fund managers who are investing in Fortune 500 companies. Now, everyone can participate in individual stocks, ETFs or mutual funds, and it shows in the numbers – retail investor sentiment hit an all-time high in 2023, with individuals pouring a record $1.5 billion into stock markets each day in February 2023.
Alternative investments are the other major shift in trading. Technology has evolved what people are investing in, and more and more opportunities are opening up for the everyday person, who can now also invest in alternatives like Bitcoin and real estate. Traditionally, real estate investment has been limited to those with significant financial resources and industry connections. It's one of the asset classes that the general public actually knows the most about, with over 64% of Americans owning property. But modern technology is breaking the glass ceiling on real estate investing – and a lot of that is due to fractionalization.
Fractionalized real estate usually refers to the process of dividing ownership rights of a property into smaller, more affordable shares, allowing multiple investors to collectively own and profit from the property. Groundfloor is one of the real estate platforms leading the way in the fractionalized real estate investing space, offering investors a chance to fractionally participate in the loans offered to developers who renovate or build new homes – essentially serving as the bank. The company was founded in 2013, and its unique approach offers fractional real estate investing opportunities for both accredited and non-accredited investors, enabling them to access high-yield returns backed by real estate assets. With as little as $10, investors can participate in pre-vetted real estate loans, potentially outperforming traditional REITs.
Groundfloor stands apart from private REITs with its transparent and fee-free structure, which establishes a direct connection between investors and their investments. The Groundfloor 3.0 auto-investing app allows investors to effortlessly diversify their portfolios across various projects, combining the convenience of technology with the stability of real estate investment. Brian Dally, the CEO of Groundfloor, shared with Benzinga in a recent interview that they “started the company because [they] thought that somebody would create a category-defining platform that opened up access for people to participate in this class of securities, in the same way that the wealthiest Americans, hedge funds, private equity funds or family offices do.”
Groundfloor’s target audience is what the brokerage industry would call a self-directed investor, or as Dally eloquently puts it, “a vanguard.” The company is focused on attracting this type of investor, who can be anyone, but the key psychographic the company is witnessing is someone who wants to be in control of their future and money – and might have a general distrust of the public markets. Younger people, especially, are interested in investing, but Dally shares that they want to go about it on their terms and with platforms they trust.
That’s where Groundfloor really stands apart from its competitors; the company was just recently awarded recognition on the Forbes Fintech 50 list. The goal of every investor is to get the highest dividend on their investment they can – Groundfloor reports it is using technology and the concept of fractionalization to get its customers a 10-12% annual return.
And these smaller, self-directed investors seem to be taking notice. Dally shared, “Since 2018, we have financed our growth not with venture capital, not growth equity capital or private equity. We've financed it by offering stock to our customers. We now have 7,100 shareholders who own 31% of the company. We're incredibly proud of that. And that has made us a more resilient platform that has an army of people who don't just invest on the platform, but they're owners and they want the platform to be successful. They're going to defend it, and they're loyal to it, and they continue investing in it.”
The company is currently incubating the next round of products it wants to bring to the mass market, through its Groundfloor Labs, which is open to accredited investors. Dally is hoping that by the end of 2024, they will be able to launch these products on the main site, available to everyone. Directionally, the company is looking to expand its product portfolio and offer more opportunities for people to invest in. As more and more investors are looking to fractionalization and alternative investment opportunities, Groundfloor may be a company to keep an eye on.
Embrace the fractional future and start investing in real estate with Groundfloor today!
Featured photo by Breno Assis on Unsplash.
Benzinga is a leading financial media and data provider, known for delivering accurate, timely, and actionable financial information to empower investors and traders.
This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice
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