How are these new construction loans structured?

Our new construction loans operate slightly differently than our renovation loans.   Borrowers must have the experience to be eligible. Minimum of 4 transactions in the last 5yrs.  These can be flips, rentals, or new construction.  The loans fund different percentages of the construction based on the tier in which the borrower falls.  We also tend to grab additional documents for this type of loan.  This would include 1 bank statement, a general contractor license, and the contract you have with your general contractor.  While they are not part of the loan,  we still need to confirm there is a contract in place. Once a loan is approved, the borrower is able to access the full amount of the loan in a series of draws. Interest accrues on the loan as it is used.

What is the advantage of investing in new construction loans?

As is the case with all loans we offer, rates are risk-adjusted based on the creditworthiness of the borrower and the value of the collateral relative to the loan balance. In general, we have found that borrowers who take out a new construction loan are more experienced and have a greater financial capacity than a typical renovator. Furthermore, new construction overall is less risky than a renovation because it is essentially a clean slate -- often with renovation projects, you run into issues that you were not expecting, whereas with new construction, you are more aware of all contingencies because you are starting from the ground up.

Why work with Groundfloor?

Finally, the current market for these types of loans is wide open -- for the most part, builders have to turn to banks or larger non-bank lenders in order to receive loans for their new construction projects. True to our mission of creating a radically open, decentralized, and accessible capital market, we saw an opportunity for GROUNDFLOOR to step in and change the game.