In today's low interest rate environment, it's getting harder for savers and investors to find places to park their cash and earn an attractive yield. Safe options like savings accounts and CDs are offering yields of less than 1%. Meanwhile, the yields on bonds aren't that much higher, as the 10-year U.S. Treasury Note is currently less than 1.5%.
That's opening the door for fintech companies, like real estate crowdfunding platforms, to provide innovative solutions that offer savers and investors higher-yielding alternative savings products. The latest innovation comes from wealthtech platform Groundfloor, which recently launched its Stairs app. This product allows anyone to start climbing the wealth ladder.
Stairs is a new app available for download. It combines savings with investing, which they dubbed "savesting," allowing users to earn a higher interest rate. With Stairs, users can earn 4% to 6% annualized interest on their cash, which is up to 600 times more than they can collect on a traditional savings account.
To get started, interested users:
- Download the app: It's available on Apple's App Store and the Google Play Store.
- Sign up and deposit money: Connect your bank account -- or Groundfloor account if a user on that platform -- and add money in a couple of clicks. New users can start investing with as little as $1.
- Supercharge your savings: You can earn up to a 6% annualized interest rate by turning on recurring deposits and rounding up your spare change (users must have a Plaid account or Plaid-enabled bank).
- Cash out anytime: You can withdraw your money whenever you need it with no fees.
- Keep your money growing: Stairs automatically reinvests your earned interest every five days to allow users to enjoy the benefits of compound interest.
Stairs is very easy to set up (I did it in a couple of minutes while writing this article). Users will start out earning 4% on whatever cash they deposit. If they turn on recurring deposits, users can step up that rate by 1%, which kicks in 30 days later. They can step the rate up by another 1% by turning on a feature to round up spare change on purchases. That feature requires setting up a Plaid account or using a bank with a Plaid-enabled system. Again, this additional rate increase would go into effect 30 days later.
How can Stairs offer such high rates?
The Stairs app builds on Groundfloor's real estate crowdfunding platform. Groundfloor provides real estate investors with hard money loans to complete fix-and-flip and other residential real estate projects. The company then packages these loans into limited resource obligations (LROs) that it sells to investors on its platform. Investors can purchase interests in these loans for as little as $10. LROs have typically returned an average of 10% interest.
In addition, Groundfloor offers notes. This product pools pre-funded loans together into notes with terms as short as 30 days and interest rates between 3% to 7%. They have a minimum investment of $1,000 and are only open to accredited investors, Groundfloor shareholders, or those who have invested with the platform for more than a year.
Stairs combines the best features of these products into one simple platform. It allows anyone to invest in a secure pool of loans backed by residential real estate. These loans generate interest income to support the yield. Further, these loans repay every five days, meaning investors aren't holding on to the repayment risk of the underlying loans. Because of that, Stairs provides users with a relatively low-risk way to generate a higher yield backed by real estate assets.
An interesting option for yield-seeking investors
Groundfloor has opened the door to the private residential real estate investment loan market to investors, allowing them to earn high yields on their debt investments. Now, it's taking this opportunity of earning high yields backed by real estate loans to savers through their Stairs app. While it's not a risk-less product like an FDIC-insured savings account or CD, it's a relatively low-risk way to earn passive income from your savings. Because of that, the easy-to-use app is worth checking out.
Disclosure: Matt DiLallo invests on the Groundfloor platform and has a Stairs account.