Groundfloor vs. Circular Urban: Fixed Debt or Appreciation

4 min read

Ser el banco o ser el dueño: deuda a corto plazo o plusvalía a largo plazo

When you lend money you know exactly how much you will earn, but there is a ceiling: not one cent more. When you buy a property, your gains have no ceiling, because you earn from rent and also from whatever the price of the property does.

The concept: fixed return vs. appreciation

A fixed return belongs to the lender: an agreed rate, whatever happens to the asset. It is predictable, and that is both its virtue and its limit.

Appreciation belongs to the owner: what the asset is worth above what you paid when you decide to sell. It is not guaranteed, but it has no ceiling either.

Example: you buy an apartment for COP $300 million and five years later it is worth $390 million. That $90 million is appreciation, and it is yours only if you are the owner: had you lent the money, you would have received the agreed interest and nothing more.

The Groundfloor model: being the bank

Groundfloor is a highly accessible US platform — you can start with USD $10 — specialized in debt. You lend to people who buy run-down houses, renovate them, and sell them quickly (fix and flip). In return they pay you interest, say 9%.

In plain words: fix and flip is buying a run-down house cheap, fixing it up, and reselling it fast. Example: they buy it for COP $200 million, spend $40 million on the renovation, and sell it for $300 million six months later.

Where its limit is: if the house you helped renovate doubles in value because the neighborhood is booming, the developer captures that gain. You get the promised 9% and nothing more. These are also very short-term investments, a matter of months, so you have to keep hunting for new loans to stop your money sitting idle.

What Circular Urban adds: capturing real wealth

With Circular Urban you do not act as a bank but as an owner. By buying shares in the SAS that owns the property you are entitled to rental income and, above all, you capture appreciation: if the building gains 30% in value over five years, the value of your shares rises proportionally.

Your wealth grows passively over the long run, without having to find somewhere to reinvest every six months. In exchange, you accept a longer horizon and a return that is not fixed in advance.

In plain words: your horizon is how long you plan to leave the money in before you need it. Example: a horizon of months suits savings you will spend soon; a horizon of years is what gives a property time to appreciate.

Comparison table: short-term debt vs. long-term ownership

Feature	Groundfloor (debt model)	Circular Urban (equity model)
Earning potential	Capped at a fixed interest rate	Uncapped (rent + asset appreciation)
Economic role	Bank / lender	Owner / shareholder
Protection against inflation	Poor (fixed rate)	High (property value rises with inflation)
Ideal horizon	Short term (months)	Long term (years)

How to choose your role

If your goal is predictable short-term cash flow, the lender's role makes sense. If your goal is building wealth, the owner's role is the one that lets you keep the part that grows. Many investors end up combining both; what matters is knowing which one you are playing.

What to weigh on our side

No ceiling does not mean no floor. The lender gets paid first: if the project underperforms, the shareholder absorbs the loss before anyone else does, not the bank. The flip side of capturing the upside is carrying the downside.

In plain words: inflation is things costing more each year, and the order of repayment decides who loses first when something goes wrong. Example: if your investment returns 5% while prices rise 8%, you gained on paper but can buy less than before. And if the project produces COP $50 million when the loan required $60 million, the lender takes the $50 million and the shareholder gets nothing.

Being the Bank or Being the Owner: Short-Term Debt or Long-Term Appreciation