Real estate is one of the world’s biggest industries. While most people choose not to get into the business of managing property or showing houses, there is a way for anyone and everyone to get a piece of the industry.
PeerStreet makes it possible to make money by investing in real estate debt. This review will help you decide if PeerStreet is a platform for you.
PeerStreet Review: Overview
PeerStreet is all about capitalizing on investments into real estate loans.
The service has been around since 2014 and has funded over 9,000 different loans. Of the $4 billion these loans encompass, over $175 has been paid out in interest payments.
With real estate going nowhere but up, PeerStreet gives investors a chance to get involved in a solid industry that sees billions of dollars each year.
What is PeerStreet?
PeerStreet represents a real estate crowdfunding platform that allows investors to buy portions of real estate loans. Loans typically run in the six to 24-month range.
The platform represents a type of peer-to-peer lending (P2P) opportunity. It highlights short-term loans with backing from real estate. If you choose to invest in PeerStreet’s platform, you will act as a mortgage lender.
Your investment provides lenders with the funds needed to help real estate borrowers. Borrowers pay monthly interest on those loans, and you receive a share of those payments.
PeerStreet Review: How Does PeerStreet Work?
To understand how PeerStreet works and learn more about its track record, you need to know something about equity and real estate crowdfunding.
Real estate crowdfunding is a source for obtaining capital or taking out a real estate loan. This form of financing uses social media sites, such as Twitter, LinkedIn, Facebook, and the Internet to interest investors in funding loans with a reasonable interest rate for businesses and real estate.
The idea behind this approach is simple – if you have a large number of investors willing to invest a small amount of money, you can quickly raise large amounts of capital.
As a result, investment opportunities arise when you have this type of setup. This is because the interest rate is typically lower on the loan, and the chances for default are lower.
Therefore, crowdfunding allows businesses to access the capital they could not otherwise raise. This allows an investor to either become a company shareholder or invest in real estate loans.
The History of Equity Crowdfunding
In the traditional sense, equity crowdfunding was, at one time, open primarily to accredited investors. Accredited investors included pension plans, insurance companies, banks, or affluent individuals with a net worth over $1,00,000.
As an investor on a crowdfunding site, your investment is much less. There are no requirements concerning net worth.
If you choose to invest with PeerStreet, you do need to be an accredited investor. However, to fund a PeerStreet loan project and real estate debt, you need to invest $1,000 initially and pay monthly installments of $100.
By using the platform, you can receive a higher interest rate on a number of loans and still stay protected if one loan goes into foreclosure. PeerStreet charges also are minimal, thereby making the platform an ideal venue for a first-time accredited investor with a smaller minimum investment and less sizeable net worth.
The platform offers real estate loans from its network of third-party lenders who review PeerStreet borrowers carefully. Loans are on the PeerStreet website for an investor to fund with a minimum investment of $1,000.
PeerStreet makes it a rule to offer loans for investment that are generally secured by first liens and provide regular interest payments for investors. Self-directed assets, such as IRAs, also add to the site’s popularity.
What is the Loan-to-Value Ratio for PeerStreet loans?
Most of the loans Peer Street offers its investors have a loan-to-value ratio that falls at 75% or less. Therefore, an investor’s risk is lowered substantially with the loan-to-value incentive.
As a result, accredited investors have a senior claim on the property should a bankruptcy take place, the real estate goes into default, or a real estate debt must be paid.
A Peer Street loan is generally short-term. Your investment portfolio will not include a long-term 15 or 30-year fixed-rate mortgage.
Instead, investors are investing in bridge loans that last for a period of six to 24 months. As a result, fix-and-flip financing is an investing feature of many of the loans PeerStreet offers on its site.
So, how does PeerStreet make money on the loans featured for investors?
Because PeerStreet represents a debt-crowdfunding investing source for loans, it makes money by charging a servicing fee on each loan produced by third-party private lenders.
This servicing fee is taken out in the spread between the interest charged to borrowers and the interest paid to investors for loans on the PeerStreet site. The amount usually ranges between 0.25% and 1.00% for all featured loans.
While Peer Street and its third-party private lenders do charge borrowers other fees for loans, the low minimum servicing fee is really the only charge that affects investors who are investing in loans on PeerStreet.
PeerStreet Review: Is PeerStreet Legit?
As a real estate investing source, you can feel confident about investing in loans on the PeerStreet site. Like any real estate P2P lending site, you always have the risk of default or foreclosure on loans listed on the site.
However, PeerStreet follows up well when it comes to posting details about loan returns or providing information about all performing and non-performing loans, including default rates.
PeerStreet is from the minds of current CEO Brew Johnson, COO Brett Crosby, and CTO Alex Perelman.
Johnson previously worked as an attorney in the fields of technology and real estate investing. His goal was to create a transparent business in an industry that once had little in the way of this type of influence when providing loans in the real estate field.
PeerStreet Review: Is PeerStreet Safe?
According to statistical data, about 93% of the loans featured on PeerStreet’s investing platform were either current or less than 90 days late.
Around 7% of the loans were over 90 days late, and 0.67% were real estate owned (REO). (REO loans represent properties where the real estate has gone through foreclosure, but the property has not yet been sold).
Further statistical data shows that about 3% of the 4,924 represented loans had gone into default.
PeerStreet handled foreclosure proceedings and recovered 135 out of 143 defaulted loans without any loss of principal to investors. Therefore, only seven loans out of the 4,924 loans on record lost part or all of their principal.
As a result, it helps to keep in mind when investing on the PeerStreet platform that you do have a small risk of non-payment as an investor.
What if a Loan Goes into Foreclosure?
Every now and then, borrowers may have trouble with paying back PeerStreet loans or drop into foreclosure. In turn, an investor may stop receiving their interest rates and payments on a loan.
However, a PeerStreet loan is still a collateral loan, which means it is secured by the property. You do have a way to get your money back if an event such as a default occurs.
PeerStreet works with regulatory and legal professionals when a default does happen, including its real estate investing team. These groups do everything possible to resolve the issue to keep their investors satisfied with the outcome.
PeerStreet is set up so investors will still get their money if the company goes out of business. The platform holds your money in an FDIC-insured trust account when you initially fund your investment portfolio.
PeerStreet Review: Cancellation Policy
When you make an investment on the PeerStreet platform, you are into the investment for a period of 6 to 24 months. There is no cancellation policy in force, as this type of debt investment is not liquid.
However, unlike an equity crowdfunding investment, which may last 4 to 10 years, your money is not unavailable for as long of a time. After all, investing in a real estate loan for 6 to 24 months is far different than investing in equity investments for several years.
You also receive regular interest payments on the loan amount you secure on PeerStreet’s platform.
PeerStreet Review: How Much Does PeerStreet Cost?
The platform charges $1,000 to open an investor loan account. However, you do have an array of choices when it comes to choosing investments in this loan asset class.
PeerStreet investors can choose from various geographic locales, maturity dates, and property types with reinvestments costing $100 monthly per loan amount. Active loans featured in this investor asset class compare closely to bond investments versus stock accounts.
PeerStreet Review: PeerStreet’s Pros and Cons
- Low minimum investment
- Possible to diversify a wealth-friendly investment
- Limited risk
- Short-term maturity
- Investments are in loans
- Non-liquid investment
- Must be accredited to invest
PeerStreet Review: Is Investing with PeerStreet Right for Me?
As long as you can handle the investment class and risk involved, PeerStreet is an option for any investor. You will need at least $1000 to invest in the platform to get started.
You’ll also need to be able to commit to investing in the real estate market for six months to 24 months at a time.
If you’re someone who wants to invest short-term in the real estate marketplace without direct involvement, PeerStreet may provide the solution you’re looking for.
PeerStreet Reviews by Subscribers
When choosing an investment such as PeerStreet, it is also helpful to look at the reviews posted by subscribers. What do they have to say about the product?
Many subscribers like the fact that PeerStreet offers diversity and is more like a bond account than a stock account. This makes the investment less volatile and risky.
Subscribers also commented that they liked the return they received on their investments.
For example, one subscriber said he received an average 5% return on his investment of $10,000 over a 6-month period – not bad for an investment that serves as a passive income source.
Most subscribers are happy with the results from their investments on PeerStreet. However, they prefer to diversify to reduce the risk involved with foreclosure and default.
Final Review: Is PeerStreet Worth It?
If you want to start your journey in real estate investments and “learn the ropes” of real estate investing, PeerStreet features loan investments that you might want to investigate.
You can use money from the cash made on the site and apply it toward further investments on the PeerStreet platform.
Keep in mind that your money will be tied up for six to 24 months at a time. If this is doable, you may find that PeerStreet gives you a feasible way to make money from real estate investments.
This system can create a passive way of earning income. Users can even take advantage of the automated investing feature on the site to make real estate investing streamlined and fast.
This unique crowdfunding source offers a transparent way to invest in real estate debt and helps increase your understanding of the real estate marketplace. It is a specialized market that covers hard money loans or rehabilitative loans for single-family residences.
How you use the PeerStreet site depends on how much of yourself you want to put into real estate investments. If you have an extra $1,000 you want to invest, the Peer Street website may be a suitable venue for you.