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PeerStreet

PeerStreet

PeerStreet Review 2020 – Real Estate Debt Investment

PeerStreet is doing what Loans Club does with personal loans with real estate investments. PeerStreet is a peer-to - peer (P2P) lending network that brings together investors and lenders to build real estate loans on one web site. And since it involves real estate loans, its function is more frequently called crowdfunding.

PeerStreet is an online platform where investors invest in private real estate loans of high quality. The goal is to provide real estate loans in a market that is not readily accessible by those who are not conventional investors in real estate.

The company focuses on private-money loan investments as they claim the asset class danger is mispriced in favor of creditors. We structure the loans to reduce the various risks related to these investments. And because a deed or mortgage secures the loans, there's a hard asset to back up the loan.

PeerStreet is different from a real estate investment trust ( REIT) because you have the ability as an investor to pick which loans you are going to invest in. It is unlike a REIT, in which the investment reflects a percentage stake in the trust 's total real estate portfolio.

Choose Your Own Investments β€” The app allows you the opportunity to randomly pick loans and build a portfolio based on your own criteria and preferences.

Automated investing β€” As with P2P lending platforms, PeerStreet also allows you to use the Automated Investing feature on the web. You set criteria based on your own investment preferences, and the automated function adds certain loans to your portfolio automatically.

Expected annual returns β€” PeerStreet maintains that typical loan investments earn between 6% and 12% on average. It is considerably higher than usually paid mortgage rates by banks and mortgage firms, but this is because they reflect loans for special cases such as renovation of assets. These are the sort of loans that are usually not open to developers in real estate and to banks.

Originators List β€” PeerStreet does have a list of originators. As an investor, this will help you do some research on the people and businesses you will be providing investment capital for.

Type of Accounts Available β€” You can also open a traditional or Roth IRA through PeerStreet, in addition to standard taxable investment accounts. IRA accounts are handled autonomously.

Fund security β€” Mutual funds are kept with City National Bank in an Investor's Trust Account and have FDIC insurance coverage of up to $250,000 per investor.

Site Protection β€” All network communications occur over a safe and authenticated link using SSL / TLS, which is a security technology used by all banks and other financial institutions. Private data are preserved in the technology of public key encryption. Hosting services provider PeerStreet also undergoes routine penetration testing and tests of vulnerability.

Loan Defaults β€” PeerStreet keeps default loans in a remote bankruptcy company separate from the normal business. They will move to manage the workout process, work on behalf of investors to safeguard their investment and optimize liquidation proceeds. Their team includes people who have a broad knowledge of real estate finance, with expertise in commercial lending, as well as complying with the law and regulations.

Screenshots by PeerStreet

How does PeerStreet Function?

Loans on PeerStreet are typically first real estate-secured liens. The deals are collected by "originators" who represent the main parties in the transaction. Investors finance the loans on the platform. Investors like these must be approved investors.

Investments made by PeerStreet are on immovable loans, not on the land itself. Also, it's important to remember that while loans made through PeerStreet are backed by real estate, the notes you invest in are not themselves. This is because the note is a portion of the loan, not the loan itself. You have the option however to invest in a whole loan.

PeerStreet can provide loans on single-family residences to either rent the property or rehabilitate the property to increase the value.

Loans are generally short-term, generally between six months and 24 months, and have loan-to - value ratios that are usually less than 75%. Loans are made throughout the world, on various types of real estate ventures, with different originators and different types of land, to establish a large diversification of potential investments.

Real estate loans are being underwritten by the finance and real estate experts team at PeerStreet. They use sophisticated algorithms, big data analytics and manual processes to underwrite every loan to ensure that loans are high quality investments.

They also carefully assess originators and only allow highly qualified private lenders to access the platform with clear track records. Investors and originators are expected to carry out their own due diligence process to identify the lenders and loans in which they wish to invest.

PeerStreet reviews track reports, financial statements, licenses and adherence to state laws on usury, background checks and review of legal and underwriting processes for originators.

For loans, they carry out independent underwriting of all loans using a mix of manual processes as well as big data analytics, order-independent valuation (BPO / Appraisal), ensuring that each loan follows PeerStreet's underwriting criteria, and also performing a review of legal documents.

PeerStreet will issue IRS Form 1099 for income tax purposes, which could be issued for interest income, original issue discount (for notes with terms longer than one year at the time of issue), debt cancellation, or for miscellaneous income, such as incentives and late fees, if they exceed $600.

Pros & Cons at PeerStreet

Professional

  • Loans Investments Only β€” Your investment interest is that of a lender rather than a direct investor, making the deals more like bonds than stocks, so you're less likely to get completely wiped out.
  • Diversification β€” All loans and notes are invested in real estate but can be diversified across a variety of parameters. This may include investments in different states and in different forms of property and loans.
  • No interest rate risk β€” Long-term bonds and other fixed income investments face interest rate risk in case interest rates increase above the rate the investment earns. Since loans on PeerStreet are a maximum of 24 months, the interest rate risk is low, if any.
  • Low Minimum β€” The initial investment threshold at $1,000 is far below the minimum of other mutual funds and exchange-traded funds.

Consensus

  • Illiquid Investments β€” You will stay in the fund until it pays off if you invest in a loan or note through PeerStreet. Those loans and notes are no secondary market.
  • Accredited Investors Only β€” This condition essentially excludes PeerStreet from small investors.
  • Not an Investment for "Widows and Orphans"β€”Loans from Peer Street may be more risky as they are often used for real estate-related entrepreneurial purposes.

Overview

PeerStreet is not an investment platform that will fit for most investors, given the low minimum initial deposit threshold, and definitely not for small investors. The company provides complex, non-conventional structures dependent loans. PeerStreet loans, for example, are absolutely not like investing in mortgage-backed securities or deposit certificates.

You need to have a certain level of knowledge about specialized real estate lending, as well as a clear understanding of the risks you are taking. PeerStreet will definitely cater to some high-risk , high-asset investors, but it isn't an ordinary investor site.

PeerStreet's crowdfunding element is certainly revolutionary, and has the potential to be the future wave particularly for commercial real estate lending. Yet, for most investors, the lack of liquidity alone would be a concern.

PeerStreet main features and highlights

Bottom line
PeerStreet is doing for real estate investing what Lending Club did for personal lending.
Fees: 0.25% - 1.0%
Min Deposit: $1,000
Target returns: 6% - 12%
Sectors:
  • Investing Platform

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