PeerStreet, which has an ex-Google co-founder and backing from Andreesen-Horowitz, is tackling real estate lending the way you’d expect a tech startup to fight a major market dominated by legacy incumbents: using technology and Big Data. (Co-founder Brett Crosby was a member of the team that established Google Analytics—he joined Google after his previous business, Urchin Software, was acquired by Google in 2005—so it’s safe to say they have some credibility with that approach.)
PeerStreet, unlike some other sites, is not a direct lender. Instead, they resale loans to crowdfunding investors through the existing infrastructure of private-money lenders. Arguably, this allows those with skill in loan underwriting (private lenders) to continue doing what they do best (after selling the loan via PeerStreet, they may then “recycle” their capital into the next loan). While lenders are encouraged to have some “skin in the game” and keep a portion of the loan to align interests better, this is not always the case.
But more on that later…
This review will go over PeerStreet to see if it really is the best real estate platform out there.
You’ll learn whether real estate investing is the right online business for you.
And at the end, you’ll find answers some of the most frequently asked questions regarding PeerStreet and real estate investing in general.
But most importantly, you’ll see the exact system many others have used to build their own internet marketing business to over $40,000 a month in mostly passive income.
This system made them swear off real estate investing for good, because it uses some of the same skills but in a much more powerful and profitable way!
PeerStreet is a platform for peer-to-peer lending or crowdfunding. It acts as a bridge between lenders (you) and borrowers searching for short-term real estate loans. Its platform can effectively manage loan investments.
The borrowers are “real estate equity investors,” which means they are professional investors who buy a home or property, fix it up rapidly, and resell it at a greater price.
Lenders that invest in PeerStreet place their money into real-estate-backed loans and are given first-lien status. The first lienholder is actually the first person to be paid back if a contract falls through, so your money is better secured in the event of a default or other severe catastrophe.
This investment is distinct from a traditional REIT in that it offers the investor greater transparency and flexibility. With PeerStreet, you may choose from a variety of real estate loan portfolios. These hard money loans are made up of various property types, geographic areas, loan maturity dates, and other factors.
PeerStreet also claims to have a cheaper fee structure than a traditional REIT, allowing investors to profit on PeerStreet’s superior returns. With PeerStreet, you may anticipate to pay a servicing charge of 0.25 percent to 1.00 percent for each loan you invest in.
All PeerStreet real estate loans are sourced from vetted private financial institutions in the United States. The borrowers to whom you will lend are well-known real estate professionals.
PeerStreet is not suitable for all investors. There are numerous requirements for the investors with whom they engage. These are referred to as accredited investors.
There is always the danger of nonpayment with any peer-to-peer lending platform. Borrowers will occasionally have difficulty repaying their loans, and investors’ interest payments may cease. One advantage is that PeerStreet loans are secured by the underlying real estate assets of each loan, so there is some redress if this occurs.
PeerStreet manages the loan recovery procedure if a borrower fails on a loan. In addition to its real estate staff, the company employs a team of legal and regulatory specialists that act on behalf of investors to make PeerStreet investors whole.
Overall, PeerStreet’s platform has shown to be pretty safe. As previously stated, more than 95 percent of loans sold to investors on its platform have been paid off without the need for a foreclosure process. As a result, most investors have obtained returns that are pretty close to expectations. Because of its outstanding track record, PeerStreet is an appealing option for accredited investors seeking to produce passive income through real estate loans.
PeerStreet loans are often first liens backed by real estate. The transactions are put together by “originators,” who represent the transaction’s primary parties. The loans are funded by platform investors. Accredited investors must be present.
PeerStreet investments are in real estate loans, not in real estate itself. It’s also vital to understand that, while the loans issued through PeerStreet are secured by real estate, the notes in which you invest are not. This is because the note reflects a portion of the loan rather than the entire amount. You do, however, have the option of investing in a whole loan.
PeerStreet loans can include loans placed on single-family homes, either to rent the property or to remodel it to boost its value.
The loans are typically of a short duration, ranging from six months to 24 months, with loan to value ratio of less than 75 percent. Loans are made around the country on various sorts of real estate projects, with various originators and property types, in order to establish a diverse pool of possible investments.
PeerStreet’s team of finance and real estate expertise underwrites real estate loans. To ensure that loans are high-quality investments, they use modern algorithms, big data analytics, and manual methods to underwrite each loan.
They also rigorously screen originators, allowing only highly experienced private lenders with a proven track record to join the platform. Investors and originators must conduct their own due diligence in order to choose which borrowers and loans to invest in.
PeerStreet examines track records, financial accounts, licensing and compliance with state usury laws, background checks, and legal and underwriting processes for originators.
For loans, they conduct independent underwriting using a combination of manual and large data analytics, order-independent valuation (BPO/Appraisal), guarantee that each loan complies with PeerStreet underwriting requirements, and examine legal documentation.
PeerStreet will give IRS Form 1099 for income tax reasons, which could be provided for interest revenue, original issue discount (for notes with periods greater than one year at the time of issue), debt cancellation, or other income, such as incentives and late fees, if they reach $600.
Choose Your Investments: The site allows you to select individual loans and build a portfolio based on your preferences and parameters.
Automated Investing: PeerStreet, like P2P lending sites, allows you to use the site’s Automated Investing function. You choose settings based on your investment choices, and the automated option adds loans to your portfolio automatically.
Expected Annual Returns: According to PeerStreet, typical loan investments will generate an APR from 6% to 12%. This is significantly higher than the mortgage rates generally charged by banks and mortgage companies, however, this is because these loans are for unique conditions, such as property restoration. These are the kinds of loans that aren’t usually offered to banks and real estate investors.
List of Originators: PeerStreet offers a list of originators. This will assist you as an investor in researching the people and businesses you will be providing investment funds to.
Account Types: PeerStreet allows you to construct a traditional or Roth IRA in addition to standard taxable investment accounts. IRAs are self-directed accounts.
Account Security: Investor monies are stored in an Investor’s Trust Account at City National Bank and are FDIC insured up to $250,000/investor.
Site Security: All activities on the platform occur through a secure and encrypted connection that employs SSL/TLS, a security technique utilized by all banks and other financial institutions. Personal information is encrypted using public key encryption technology. PeerStreet’s hosting provider is likewise subjected to frequent penetration testing and vulnerability assessments.
Defaulted Loans: PeerStreet keeps defaulted loans in a distinct bankruptcy-remote entity from the main firm. They will take over the workout process, act on behalf of clients to protect their investment, and maximize liquidation proceeds. Their team includes individuals with extensive knowledge in real estate lending, including commercial loan experience and legal and regulatory compliance.
PeerStreet only invests in real estate debt. The majority of their loans are for residential acquisitions or refinancings, as well as rental investment, while they do offer multi-family, industrial, and other commercial real estate loans on occasion. Investors can choose individual loans as they become available or use PeerStreet’s automatic investing function to invest (and reinvest) in loans that fulfill specific criteria (eg, interest rate, LTV, term, and investment type). The majority of loans are for 6-24 months, with the longest duration displayed on the website at the time of writing being 36 months. In general, LTV ratios are less than 75 percent.
While the minimum investment in a new loan is $1,000, as of April 2019, automatic balance reinvestments of at least $100 are an option, allowing investors to reinvest interest payments effortlessly and compound their gains.
One of the appealing aspects of real estate investing (particularly debt investing) is that what you invest is backed by a tangible asset that can be sold to recoup investor funds if something goes wrong. However, as with many other crowdfunded real estate investing sites, your investment is not technically protected by the underlying property. Instead, you are given a “Mortgage-Dependent Promissory Note,” which rights you to a portion of the principal & interest payments paid by the borrower on the mortgage.
PeerStreet, like many other crowdfunded real estate sites, levies fees as a “spread” between what the borrower pays and what the investor receives. PeerStreet is paid only when its investors are paid. PeerStreet’s fees are on the lower end of the spectrum when compared to similar platforms, often ranging between 0.25 percent and 1.00 percent. (For instance, if the borrower is paying 9 percent interest on a loan in which you have invested and the charge is 1.00 percent, you will receive 8 percent interest.) The charge is always mentioned in conjunction with the investment information.
PeerStreet loans have interest rates ranging from 6 to 9 percent, with terms ranging from 6 to 36 months. Investors get monthly interest payments (the exact date varies depending on the investment), with principle and any other distributions paid to investors as received by PeerStreet. Funds remain in your PeerStreet account until you withdraw them (or choose to have them reinvested if you exceed the $100 reinvestment minimum).
PeerStreet has improved their investor updates procedure, but due to their enormous volume of loans, thorough proactive updates are rare – if you invest in properties on PeerStreet, expect to check back frequently to track their performance.
PeerStreet understands that volume is important when competing on technology, Big Data, and efficiency. Hence, there are a relatively high number of loans moving through PeerStreet on a regular basis. An investor considering using the automated investing function should consider whether they are comfortable with PeerStreet’s procedure and approach to screening lenders and loans (which is largely reliant on a network of third-party origination partners).
Under SEC Regulation D, PeerStreet only accepts investments from accredited investors. They are not a licensed broker-dealer or financial advisor, but they (or one of their affiliates) are a California Lender and a Real Estate Broker (they are headquartered in Manhattan Beach, CA). Its marketed due diligence method for their loans includes assessing an independent appraisal and related legal documents, confirming that the loan fulfills PeerStreet’s underwriting guidelines, and doing independent underwriting using both manual and “big data analytics.” Before accepting a third-party lending partner, they investigate the prospective partner’s track record, state licensure, and compliance with lending laws, as well as conducting background checks. In theory, their high loan volume provides them with a wealth of data to work with to improve the system. Still, in practice, none of these crowdfunded investment platforms have yet experienced a major downturn, so the underlying algorithms may not yet have a truly representative picture of loan performance.
As an accredited investor, yes you can!
There’s a lot that comes along with real estate investing that many people struggle with.
Now, don’t get the wrong idea…
It’s not impossible to make money with real estate investing, but if you’re gonna put in the amount of grueling work to do this business (which, trust us, isn’t easy), you might as well bring in some REAL money while you’re learning the ropes.
The program that helped skyrocket many online businesses to over $40,000+ per month is so simple that making money really does become second nature.
PeerStreet is not a scam. It is a legit real estate crowdfunding platform.
It is entirely possible to build a profitable, successful real estate investing business… But there are better ways to build a business other than with real estate investing…
Yes. PeerStreet is legit. It is a reputable real estate funding platform that thousands of people have used to scale their real estate investements.
Where this PeerStreet falls short is in scalability. Because in order to make a good amount of money with real estate, you have to own several different houses.
And who has that kind of capital to start?
But what if you went local?
With Local Lead Generation, you will be getting service requests from multiple sites at every minute of the day from people who are willing to pay a lot of money for what you can provide them.
I was watching a YouTube video once where the host made a comment that it isn’t about making a lot of money from one website… it’s about making a little bit of money from lots of different websites.
So, think of it this way….
What if you could have streams of investment income where you operated 10 rental units that you could charge anywhere from $750-1,000 per month?
That’s $7,500-10,000 per month in passive income!
What If You Invested Into 100 Rental Units?
But instead of spending $Millions to build houses or apartment complexes… you spend a couple hundred dollars to build websites.
You then get those websites ranked in the search engines for specific home-based services that customers are searching for.
Next, you offer your lead generation system to local business owners who are looking for customers and are willing to pay you for their information.
You’ve just created a Digital Real Estate Investment Empire that is potentially earning you 4-5 figures in PASSIVE INCOME on a monthly basis without spending a single dime on ads.
With conventional digital real estate, you have to compete with thousands, if not millions of others who are selling the SAME product to the SAME customers.
Once the training program is completed you will also have access to a Facebook group much better than the PeerStreet group in our opinion. This group is much more active.
Unlike PeerStreet, where you’re profiting maybe $250 per property, you could be getting 5-10X THAT.
With Local Lead Generation, the competition is virtually nothing and your profit margins are 85-90%.
Now, I could go on and on, but I’m sure you have tons of questions about how to create Digital Real Estate assets and start building YOUR digital empire!