PeerStreet is a real estate crowdfunding platform designed to attract investors with a high tolerance for risk and a large amount of capital to raise. It has a required minimum of $1000 and a diverse portfolio of offers. However, it is only for accredited investors.
PeerStreet is an online marketplace where investors invest in high-quality private real estate loans. The goal is to provide real estate loans in a place that is not easily accessible to those who are not traditional real estate investors.
The platform focuses on private money lending investments because they believe the risk in the asset class is mispriced in favor of investors. They structure loans to mitigate various risks associated with such investments. And since the loans are secured by a deed or mortgage, there is a tangible asset to back the loan.
PeerStreet differs from a real estate investment trust (REIT) in that, as an investor, you have the ability to choose which loans you invest in. This differs from a REIT, where your investment represents a percentage of the total real estate portfolio. for confidence.
|Account Fees||0.25% – 1.0% setup fee|
|Time Commitment||6 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||50 States|
Choose Your Own Investments — The platform allows you to individually select loans and build a portfolio based on your own parameters and preferences.
Automated Investing — Similar to P2P lending sites, PeerStreet also allows you to use the site's automated investment feature. You set parameters based on your own investment preferences and the automated feature will automatically add those loans to your portfolio.
Expected Annual Returns — PeerStreet claims that typical credit investments will earn an average APR of 6% to 12%. This is significantly higher than the mortgage rates typically charged by banks and mortgage companies, but that's because they provide loans for special situations, such as renovating a property. They are the types of loans that are not usually available to real estate investors and banks.
List of Originators —. PeerStreet actually provides a list of originators. This will help you as an investor to do some research on the people and companies you will be providing investment capital to.
Type of Accounts Available — In addition to regular taxable investment accounts, you can also open a traditional or Roth IRA through PeerStreet. IRA accounts are self-directed.
Account Protection — Investor funds are held in an investor trust account at City National Bank and are covered by FDIC insurance up to $250,000 per investor.
Site Security —all interactions on the platform take place over a secure, encrypted connection using SSL/TLS, a security technology used by all banks and other financial institutions. Personal data is stored in public key encryption technology. PeerStreet's hosting service provider also undergoes regular penetration tests and vulnerability assessments.
Loan Defaults —. PeerStreet holds debts in a remote bankruptcy entity separate from the regular business. They will be moved to regulate the trading process, work on behalf of investors to protect their investments and maximize returns from settlement. Their staff includes individuals with a deep understanding of real estate lending, including commercial lending experience, as well as legal and regulatory compliance.
How Does PeerStreet Work?
Loans on PeerStreet are generally collateralized by real estate. Deals are made by “leaders” who represent the main parties to the deal. Loans are funded by investors on the platform. Those investors must be accredited investors.
Investments made through PeerStreet are in real estate loans, not the real estate itself. It's also important to understand that while loans through PeerStreet are backed by real estate, the notes you invest in are not. This is because the note represents a portion of the loan and not the loan itself. However, you have the option of investing in a full loan.
PeerStreet may include loans made on single-family homes, either to rent out the property or to renovate it to increase value.
Loans are usually short-term, typically six to 24 months, and have a loan-to-value ratio that is typically below 75%. Loans are provided throughout the country, with different types of real estate projects, different originators and different types of properties, in order to create a wide diversification of potential investments.
Real estate loans are provided by PeerStreet's team of real estate and financial experts. They underwrite each loan using advanced algorithms, big data analytics and manual processes to ensure the loans are high-quality investments.
They also screen originators carefully and allow only highly experienced private lenders to access the site. Investors and originators should conduct their own due diligence process to select borrowers and loans in which they wish to invest.
For originators, PeerStreet reviews track records, financial statements, licensing and compliance with state anti-moneylender laws, background checks, and underwriting and legal process reviews.
For loans, they independently underwrite all loans using a combination of manual processes as well as big data analytics, BPO/Appraisal, ensure each loan meets PeerStreet placement and also perform due diligence. documents.
For income tax purposes, PeerStreet will issue IRS Form 1099, which may be issued for interest income, initial issue discount (for notes with a maturity of more than one year at the time of issuance), cancellation of debt, or miscellaneous income such as incentives and late payments. fees if they exceed $600.
|Account Fees||1%/year||None||2% annual management fee|
PeerStreet Pros & Cons
Despite the low minimum initial deposit requirement, PeerStreet is not an investment platform that will work for most investors, and certainly not for small investors. The platform offers sophisticated loans based on unconventional arrangements. For example, PeerStreet loans are not like investing in mortgage-backed securities or certificates of deposit.
You need to have some level of knowledge about specialty real estate loans, as well as a good understanding of the risks you are taking. PeerStreet will certainly appeal to certain high-risk, high-asset investors, but it is not a platform for the average investor.
The crowdfunding aspect of PeerStreet is definitely innovative and has the potential to be the wave of the future, especially for commercial real estate lending. But for most investors, illiquidity alone will be an issue.