Investing in real estate can be a lucrative way to diversify your investment portfolio and generate passive income. However, traditional real estate investing often requires significant capital and expertise, making it inaccessible to many individual investors.
This is where PeerStreet comes in. PeerStreet is an innovative online platform that allows individual investors to invest in high-quality real estate debt investments. In other words, collect interest on mortgages.
We all know what it’s like to pay interest. What if you could collect it instead? We kicked the tires to see if you should explore this service.
What is PeerStreet?
PeerStreet bridges investors with real estate loans and has been connecting people since its launch in 2013. Harnessing the power of technology to offer opportunities and secure investments, PeerStreet provides access to otherwise inaccessible markets.
With PeerStreet, you can invest in a selection of real estate debt investments, such as short-term bridge loans and long-term rental property loans and even commercial real estate financing.
These are all anchored by actual properties so that investors will get the best possible information about the borrower’s condition, details on the collateralized asset, and essential terms concerning each loan.
By leveraging PeerStreet’s platform, investors can diversify their portfolio with various real estate debt investments. Plus, they can access the company’s advanced tools, which help them track and manage their assets while reinvesting profits.
Related: Real Estate vs S&P 500: What's The Better Investment?
Pros of using PeerStreet
PeerStreet is an online platform that connects investors with real estate loans. Some of the pros of using PeerStreet include the following.
- Access to real estate investments: PeerStreet provides access to real estate loan interest, previously only available to institutional investors.
- Detailed loan information: PeerStreet provides detailed information about each loan, including the borrower, property, and loan terms. This allows investors to make informed decisions about their investments.
- Low investment minimums: PeerStreet has a low investment minimum, allowing many to invest in a range of loans with small amounts of capital.
- Automated investing: PeerStreet offers an automated investing feature, allowing investors to set their investment criteria and automatically invest in loans that meet them.
- User-friendly platform: PeerStreet’s platform is user-friendly and easy to navigate, making it easy for investors to manage their investments and track their returns.
- Transparent fees: PeerStreet charges a transparent fee for its services based on the loan amount and only charges if the loan is successfully funded.
Cons of PeerStreet
While PeerStreet offers several benefits to investors, there are also some potential drawbacks to consider.
- Real estate market risks: If a borrower defaults, you could lose the principal invested. PeerStreet has a foreclosure process in which they sell the asset to reimburse investors, but anyone in real estate knows that a foreclosure is typically a money-losing prospect for the lender.
- Limited liquidity: PeerStreet loans are typically held until maturity, which means investors may not have access to their funds for the duration of the loan term. While PeerStreet offers a secondary market for investors to sell their investments, you may not be able to find a buyer.
- Limited investment options: While PeerStreet offers access to a range of real estate debt investments, the platform is limited to this asset class. Investors looking for more diversified investment options may need to look elsewhere.
How does it work?
PeerStreet works by connecting investors to real estate opportunities with a simple process.
Step 1. Loan origination
PeerStreet partners with established real estate lenders to offer loans to borrowers like short-term bridge loans, long-term rental property loans, and commercial real estate loans.
Step 2. Due diligence
PeerStreet’s team conducts due diligence on each loan. This means that the loans offered through PeerStreet are high quality and meet the standards of the platform. This involves a comprehensive review of each borrower’s creditworthiness. Another area they check is the independent valuation of each property to make sure it’s accurately valued. The loan-to-value ratio should also be appropriate.
Step 3. Loan offering
Once a loan has passed due diligence, it’s listed on the PeerStreet platform, where investors can browse and invest in the loan.
Step 4. Investment
Investors can review the details of each loan, including the borrower’s information, property information, and loan terms. If they choose to invest, they can select the amount they wish to invest and fund their investment through their PeerStreet account.
Step 5. Loan servicing
PeerStreet services the loan, which includes collecting payments from the borrower, distributing payments to investors, and managing the loan throughout its term.
Similar companies
If you’re considering PeerStreet, here are some other companies that offer similar services and may be worth looking into:
- Fundrise: Provides investors the ability to invest in a diversified portfolio of real estate assets, including debt and equity investments.
- RealtyMogul: A platform that connects investors with commercial real estate investments.
- Kiavi: An online mortgage lender that provides quick and simple rental loan options for entrepreneurs.
- Roofstock: Allows investors to buy and sell single-family rental properties, with a focus on providing turnkey investment properties.
- Patch of Land: Online real estate crowdfunding platform that connects investors with short-term, high-yield real estate loans, primarily for fix-and-flip projects.
These companies offer various real estate investment opportunities, from debt investments similar to PeerStreet to equity investments in real estate assets. It’s important to conduct thorough research on any investment opportunity and assess the risks and rewards before making a decision.
What do real users have to say about it?
November 18, 2018 at 7:25 pm
“So far here is my experience: 18 fully repaid loans, 0 principal lost. A few loans went beyond their original maturity date but in the end they where all paid in full with interest + extra interest for the extensions. I currently have 16 active loans, 15 are current and one is 30 days passed due. Of the 15 loans that are current on their interest payments one was given a 6 months extension beyond the original maturity date for the loan. I am also using LendingClub and my return on PeerStreet so far is slightly better than what I have on LendingClub.”
-Tomas | InvestorJunkie
“A property was purchased for $175k and 1.5 years later Peerstreet loaned $806k on it and claimed it was a LTV of 75%. $25k worth of work was completed from the time of purchase to the time of the appraisal. Peerstreet seemingly loans on whatever comes their way and the underwriting is non-existent. The false advertising of their LTVs depends on whatever crazy appraisal is done and they won't tell me who the appraiser is as they know it is terrible. I asked them for more information on the appraisers so I can piece together all the people involved in this and they won't provide anything” -Connor W | Better Business Bureau
It’s clear that your experience may vary when using PeerStreet. Our advice: if you do invest, go slow and see how a small amount of money performs for a time. Get to know the platform and make sure there aren’t better ways to get yield from your hard-earned investment dollars.
What’s the bottom line on PeerStreet?
PeerStreet could be a good solution for new and experienced investors, and especially those wanting to take baby steps into real estate debt investing.
It certainly is less risky than funding an entire real estate project on your own.
While it’s accessible, don’t let the slick interface convince you to invest your life savings. Go slow with the knowledge that this type of investing isn’t for everyone.
