Who's it for?
A secondary loan marketplace, PeerStreet is for those who are interested in commercial real estate and/or development.
In addition, “accredited investors” need only apply. Investors must have a net worth greater than $1 million in liquid assets (meaning the equity in your home doesn’t count) or you need to earn more than $200,000 per year or make $300,000 jointly.
For more information on the specific definition of “accredited investor,” and more information about calculating net worth, visit the investor.gov website.
Commissions and fees
According to PeerStreet’s website, a servicing fee is applied to each loan offered for investment, which is a “spread” between the interest rate payable on a loan and the interest rate you receive as an investor.
PeerStreet’s minimum investment is $1,000 and account fees range from 0.25% to a 1% setup fee. The investment length ranges from six to 24 months.
PeerStreet loans are secured by first liens on real estate (aka, PeerStreet is the first to be paid.) Most PeerStreet loans cover a short time span (typically 6-24 months) with loan-to-value (LTVs) at 75 percent or less.
Loans vary across the following:
- Property type
PeerStreet’s platform allows you to select loans individually and build a portfolio to your specifications.
In addition, PeerStreet offers retirement investment options through a traditional or Roth IRA. It’s a benefit to investors who are interested in having a tax advantaged account.
Platform and tools
To get started with PeerStreet, here are the steps you’ll need to take to get started:
- Provide your basic information (name, email, password, etc.) to create your account.
- Provide your income and net worth information (the website will ask you for your income information over the past few years.)
- Complete your investor profile. It’ll ask you questions about what your investing experience is, your objectives and risk tolerance. You’ll also be asked to sign the investor agreement and verify your identity.
- You’ll be taken to an area of the site where you can review available and active investments.
Once officially registered, you’ll have access to a Dashboard that will summarize your account balance, interest-to-date and available cash. An interest chart gives you a snapshot of your tracked interest over time.
You’ll be able to see various positions as well, including active loan positions, loan positions awaiting closing, and paid off loans. Other tabs you can click on include transaction history, statements and automated investing.
All tabs are intuitive and give PeerStreet investors an easy-to-understand snapshot of their loans and portfolio performance.
Choosing a deal
To get serious about a deal, you’ll drill in on photos of the property, and it will also show you location, type, loan strategy, basic terms of the loan and a proposed return chart. A full appraisal is also always included, and similar sales and property values in the region can also be viewed.
Handling loan defaults
PeerStreet’s team includes law and regulatory compliance experts who work on investors’ behalf to prevent and, in the case that it does happen, to be sure that investors are protected during default/foreclosure situations.
PeerStreet uses “due diligence” to ensure that the loans on the PeerStreet website are legitimate. A combination of manual processes as well as big data analytics, PeerStreet reviews an independent evaluation and ensures that each loan complies with underwriting guidelines. In addition, in-depth legal review and match-up of all underwriting guidelines are also done.
For lender partners, PeerStreet also thoroughly reviews records and financials, thoroughly examines licensing and state lending laws, runs background checks and reviews legal and underwriting processes.
Return on investment
PeerStreet’s website states that investors as a whole see 6-12% annualized returns. PeerStreet is able to offer higher returns compared to traditional mortgage rates offered by financial institutions because the company deals with alternative loans, which can have a higher interest rate.
Customer service, or concierge service at PeerStreet, can help with the following, and offers help with the following on the PeerStreet website:
- Large transactions
- Setting up a self-directed IRA
- Setting up entities to invest in PeerStreet
- Completing an automatic investment
If you’re a qualified investor, you’ll have access to actual professionals who can help answer any questions you have about PeerStreet or your account.
Ease of use
The PeerStreet website is sleek and easy to use. Void of “extras,” the language and charts on the website are all extremely clear and easy to understand.
If you’re an accredited individual, interested in short-term debt deals and at ease with the lack of liquidity and potential default risk involved with Peerstreet, this may be the investing avenue for you.
In addition, if you’re interested in a relatively flexible and transparent mode of investment that you won’t get with a REIT(not to mention the potential for higher yields compared to an REIT), PeerStreet could be a way to strengthen your assets.