- PeerStreet is the first crowdfunding site to provide a two-sided marketplace for investing in real estate debt.
- Private real estate transactions offer significantly higher returns.
- Invest in a diverse portfolio of real estate-backed assets across America.
Are you an accredited investor looking to diversify your returns? Real estate offers you an investment opportunity to grow your wealth. With PeerStreet, you get access to top-quality real estate investment deals without the hassle of property management.
Inside this review
What is PeerStreet?
Peerstreet is an online real estate marketplace offering investment opportunities in high-quality real estate loans to accredited investors. Founded in 2014, the company has a track record of over 8,800 deals, with over $4 billion in assets under management.
The company provides loans for real estate purchases, using private money loan investments. PeerStreet also secures its loans through a first lien on the property, making investors first in line to be repaid.
PeerStreet is not a real estate investment trust (REIT) because investors can select the deals they want.
Where is it available?
PeerStreet is only available to US residents. The company doesn't accept investments from outside of the United States.
Who is it designed for?
The PeerStreet platform is only available to accredited investors meeting the SEC's criteria of a high-net-worth individual. However, the company intends to open the platform to all investors in the future.
Investment minimums are small, with deals available for as little as $1,000. The reason for the accredited investor status is due to SEC regulations around investment in property transactions in the wake of the 2008 mortgage crisis.
How does it work?
All loans made through the PeerStreet platform typically feature first liens secured by physical property. Originators put the deals together, and they represent the interested parties in the financial transaction. The investors fund the deal through the platform, with the investor investing into the loan, not the real estate.
While PeerStreet insures its loans, the notes available for investors do not have any underlying risk protection. The reason for this model is due to the note representing a piece of the loan, not the loan agreement itself.
Typically, deals have short-term horizons, with the average deal running between six months to 24 months. Most investments feature a loan-to-value ratio of below 75%. The company makes the loans available across the United States, using a network of originators creating a wide variety of investment opportunities through the platform.
PeerStreet has an underwriting team that calculates and assumes the risk in each deal listed on the site. The team uses big data analytics, proprietary algorithms, and manual decision-making processes to ensure all loans are of the highest quality for its investors.
PeerStreet issues IRS Form 1099 for income tax purposes, issued for interest income, original issue discounts, debt cancellations, or misc income, such as late fees and incentives exceeding $600.
Fees
The fee structure provided by PeerStreet is different from other companies due to its debt crowdfunding model. PeerStreet makes the bulk of its fees from servicing loans, structuring the spread between the interest it pays to investors and the rate it charges to borrowers.
Typically, service fees range between 0.25% to 1.00%. You'll also need a minimum investment of $1,000 to start and at least a 6-month investment horizon for the deals to make sense.
How to sign up
Visit the company's official website and create an account. After signing up, the company confirms your accredited investor status through its third-party providers. If accepted, you have full access to the platform, allowing you to select deals that meet your investment criteria.
Pros & cons
Pros
- Investment into loans, not real estate, but backed by hard assets.
- Diversification of your investments across different properties, states, and different types of loans based on your own preferences
- Automated investment function automatically invests you in deals according to your specified risk parameters.
- Fixed interest rates limit volatility and nasty surprises if monetary policy shifts.
- Low investment minimums, with $1,000, for initial investment into property notes.
Cons
- It invests your money into illiquid assets, and you have no option to cash out early.
- Suitable for accredited investors only, locking out smaller investors.
- Some loans can come with high risk.
Alternatives
- Fundrise. A crowdfunded real estate platform that offers investors access to private real estate deals.
- Streitwise. A real estate investment platform that provides investors with access to commercial real estate deals. Accredited investor status is not a requirement with Streitwise.
- RealtyMogul. This crowdfunding site is one o0f the oldest in the industry. It has options for accredited and non-accredited investors, allowing you to partially invest in real estate deals through the platform.
- LendingHome. Another real estate investing site suited to accredited investors. You can invest in loans and secure bridge financing for properties through the platform.
Verdict
According to PeerStreet, their loans average APR of 6-9%, well above today’s average mortgage rate of less than 5%. This relatively higher return does not come without risks.
Real estate is a highly illiquid asset, subject to micro and macroeconomic risks. Investments are not directly secured by the property but are mortgage-dependent promissory notes which are linked to the performance of the corresponding property loan tied to your investment. That said, PeerStreet offers a diverse and transparent portfolio of properties for potential investment. If you are an accredited investor looking to diversify into higher risk, higher return real estate, PeerStreet may be a good opportunity for you.
