December 30, 2017

PeerStreet

 

 

PeerStreet specializes mostly in residential debt investments (with a smattering of multifamily and commercial). They have one of the lowest minimums in the top 10 ($1K versus $10K average).

Maintains a very high standard of sponsor due diligence.  They allow investors to review the performance of every past investment.

And impressively, since 2014 only 1% (12 loans out of 1,200 ) have had a notice of default (or lawsuit) filed. The site has currently lost $0 of investor principal (although some interest was lost). In October 2017, the site had originated over $500M in loans.

Of those 12 loans:

  • one has been brought current and reinstated
  • two properties have been taken back through foreclosure – one of these foreclosures has been sold with 102% of the investors’ initial investment amount returned and the other is in process
  • the remaining nine are at various stages of the foreclosure process


PeerStreet does not originate its loans. As a result, it’s dual fee structure (spread charged to the investor, and spread given to the sponsor), results in higher total fees than competitors.

Volume is on the low side (not necessarily bad)

Additionally, it loans in some states that do not have a nonjudicial option. This means that if things go wrong and foreclosure has to be invoked, it can take years (instead of months) to resolve before you get your money back. And it can be very expensive (which further stresses out the equity cushion and can cause losses). Offers opportunity to add value by focusing on states that don’t have the nonjudicial option.

  • Advantages: Excellent transparency, solid performance record, lowest minimums in the top 25, $26 million in venture capital funding.
  • Disadvantages: Fees tend to the high side (dual spreads total .75% – 3.25% versus 1% average), not a lot of volume, some higher LTV loans.