PeerStreet is a lending company, which was founded by real estate attorney Brew Johnson in 2012. The idea behind PeerStreet is to open up the complex and often expensive world of real estate investing by introducing the market to the popular trend of crowdfunding.
In this PeerStreet review, we will cover:
- What is crowdfunded real estate
- Pros and cons of investing in crowdfunded real estate
- Requirements and minimum investment needed
- How to get started
PeerStreet Review: What is Crowdfunded Real Estate?
The idea behind crowdfunding is raising a small amount of money from a large number of people.
What happens when you add real estate to the mix? That small group of people essentially acts as a bank.
Unlike buying say a rental house, with crowdfunded real estate investing you’re funding real estate loans. You are then paid for funding the loan.
With PeerStreet, the type of loan you’re buying is short-term. The borrower pays around 6% to 12% for this type of loan, which makes for some very attractive rates on your-end.
The borrower’s goal is to sell or refinance the property before the loan expires. You then collect interest on the loan, plus are paid back (minus fees/transaction costs) your investment.
With crowdfunded real estate your investment is backed by a physical property. Compare this to investing in crowdfunded or peer-to-peer loans from a company like LendingClub — with real estate, there’s an asset behind the loan.
Crowdfunded real estate opens up real estate investing and funding to a wider range of people, including those looking to supplement their income to achieve financial independence.
That’s appealing for the person or business seeking the investors because those small amounts add up quickly. Another reason why businesses like seeking crowdfunding are because it gives them access to an investor they likely would have never hooked up with.
For investors, crowdfunded real estate offers them a less expensive, more diverse, and easier way to participate in the real estate market and the sizeable returns it can earn. While real estate lending in the past has been limited to private lenders only, this makes it more accessible.
Pros to PeerStreet: Minimum Investment, Lending, & More
There are a number of pros to using PeerStreet.
- It doesn’t cost much to get started. You can begin with only $1,000 per loan which lets you diversify your portfolio for less risk. For participating in the real estate world, that’s a cheap buy-in.
- You don’t have to commit to anything to see how it works. You can sign up for free and look at the potential investments without promising any money at all. If you like what you see, you can proceed, but there is no commitment to do so when you sign up.
- The loans have been pre-vetted by PeerStreet’s team of real estate and finance professionals.
- If you have more money than time, you don’t have to pick the loans yourself. You can rely on PeerStreet to select a portfolio for you with their Auto Investing feature.
Cons to PeerStreet: Liquidity & Requirements
Using PeerStreet won’t be for everyone – there are a couple of cons to using it.
- You have to be an accredited investor to use PeerStreet. You’ll be able to see some of the criteria accredited investors must meet in the next section.
- For some, the lack of liquidity of the investments may be a con. If you make an investment, you can’t pull your money out of the loan if you suddenly become strapped for cash. The loan time frames are typically between 6 to 24 months. You may earn decent yields in a fairly short term of the loan but if you’re looking for a liquid investment, you’ll want to consider something else.
PeerStreet Requirements: What Is An Accredited Investor?
Although the minimum investment is only $1,000, you must be an accredited investor to invest.
To be accredited, you must have a net worth of more than $1 million – and that figure doesn’t include the value of your primary residence.
You can also be accredited if your yearly income is more than $200,000 if you’re single or $300,000 if you’re married.
Start Investing in PeerStreet
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