PeerStreet Review 2023: Invest in Real Estate Debt
PeerStreet is an online marketplace where accredited investors can invest in high-quality private real estate loans.
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Thanks to the internet and modern technology, investing in real estate is becoming more and more accessible for retail investors. In addition, real estate has historically generated excellent returns, and it is one of the most preferred asset classes for creating wealth. Therefore, it is no wonder that investors want to get involved in and benefit from real estate investing.
However, many real estate investors don’t want to own and manage real estate properties themselves or have the financial resources to invest in property deals directly. That’s why the number of crowdfunding platforms increased massively over the years. And one of these platforms is PeerStreet.
In this PeerStreet review, we will dive deeper into the platform, how it works, the available features, and which pricing structure to expect. We also look at the positives, negatives, and customer service. We also answer some FAQs and determine who should invest in real estate debt through PeerStreet.
Quick Summary: PeerStreet is a real estate crowdfunding marketplace where accredited investors can invest in high-quality private real estate loans. The platform allows investors to self-select loan investments and build portfolios of individual loans.
- Multiple investment opportunities
- Automated investing
- Transparent fee structure
- Earn interest on uninvested cash
- Invest in real estate debt
- Accredited investors only
- Limited liquidity
What Is PeerStreet?
PeerStreet is an online real estate crowdfunding platform that democratizes real estate investing. On its marketplace, they connect investors with borrowers and allow them to invest in high-quality, short-term, real estate loans backed by a first lien position. The platform aims to open the doors for accredited investors to an asset class that has been difficult to access in the past if you haven’t been a knowledgeable real estate investor.
Investors can choose from multiple investment options and build a customized portfolio according to their preferences, strategy, and risk tolerance. PeerStreet provides you with the opportunity to diversify some of your portfolio into commercial real estate debt with as little as $1,000.
How Does PeerStreet Work?
The platform manages two sides of real estate investing on their marketplace and connects you with investments sourced from private lenders and brokers across the country.
First, borrowers take a short-term bridge loan from a lender in PeerStreet’s nationwide network, which the lender will then submit to the platform. From there, the reviewed loans are published on the platform’s marketplace, where investors can invest in these loans. Once the funding is done, PeerStreet manages the loan until its maturity and distributes the proceeds from the borrower’s monthly loan interest payments to the investors.
How to Open a PeerStreet Account
Opening a PeerStreet account is pretty straightforward and only takes a few minutes. First, click on the Get Started button on the company’s website and enter your name, e-mail address, and password to create your account. After that, select your account type and fill out your investor profile, including income information and social security number or taxpayer ID. From there, you can browse the investment opportunities on the marketplace.
Remember that you have to be an accredited investor if you plan to invest in real estate through PeerStreet. To qualify as an accredited investor, you must have:
- $200,000 in annual income per year for the last two years ($300,000 with a spouse)
- $1 million in net worth excluding your primary residence
Once you find an investment opportunity that you like, you can fund it immediately.
PeerStreet has various unique features that are exciting for accredited real estate investors. For example, the platform provides multiple investment options, lets you choose how to invest, addresses loan defaults, and has an in-house asset management team. Read on to find out more about the available features.
|Time Commitment||6-36 months|
|Property Types||Residential, retail, office, industrial and hospitality|
|Advertised Returns||6% to 9% annualized (Average returns)|
|Regions Served||50 States|
|Support||Phone (+1 844-733-7787) and Email ([email protected])|
Multiple Investment Options
If you invest with PeerStreet, you can choose from numerous product offerings the platform has accepted from their lender network. One of their main aspects is the varying loan duration. The loans on the crowdfunding platform are short-term bridge loans with a typical investment term that ranges between one and 36 months.
As an investor, you can invest in those loans that interest you and have the most exciting criteria. These criteria include specific geographic regions in the U.S., various property types like residential, multifamily, and commercial real estate, loan maturities, investment risk, originators, and many more.
The great thing about PeerStreet is that it gives you flexibility on whether you want to invest manually or not. Investors who wish to have complete control over their investments can hand-select debt investments from the platform’s marketplace’s published opportunities. That way, PeerStreet allows you to create a customized portfolio based on individual factors and criteria that fit your unique investor profile.
If you don’t want to invest manually, you can activate the automated investing function. This feature helps allocate your funds across individual loan investments according to your set investment parameters. From there, PeerStreet handles the rest. Once an investment matching your criteria is launched on the site, automated investing reserves a spot for 24 hours so you can review the investment before you back it. If you don’t cancel your spot within that period, the platform invests money up to your desired investment amount and adds these loans to your portfolio.
Multiple Account Types
Once you created an account, you can select the account type through which you want to invest on PeerStreet. The platform currently supports taxable as well as various self-directed retirement accounts:
- Taxable investment accounts
- Traditional IRAs
- Roth IRAs
- Rollover IRAs (401(k), 403(b), and 457)
List of Originators
On its website, PeerStreet provides investors with data on the published loans as well as the originators the platform partners with nationwide. On the overview tab, you can see who the originator is and you can get more information if you want to do some further research on the companies and entrepreneurs your capital supports. You will also learn more about the type of borrower and the credit score.
Loan Defaults & Foreclosures
If a loan should go into default, PeerStreet’s experienced real estate team will take care of the process “on behalf of the investors to protect their investment and maximize proceeds”. Besides, all loans are held in a bankruptcy-remote entity. Usually, the company first pays the legal fees and foreclosure-related costs. After that, they distribute capital, interest, and default interest payments to their investors according to their investment size.
In-House Asset Management Team
PeerStreet has an in-house asset management team because the company wants to provide their customers with a loan management service that monitors everything such as payments, insurance, communication, and many other aspects. They take care of non-performing loans as well as those that are past their maturity because PeerStreet doesn’t want you to worry about the details of the loans you are invested in or to have to coordinate with third parties that are involved.
People invest in real estate because this asset class is known for bringing in high annual returns. Therefore, PeerStreet usually targets high-quality, moderate loan-to-value (LTV) short-term loans. The reason is that short-term U.S. mortgage-backed securities tend to compensate investors better than other fixed-income assets. As a result, the typical investments will yield expected returns between 6% and 9% per year, depending on the specific loan characteristics.
Integration with Third-Party Services
This feature illustrates that PeerStreet listens to its users. Their customers approached the platform because they wanted a complete bird’s eye view of their entire investment portfolios. Investors wanted to include PeerStreet positions to make smarter and more informed investment decisions. That’s why the crowdfunding platform started integrations with Betterment, Wealthfront, and Mint. Now, users can finally integrate their real estate data from PeerStreet to get additional insights and have a full overview of their investments in one place.
If you have a cash position available in your PeerStreet account, you can invest it in Pocket. This feature allows investors to earn interest on their idle cash while waiting for new investment opportunities to be published in the marketplace. However, money invested in Pocket has to be redeemed first before you can invest it in new loan opportunities. The annual interest rate currently sits at 2% but can change at any time. Keep in mind that Pocket is no banking product and not FDIC- or SIPC-insured.
PeerStreet Pricing and Fees
Joining and maintaining an account on PeerStreet is free. Even when investing, you don’t have to pay any fees upfront. The reason is that their servicing fee is a spread between the interest rate borrowers pay on their loans and the interest rate investors receive. The benefit of this transparent and investor-friendly structure is that you only pay fees when you receive money yourself. The spread currently varies between 0.25% and 1.00% and will be disclosed on each loan’s detail page.
The minimum investment amount to start on PeerStreet is $1,000, which isn’t much compared to other real estate platforms out there. This amount gives investors the chance to deploy their funds into multiple loans and lower their risk right from the start.
Two aspects need to be covered here: Account protection and security measures.
All funds held in cash on the platform enjoy FDIC insurance coverage of up to $250,000. Funds that are transferred to the PeerStreet Investors Trust Account at Wells Fargo are also FDIC-insured but up to the maximum amount for every individual and only while they are in the account. Once they are transferred out, insurance will no longer be in effect. Notes and Pocket investments are also not insured by the FDIC.
When it comes to the platform’s security, all communication occurs via an encrypted and secure connection using SSL and TLS technology. The technology is a bank-level financial standard that encrypts all your personal and financial data. Moreover, PeerStreet’s hosting provider undergoes vulnerability assessments from time to time.
PeerStreet Customer Service
If you want to contact the PeerStreet support team, you can do so via phone, chat, or e-mail between regular business hours. The platform also features an extensive FAQ section covering a vast range of questions investors may have about the entire product offering. This makes it easier to find a quick solution to an issue rather than calling or writing an e-mail and waiting for a response.
- High deal flow as new investment options are listed every day
- Excellent diversification across characteristics such as states, LTV, or property types
- Manual and automated investing are both supported
- Self-directed retirement accounts and rollovers are available
- PeerStreet has a strong performance track record and a low default rate
- Loans are backed by hard assets
- Integration with Betterment, Wealthfront, and Mint
- Investors can earn interest on idle cash through pocket-transparent and investor-friendly fee structure
- The $1,000 minimum investment is a reasonable threshold
- Great loan-to-value ratios between 60% and 75%
- Highly illiquid investments as they can’t be sold
- Loan defaults are part of the business model
- Only accredited investors are accepted
- No single deals or REIT products are available
While PeerStreet may be an excellent choice for generating passive income from real estate debt investments, investors might also be interested in real estate portfolios, REITs, and individual property deals. Hence, we listed two other crowdfunding platforms below:
An alternative platform for real estate investors is Fundrise. In contrast to PeerStreet, the platform also allows non-accredited investors to participate in real estate investments and has a much lower minimum investment. For example, the entry-level Starter Portfolio starts at just $10 compared to PeerStreet’s $1,000.
Using Fundrise, investors can invest in commercial and residential real estate portfolios instead of short-term real estate loans. Moreover, Fundrise offers five account levels that unlock different features such as IRA investing, a customized portfolio strategy, or access to private REITs. However, three of these five account levels require a minimum investment of at least $5,000.
While both platforms have different approaches to real estate investing, they have similar fee percentages. Although Fundrise charges an annual advisory fee of 0.15% and an annual asset management fee of up to 0.85%, they both charge their investors a maximum of 1% in fees. Read our full Fundrise review to learn more.
CrowdStreet is our second alternative for real estate investing. It provides investors with direct access to commercial real estate investment opportunities on their platform. You have the option to invest in diversified funds and individual deals or to have a professionally managed real estate investment portfolio. Like with PeerStreet, these investment opportunities are only accessible for accredited investors.
To get started with CrowdStreet, investors must come up with a steep $25,000 minimum investment, which is significantly more than PeerStreet’s $1,000. This can hurt your overall portfolio diversification because you could invest in 25 properties on PeerStreet with that amount.
A huge benefit of investing with CrowdStreet is that you are not paying any account fees like on other crowdfunding platforms because the deal sponsors must pay them. However, you might face other fees for funds that can range anywhere from 0.5% and 2.5%, depending on the project. Read our full CrowdStreet review to learn more.
|Fees||0.25% – 1.00%||0.50% to 2.5% (Funds); Project fees vary||1.0% per year|
|Promotion||None||None||Advisory fee waived (*12 months)|
|Highlight||Access to private real estate loans||Access to commercial real estate investment opportunities||Access to private real estate deals|
|Best For||Long term accredited investors||High net-worth individuals||Long term investors|
Who Is PeerStreet Best For?
PeerStreet is best for accredited investors only, as non-accredited investors can’t invest on the platform. Having said this, the platform is an excellent choice for adding real estate to your portfolio or further diversifying your current real estate position through loan investments. The $1,000 minimum also makes it very easy to spread your capital across multiple deals.
In addition, investing in debt is a great way to earn passive income as the interest payments from the loan borrowers are the cash flow you are looking for. Besides, investors who want to hand-pick their investments, as well as those who want the platform to do the heavy lifting, will find convenient features on PeerStreet.
PeerStreet Review FAQ
While we covered PeerStreet in a very detailed fashion, we understand that you might have some additional questions. That’s why we compiled answers to the most frequently asked questions below.
Is PeerStreet Safe?
Like with any investment on a crowdfunding platform, there is risk involved, especially for real estate loans. Borrowers might not be able to repay their loans or go into default and payments could stop flowing in. However, all loans are backed by the underlying properties and PeerStreet is in the first lien position. Besides, more than 95% work out without a foreclosure process. This makes PeerStreet a relatively safe choice to earn passive income from real estate.
Is PeerStreet a Good Way to Invest?
If you want to diversify your portfolio with real estate investments, PeerStreet can be a viable option for you. However, the approach is different from most crowdfunding platforms as you invest in real estate loans and debt instead of single property deals and REITs. Still, if you are looking for a way to generate passive income every month, loan investments backed by the underlying properties can be an excellent way.
How Are PeerStreet Investments Sourced?
PeerStreet sources its loan investments from its nationwide lender network. Their trusted lending partners typically vet all borrowers themselves, run due diligence, and ultimately submit the short-term bridge loans to the platform for consideration. After reviewing and underwriting, the accepted loans are listed on the marketplace for funding.
When Can You Sell PeerStreet Investments?
Currently, investors on PeerStreet cannot sell their illiquid loan investments prematurely like on other crowdfunding platforms. PeerStreet doesn’t buy your investments back and there is no secondary marketplace to sell them to fellow investors. However, the crowdfunding platform states that they know that investors would like to have such a feature and hopes they can offer this in the future.
Is PeerStreet Only for Accredited Investors?
Yes, PeerStreet currently allows only accredited investors, family offices, and institutions to invest in real estate loans on their platform. The reason is that they follow the Securities and Exchange Commission’s policies on investor requirements for unregistered securities. This means that an individual investor must have earned income exceeding $200,000 ($300,000 together with a spouse) in each of the last two years and expect the same income this year. Alternatively, they must have a net worth of over $1 million without the primary residence’s value.
How Is PeerStreet Different from a REIT?
If you invest in a REIT, you have less flexibility and transparency than if you invest with PeerStreet. The reason is that you can choose the loans you want to invest in yourself from their pre-vetted opportunities and don’t need a middleman who invests your money for you according to their personal strategy. Plus, the platform has a better fee structure than most REITs, which in turn gives you higher yields.
How Does PeerStreet Make Money?
PeerStreet’s primary source of income is the servicing fee (also called the spread) they charge investors when they receive interest payments. Suppose a borrower secures a loan from a PeerStreet lending partner at a 10% interest rate. The crowdfunding platform now sells the loan and pays investors 9%. The difference of 1.00% is PeerStreet’s profit.
In A Nutshell
- Account Minimum: $1,000
- Fees: 0.25% to 1.00%
- Promotion: None
PeerStreet is the pioneer for investing in real estate debt and aims to align the interests of all parties involved — borrowers, lenders, and accredited investors. The crowdfunding platform has many great features, such as a massive deal flow, manual and automated investing, integration with third parties, and various diversification options.
While the platform has a strong track record, one must note that loan defaults can happen and liquidity can be an issue for investors. Moreover, PeerStreet offers unusual short-term bridge loans that are different from conventional mortgage-backed securities, which require specific knowledge about lending and the implied risk.
Still, the $1,000 investment minimum is a good argument for investors to try out the platform without having too much skin in the game. And in case you like what you see on the platform, you can increase your position step by step, diversify across multiple loans, and keep your overall risk low.
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Carsten is a Freelance Copywriter with a personal interest in money management and investing. Besides taking care of his investments, he loves traveling, reading books, and working out (calisthenics & yoga).
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