Peer street ? ask for experience

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Peer street ? ask for experience

Ken Wang
Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes

Dear All,

  Has anyone used peer street ? Any catch or pro & cons to share with us? appreciate your time!

Sincerely,

Ken

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Michael G.
Rental Property Investor · Brooklyn, NY · Member since 2013 · 272 posts · 165 votes
9y

Here's my take:  (Warning: Long post)  As a RECF site that focuses only on Real-Estate Debt, they seems to be just a newer, carbon-copy of PatchOfLand.com, as far as I can tell...   I haven't done extensive research, but I noticed 4 main differences:  (Please weigh in if you know differently... I promise not to take it personally)

  1. They don't appear to pre-fund to their borrowers - which essentially means that a.) they don't have skin in the game, and b.) the lenders/investors don't begin accruing interest right away
  2. They don't appear set-up investors up with a 'Bankruptcy-Remote' legal structure which protects investors in the event that PeerStreet goes bankrupt. This is an important one because if you invest in a borrower whose project is going well and is paying on-time, but then Peerstreet fails, it would be a cryin shame!
  3. They don't source their own borrowers.. They appear to buy pre-vetted, pre-underwritten loans from others... While this may save them Marketing costs to acquire new borrowers, I worry about the concept of "adverse-selection."  Why would someone else sell their best loans, rather than their worst?
  4. Their returns appear to be lower. Not sure if they are pocketing a few %'s more than the industry, but their yields appear to be consistently lower for what amounts to the same risk assumed vs. PatchOfLand or Realty Shares.

Like PatchOfLand, PS seems to also allow investors to review all the details of all previous loans. To the extent that as much transparency as possible is good, I definitely like this. (Not sure If they post info on their defaulted loans, as invariably, if you do enough loans, some % of them will eventually go into default.)

As I said above, I don't hold myself out as an expert by any means so please don't hold me to the above or take it as scripture. They are only my initial observations so far.  If I missed any differences, please add to my comments too!

As it happens, I genuinely like ALL of the above names - PatchOfLand, RealtyShares, and possibly even PeerStreet too (although they are a much younger newer entrant to the market, so I would like to see if they are still around in a year or two).    Others top players in the market are Real-Crowd and LendingHome.

Would love to hear feedback from neutral others on what they think are the +'s and -'s of each of the above names (but if you're affiliated with any of the above, please stay away!)

Thanks!

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  • Michael G.
    Rental Property Investor · Brooklyn, NY · Member since 2013 · 272 posts · 165 votes
    9y

    Here's my take:  (Warning: Long post)  As a RECF site that focuses only on Real-Estate Debt, they seems to be just a newer, carbon-copy of PatchOfLand.com, as far as I can tell...   I haven't done extensive research, but I noticed 4 main differences:  (Please weigh in if you know differently... I promise not to take it personally)

    1. They don't appear to pre-fund to their borrowers - which essentially means that a.) they don't have skin in the game, and b.) the lenders/investors don't begin accruing interest right away
    2. They don't appear set-up investors up with a 'Bankruptcy-Remote' legal structure which protects investors in the event that PeerStreet goes bankrupt. This is an important one because if you invest in a borrower whose project is going well and is paying on-time, but then Peerstreet fails, it would be a cryin shame!
    3. They don't source their own borrowers.. They appear to buy pre-vetted, pre-underwritten loans from others... While this may save them Marketing costs to acquire new borrowers, I worry about the concept of "adverse-selection."  Why would someone else sell their best loans, rather than their worst?
    4. Their returns appear to be lower. Not sure if they are pocketing a few %'s more than the industry, but their yields appear to be consistently lower for what amounts to the same risk assumed vs. PatchOfLand or Realty Shares.

    Like PatchOfLand, PS seems to also allow investors to review all the details of all previous loans. To the extent that as much transparency as possible is good, I definitely like this. (Not sure If they post info on their defaulted loans, as invariably, if you do enough loans, some % of them will eventually go into default.)

    As I said above, I don't hold myself out as an expert by any means so please don't hold me to the above or take it as scripture. They are only my initial observations so far.  If I missed any differences, please add to my comments too!

    As it happens, I genuinely like ALL of the above names - PatchOfLand, RealtyShares, and possibly even PeerStreet too (although they are a much younger newer entrant to the market, so I would like to see if they are still around in a year or two).    Others top players in the market are Real-Crowd and LendingHome.

    Would love to hear feedback from neutral others on what they think are the +'s and -'s of each of the above names (but if you're affiliated with any of the above, please stay away!)

    Thanks!

    6Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    9y
    Thanks Brooklyn ! Very useful information , definitely keep this for my reference. Ken
    0Reply
  • David P.
    Merritt Island, FL · Member since 2016 · 12 posts · 4 votes
    9y

    I'm very impressed with PeerStreet. I researched them for a couple of weeks and just recently their automatic system placed me into an investment (loan) that I'm very happy with. My first loan has an APR of 9.5% plus I get another 1% bump (because a friend gave me a referral link) for a total return of 10.5%! This investment has a low LTV of 61%, which I like.

    From Nate Wood (PS customer service): "PeerStreet is set up as two companies. I work PeerStreet Inc. which is our operating company. It pays all the expenses of the business. We also have a bankruptcy remote special purpose entity called PeerStreet Funding LLC (PSF). PSF holds all the notes and its sole purpose is to service loans and pay interests and principle back to investors. If PeerStreet Inc. were to go out of business for any reason, a springing member would be activated (we pay a monthly premium for this, think of it as an insurance policy) who's sole responsibility would be to continue servicing the existing loans and return capital back to investors."

    Dave

    0Reply
  • Michael G.
    Rental Property Investor · Brooklyn, NY · Member since 2013 · 272 posts · 165 votes
    9y

    Thanks @David P. 

    I remember when PatchOfLand first pioneered the concept of a 'Bankruptcy Remote' legal structure, it was a big deal for us investors... Realty Shares soon followed suit within a couple of months, as well as iFunding (I think) + a few others.  I'm heartened to see that this has now become "industry-standard" ... 

    0Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    9y

    Thanks both @David P. and @Michael G., unfortunately, i already signed up before seeing the link... :(

    0Reply
  • David P.
    Merritt Island, FL · Member since 2016 · 12 posts · 4 votes
    9y

    @Ken Wang

    FYI, MY father just signed up for PeerStreet without using the referral link, the next day he sent PS an email asking if he could use my link and they said no problem.  

    0Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    9y

    thanks @David P. !

    0Reply
  • Julia W.
    Hampton, VA · Member since 2016 · 31 posts · 8 votes
    9y

    Blog review on Peer Street (he's got others on different P2P sites as well). 

    2Reply
  • Don Souza
    Rental Property Investor · San Rafael, CA · Member since 2016 · 57 posts · 16 votes
    9y

    I have PeerStreet account. I would prefer they pre-fund borrowers and provide bank savings account interest to lenders. While the latter appears small, it's a good customer service gesture. The yields are moderate, though acceptable. Agree with above in that they should have skin in the game.

    1Reply
  • Christopher Cannon
    Investor · Marysville, CA · Member since 2017 · 8 posts · 1 vote
    9y

    @Ken Wang Do you or anyone else know whether peer street would constitute a 'like kind' investment to complete a 1031 exchange?  Thank you

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Christopher Cannon, You're not taking title to real estate.  You're lending secured by a real estate investment.   These will not qualify for 1031 treatment.  It's got to be a sale of real estate followed by a purchase or real estate.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    2Reply
  • Christopher Cannon
    Investor · Marysville, CA · Member since 2017 · 8 posts · 1 vote
    9y

    Thank you @Dave Foster for the quick response.  That's what I figured, but I wanted to check since peer street does have a secured interest in the property.  Thanks again.

    0Reply
  • Bill ExeterBusiness Member
    1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
    9y

    Hi @Christopher Cannon, 

    No, it would not qualify for 1031 Exchange treatment.  The investment is actually a "personal property interest" as opposed to a "real property interest."  You would need to actual buy real estate rather than loan out secured by real estate in order to qualify for 1031 Exchange treatment.  

    Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
    WebsiteView Page
    0Reply
  • Jane Gibbons
    Long Beach, CA · Member since 2017 · 1 post · 0 votes
    9y

    I have been invested in Peer street since Sept-Oct of 2016. I was very gung-ho about it initially but have become disappointed in the platform  based on the number of properties that have late payments, are in pre-foreclosure, or are in outright foreclosure with legal hurdles preventing the sale of the asset.  I am currently still in 7 properties and 38% of that portfolio is not paying and two of them are in foreclosure.....one with a tenant that has to be removed, and the other with a some other legal complication. If Peer Street is still saying they do not have a foreclosure issue, they are are not being honest.

    Jane

    0Reply
  • Aaron Pfeffer
    Lender · Los Angeles, CA · Member since 2015 · 127 posts · 82 votes
    9y

    First, @Jane Gibbons that is very interesting to hear, so thank you for sharing.  They do in fact (or until recently) tout how all of their Trust Deeds are performing, so it's very eye opening to learn this may not be the case.  Secondly, I wanted to chime in because it seems there is a misconception about this company on this thread with regards to how they operate.  PatchofLand and RealtyShares are crowdfunding ORIGINATORS for real estate developers, where PeerStreet is a marketplace for accredited investors to purchase secondary hard money deeds.  In other words, they are the Secondary Market, or Fannie/Freddie of the hard money and private money world.  So if a hard money lender or private beneficiary wants to sell their Trust Deed, they can do so on PeerStreet, and PeerStreet offers a platform where many investors can purchase parts (or all) of the note that is being sold.  That is very different from actually originating the money for the investment in the first place.  I know that sometimes PeerStreet buys a portion of these Trust Deeds being sold themselves, and sometimes they just act as the brokerage making the offering, and they take their fee by reducing the value of the note to the end investor, keeping the spread for themselves.  @Julia W., thank you for your post, as the Blog Review link does specify that PeerStreet does not originate.  But the blog calls this a blemish, as if they are in competition with the above mentioned P2P companies. I have zero affiliation with PeerStreer, nor have I purchased any of their investments.  I just wanted to help make clear the distinction between sites that originate via crowdfunding and a site like PeerStreet which is a marketplace to purchase already financed investments.  Very different.

    0Reply
  • Randy Rogers
    Oakland, CA · Member since 2016 · 5 posts · 8 votes
    9y

    Aaron Pfeffer:  Excellent explanation.  Thank you.

    Jane Gibbons:  I have dozens of investments with Peer Street.  Several have gone into default, a couple have gone into bankruptcy, and there has been one foreclosure.  This doesn't alarm me.  One needs to expect a certain level of defaults with hard money loans.  I am comfortable with Peer Street's servicing of the defaulted loans and expect payment in full when the underlying properties are eventually sold.  As long as values hold in the real estate market, we investors will be fine.  (Our risk is a downturn in property value; so pray for the health of the residential real estate market.)

    0Reply
  • Dave Ketcham
    Investor · Temecula, CA · Member since 2013 · 37 posts · 5 votes
    9y

    I've had a good experience with them.  Their rates seem to be a bit lower than other note-focused crowdfunding sites, but the convenience of the automatic investing makes it easy to build a diversified portfolio of notes.

    0Reply
  • Amy Wan
    Attorney · Los Angeles, CA · Member since 2016 · 284 posts · 314 votes
    9y
    i like peerstreet's management team. they are different i that they buy pre-originated loans instead of originating their own. doesnt really matter that they dont prefund since the platforms aim to sell 100% of a note off anyway so they isnt true skin the the game in a real sense. i believe they did adopt some but not all of the bankruptcy remote structure, but its been a while since i last looked. remember that bankruptcy remoteness is only as good as a court says it is, which is dependent on how the company runs internally.
    2Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    9y
    Originally posted by @Aaron Pfeffer:

      Secondly, I wanted to chime in because it seems there is a misconception about this company on this thread with regards to how they operate.  PatchofLand and RealtyShares are crowdfunding ORIGINATORS for real estate developers, where PeerStreet is a marketplace for accredited investors to purchase secondary hard money deeds.  In other words, they are the Secondary Market, or Fannie/Freddie of the hard money and private money world.  

    Thank you Aaron, that's very nice clarification!

    0Reply
  • Bryan Grantham
    Lender · Henderson, NV · Member since 2014 · 7 posts · 1 vote
    9y

    I am a licensed hard money lender and have been actively looking into Peer street as a potential money source. One question I have is what draws investors to use companies like Peer street and patch of land instead of going directly to the hard money lender themselves? Sounds like a few of you are already using Peer street so maybe you can give me some insight into this. Trying to gather as  much info as I can before I decide to take them on as a funding source.  

    0Reply
  • Arthur McCarran
    Daly City, CA · Member since 2017 · 1 post · 0 votes
    8y

    @Randy Rogers: I'm curious about what's the current state of the loans you mentioned were in foreclosure/default/late 4 months ago. I believe this would give us a good data point about how good PeerStreet is at collecting money from defaulted loans.

    0Reply
  • Sara Anne Pace
    Middletown, CT · Member since 2017 · 18 posts · 16 votes
    8y

    I invested in both PeerStreet and Fund That Flip. FTF originates their loans, all 1st position with personal guarantee ( meaning that they can go after your personal assets in deficiency judgement), lends at 65% ARV or lower. Their interest rate at 8.5-11% is about 2-3 points higher than Peer Street. I spoke with the founders; as of last month, they have not had any foreclosures since being in business since 2014 and after over 200 fundings. They had one Deed in Lieu and no money was lost for the investors. 1% foreclosure rate is about industry standard.

    I am puzzled, however, that Peer Street with no skin in the game is able to attract  many investors.  It is hard to buy  loans with their automated investments  going first.  I would love to hear about other investors'  recent Peer Street investment experience.  I too am curious about @Randy Rogers  experience at PeerStreet regarding loans in  default.  

    0Reply
  • Randy Rogers
    Oakland, CA · Member since 2016 · 5 posts · 8 votes
    8y

    I have invested in 290 Peer Street loans over the past 18 months. 133 have paid in full and 157 are currently outstanding. 146 of these are listed as "current", seven are listed as "late 30", one is listed as "late 90", one is listed as "default" (and Peer Street has commenced foreclosure), and one is listed as "REO". I don't pay attention to anything listed as "late 30". There have been lots of previous loans in this category and they typically pay in full before the "late 60" stage. The "REO" loan is everyone's worst nightmare. The borrower made one payment before defaulting and then filed bankruptcy on the eve of foreclosure. Peer Street hired counsel who obtained relief from the bankruptcy stay but the owner transferred the property on the eve of the second foreclosure to someone who filed a new bankruptcy case and Peer Street was forced to obtain court relief once again. It did so and conducted the foreclosure sale and Peer Street was the successful credit bidder. It then had to undertake an eviction action against the people living at the property which was completed in November. Peer Street indicated that it would be fronting the necessary funds to paint, install carpet, and make some other repairs and expects to list the property in January. Because the real estate market has held firm I am expecting full repayment when the property sells (although I assume the broker commission, the legal fees, the repair costs , and payment of property taxes all "come off the top" and the aggregate amount of these will be significant; I also suspect that Peer Street will "take the hit" on any shortfall for PR purposes even though it is not legally obligated to do so). It seems to me that Peer Street has handled the situation appropriately. The "lesson" I take away is that you can never tell in advance which loans will go sour and so it is wise to diversify as much as possible to minimize the adverse impact of any particular loan.

    4Reply
  • Michael G.
    Rental Property Investor · Brooklyn, NY · Member since 2013 · 272 posts · 165 votes
    8y

    @Randy Rogers

    Well articulated.  Thanks for your informative post. I can confirm that I've had similar experiences with other  RE Crowdfunding portals, including those with yields 300-400 basis points higher than PeerStreet with similar risk profiles. Time & patience is the essence with these types of investments.

    0Reply
  • Ian IppolitoBusiness Member
    Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    @Randy Rogers,  thanks for sharing all those helpful details. So you’re experiencing an uncured default rate of 0.68%  on a substantial portfolio . That’s very good and even better than the overall uncured default rate that the PeerStreet platform reports of 1% (which itself is very good).  The best platforms and funds are under two percent. 

     Some of the other crowdfunding platforms refuse to release their performance. However in talking with individual investors with substantial portfolios on them,  they report 6 to 15% uncured default rates!

    The Real Estate Crowdfunding Review
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