One of the newer ways to earn a decent return on available cash comes from an interesting corner of the personal finance world: P2P real estate. The company offering this unique cash investment is PeerStreet.com. There are lots of players in the space, including some big names like Fundrise, YieldStreet, and Realty Mogul, but PeerStreet is not always mentioned in reviews and side-by-side P2P real estate comparison posts even though it’s been around since 2013. (In fact, if you Google “peerstreet,” Yieldstreet.com and Realty Mogul come up first. Maybe this is a comment on the company’s market spend?)
Dealing in Real Estate Debt
The Chief Customer Officer at PeerStreet, and one of the co-founders, is a former Google Product Marketing guru, so you have to assume he is on top of marketing. PeerStreet is a real estate-backed loan investment crowdfunding platform for accredited investors* based in Los Angeles. The fractional high-interest loans are collateralized with real estate all around the United States.
According to the site: “Loans are sourced from vetted private lenders throughout the United States who often have regional real estate expertise and long-term borrower relationships. PeerStreet enables these lenders to expand their lending capital, empowering them to make more loans, which flows through to borrowers who in turn improve their local communities—one house at a time.” Essentially, PeerStreet operates as a “hard money” marketplace that connects lenders and borrowers for (mostly) short-term bridge loans of around 6 to 24 months in length. Short-term, real estate backed loans such as these represent an asset class previously inaccessible for individual investors.
Earn 3-5% on Available Cash
To earn interest on your cash, you need to use the Automated Investing option on PeerStreet. Cash Offer Loans of 3-5 months yield 5% and 30-Day Notes yield 3%. It’s all pretty self-explanatory and the site is easy to use or modify when your needs change. Remember, you don’t need to tie up your money in the longer term bridge loans AT ALL if you want to keep your money liquid and relatively close at hand (5 months max for Cash Offer Loans or as soon as 1 month for 30-Day Notes).
TIP: It can take time for your money to get invested and depends on the availability of Loans and Notes at the time.
(Note that adding funds to your account can also be automated from your bank accounts but it is on a different page.)
Don’t Sweat the Small Stuff
You can also reinvest available cash in smaller amounts into bridge loans that meet your specs separately once your balance reaches $100. So, if you are invested in loans through PeerStreet, there is an option for re-investing balances between $100 and 1,000 (the minimum for investing in a bridge loan) so, again, your money doesn’t sit idle. This allows you to compound your returns (i.e., earn interest on your interest) and further diversify your portfolio.
Pocket: a New Source of Warehouse Capital
This 5% interest rate opportunity for available cash is only one of several options from PeerStreet that they offer for earning decent interest rates (from 3% to 5%) on cash. PeerStreet also recently upped the interest rate on Pocket, one of their interest-bearing cash instruments, to 2.5% that was introduced about a year ago (January 2021). Pocket Money that is invested in Pocket may be used to warehouse loans before they are sold to investors on the PeerStreet marketplace.
A Liquid, Interest-Yielding Alternative
Pocket was created in response to investor feedback and requests for an alternative to low-yielding banking rates. Dealing with available cash is a concern for many. The account has no minimum balances or fees and it is not tied to any particular P2P loan, making it more liquid than other PeerStreet instruments or other fixed income investments. Note that it is not FDIC insured.
How is PeerStreet as a Company?
PeerStreet is a privately held company, so not all information is verifiable and the news about the company can seem somewhat mixed. It is important to note that they laid off about 50 employees in 2020. As of this post, they had approximately 30 fairly high-level positions open at the company, according to their website. As of January 2022, they have a reported 222 employees. Beyond that, Crunchbase reports 8 rounds of funding for a total of 121.9 million.
*According to the SEC, to be an accredited investor as an individual, you must earn an income that exceeds $200,000 a year or $300,000 if jointly filing with a spouse, or have a net worth exceeding $1 million, either individually or jointly, excluding the value of a primary residence.
Open a PeerStreet Account and Get a Yield Bump
OPEN A NEW PEERSTREET ACCOUNT and receive a 1% yield bump on your investments (not applicable to Pocket loans).
FULL DISCLOSURE NOTE: I will receive a 1% yield bump in my account as well, which help keep the lights on here at Wealthy Nest.
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Disclaimer: All the information provided above and on this site is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.