On the Sunny PeerStreet Side of the Street

From Peer-to-Peer Lending to Real Estate Lending
Beginning in May 2016, I began moving over portions of my traditional IRA money from a Lending Club account over to a new PeerStreet Lender account. (You might recall the bad press and organizational confusion that Lending Club was having at the time.) PeerStreet was new at the time (established in 2013 and based in Los Angeles, CA) and was the first two-sided marketplace for real estate debt out there. Basically, PeerStreet deals in high yield, short-term real estate-backed loans.
As part of my due diligence, I spoke on the phone several times with Investor Relations and Support, who mentioned that lots of customers were moving over from Lending Club at the time, and I also interviewed one of the CEOs and Founders, Brew Johnson. I am still currently invested in PeerStreet, both with a traditional IRA and an individual account.

What is PeerStreet–Is It a REIT?
PeerStreet is a unique real estate investment that serves an alternative to the stock market and to other types of real estate investments, including real estate investment trusts (REITs). Essentially, the company manages and services private loan money to provide loans for both multifamily and residential real estate purchases. PeerStreet sources loans from a national network of private lenders and brokers and then aggregates, services, and manages those loans for individual and institutional investors.
Although it has some similarities to a REIT (both employ real estate professionals as investment managers), its main difference is that unlike REITs, with PeerStreet you are allowed to select the investment deals you want. You can diversify your loans across different locations, markets, lenders, return rates, terms and LTVs (Loans-to-Value).
Both investments are true Passive Income investments, meaning that you are not actively involved in the management of the investment. The day-to-day is handled by someone else (in this case, real estate experts in with years of experience in the field).
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Older Not Newer
They specialize in loans for up-cycling and renewing aging homes and buildings as opposed to supporting new construction. New investment offerings are posted each business day at noon Pacific Time (the company is based in the Los Angeles area).
More Transparency for Investors
Also, PeerStreet offers more transparency to the investor than a REIT in that you have access to more information about each property and the loan applicants. REITs do not usually have this kind of transparency for investors and tend to invest in very similar properties in distinct sectors. Non-traded (or non-public) REITs have come under fire for their high fees and lack of share value transparency.
Where In Line Will You Be?
For real estate, it is crucial to know where “in line” (the lien position) you will be in, in case of defaults. PeerStreet secures its loans through a first lien on each purchased property, effectively making it the first in line to be repaid in case of default.
Not Exactly Open to All
PeerStreet, like other FinTech real estate investment companies (FundRise, YieldStreet, CrowdStreet), attempts to be a Great Equalizer by offering real estate investment opportunities to “regular” investors that they would not otherwise have. I say “regular” in quotes because PeerStreet requires that its investors be Accredited Investors*, so essentially, they are opening up these opportunities only to those with millionaire status or with an established high income.
Take heart, though; you may not think you qualify as an Accredited Investor, but you should be aware that there are several ways to legitimately qualify that very few investors know about. The SEC modified and expanded the requirements for Accredited Investors in 2020, making it easier for individual investors to qualify.
Earn 5% at PeerStreet on Your Idle Cash

The Upside of My PeerStreet Portfolio
Below are my investment returns and the up-to-date statuses of the loans in my Traditional IRA account, which I opened in May of 2016. I received a reimbursement for the initial transfer fee for moving over funds to PeerStreet, but that is the only fee I have had waived.
My Investment Returns
From June 2016 to the date of this post (March 2022) my cumulative interest rate was 38.4% (which makes the average yearly rate 6.4%). My annual rate for first three months of the current year 2022 so far is 6.6%, which is right on course and consistent with the previous years.
Minimizing Capital Gains with Tax Loss Harvesting in an ETF Portfolio …

How Your Return is Calculated
PeerStreet uses a specific cashflow and methodology to calculate earnings.
Cumulative Return = Cumulative Net Earnings / Average Invested Principal
Cumulative net earnings is a percentage of how much your portfolio has grown in relationship to how much money you’ve invested. It includes interest you have earned and also includes any fees, gains on sale, and charge-offs you have had.
Annual earnings is simply on average how much you have earned per year.
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Statuses for All My Investments
Of the 191 investments I have participated in up until now, 162 have been Paid Off, which comes to 85% of my loans being paid.
Of the 191 real estate investments I participated in, 85% were paid off (162 investments).
2 were Liquidated Early, and 3 were designated Short Pay. (A Short Pay is a transaction in which the lender agrees to accept less than is owed on the propertym permitting a sale.) Of the current investments, 13 are Active – Late, ) 0 are Active – Deferred, and 11 are Active – Current. I have 24 Active accounts at this time (March 2022).

Invest for Your Risk Tolerance
In all investments, it is important to know and stick to your own personal risk tolerance. Your tolerance to risk for real estate investments might be different than your tolerance for stock, ETF, and bond investments, or even a REIT or brick-and-mortar buildings/land.
Investment Per Loan | $1,000 is the minimum for each loan but you can invest more. It is acceptable to invest any amount (whole number) you want, for example: $1,005. |
Maximum Term (in Months) | This depends on your risk tolerance and investment goals. Also see Build an Investment Ladder |
Maximum LTV (Loan to Value) | The higher the LTV ratio, the riskier investment. This metric tells you how much the borrower has invested in the deal and how the capital stack (total amount of capital, debt and equity) is structured. |
Minimum Yield | This depends on your risk tolerance and investment goals. 6-7% is a common yield on the PeerStreet platform. |
Build an Investment Ladder
You can build a ladder of loans to come due at timing intervals you choose. Note that some loans are paid off early or extended and not paid off in time, which could affect your ladder.
How Do Their Fees Work?
PeerStreet uses a servicing fee (generally between 0.25% and 1.00%) on each loan to act as a “spread” between the interest rate payable on a loan and the interest rate you will receive as an investor. This fee is disclosed and is different per each loan.
Automating Your PeerStreet Investing

PeerStreet offers an automated investing solution. Basically, you access it and set your preferences (for example, how much to invest at a time, LTV, etc). You are automatically placed in a queue and notified when a new loan has met your requirements and will be invested in. You have 24 hours to cancel if you do not want that particular investment.
I used the automated investing feature often when I was busy at work and didn’t want to miss a good investment, and I also didn’t want to leave a lot of uninvested cash on the table. Here are the settings I used:
Investment Per Loan | $1,000 (this is the minimum) |
Maximum Term (in Months) | 12, up to 24 if building a ladder |
Maximum LTV (Loan to Value) | 70% |
Minimum Yield | 8% |
Sometimes I played with the settings a bit. For example, I sometimes set Maximum LTV to higher than 70% and the Minimum Yield to lower than 8% (like, to 7%) when I wasn’t getting enough hits and my cash ended up just sitting there, idle. (I have nothing against cash, I just have uninvested cash in another account for that purpose.)
Build an Automatic Ladder
For the Maximum Term setting, if you want to create a ladder of loans, you can vary the number of months so that the loans are paid off by a certain time, building a ladder of investable cash in regular time intervals. Like I stated above, note that some loans are paid off early or not paid off in time (extended). This might affect your ladder and you will need to manually adjust your settings.
A Typical Loan Offering

Here are the kinds of details you will have available to you when looking to invest. This information is for a Cash-out Refinance deal in Detroit, Michigan. In addition to the info below, you also have access several documents, like the Mortgage Payment Dependent Note Private Placement Memorandum, and others.
Projected Return Calculator

Yield Details

Investment Overview: Debt Stack and Leverage Details

Valuation, Payment Terms & Extension Options, and Borrower

Open a PeerStreet Account and Get a Yield Bump
OPEN A NEW PEERSTREET ACCOUNT and receive a 1% yield bump on your investments.
FULL DISCLOSURE: I will receive a 1% yield bump in my account as well, which helps 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.
Past performance is not a guarantee or indication of future performance. Any investment involves the risk of loss.
Photo by Alvaro Araoz on Unsplash
Upside by Silviu Ojog from NounProject.com