This is the first post in a series on my PeerStreet investment account
What is PeerStreet?
The day after I setup my account I received an email and a phone call from Ethan at PeerStreet. He asked me if I had any questions. I said, “yes, how do I explain to my wife what I’m about to invest in?” The fact that I asked this question should be a red flag, because it’s a good indicator I haven’t done enough research yet. As a general rule I don’t invest in things that I can’t explain to Mrs. R., but I got around it this time by telling her I’m only going to start with $10,000 and see how it goes.
Ethan said to tell her that these are short-term loans on unoccupied homes. The typical borrower is an individual or group engaged in real estate investing – think fix and flip. To Mrs. R. this is an attractive opportunity because she is a fan of real estate investing, but doesn’t necessarily want to sink a bunch of money into one project in our local market. PeerStreet allows individuals to spread their money across multiple properties and invest as little as $1000 in a single loan. They advertise that PeerStreet loans return a range of 6% to 12% annualized. Most importantly to us PeerStreet claims to offer conservative loan to value ratios and they make a compelling case that investing in debt is safer than in equity. Their site states: “Debt is the safest type of real estate investment. It’s senior to the borrower’s equity, providing a cushion that protects the lender’s investment.” So far PeerStreet has a solid track record and has not lost any of its investor’s principal.
Creating a PeerStreet Account
Setting up my account was simple and fast, but with the security I’ve come to expect from online financial institutions. PeerStreet is also very personable. Shortly after you click “create my account” one of their representatives from investor relation will email and call you.
PeerStreet is literally not for everyone, which if you didn’t already know you will quickly discover after clicking “create my account”. This kind of investment is regulated by the SEC and is only available to U.S. based accredited investors. Which means if you are an individual investor you must have a million dollar net worth (excluding the value of your primary residence) or have made more than $200,000 as an individual ($300,000 as a married couple) during the past two years, with a reasonable expectation of continuing at that income level going forward.
Four Types of Accounts
I opened an individual account and will be investing after-tax dollars. You can also open a self-directed Traditional or Roth IRA account and invest directly on PeerStreet. Mrs. R and I have a living trust that we title our non-retirement accounts into, but I did not set this account up that way. If I continue using PeerStreet I will work with them directly at a later date to retitle the account into the trust. The fourth account type you will see is “company”, which seems like a fairly broad category, but PeerStreet’s FAQs state that their investors include high-net-worth individuals, family offices and institutions (hedge funds, private equity funds, money managers, etc). This is consistent with PeerStreet’s stated goal of leveling the playing field between Wall Street and Main Street by allowing investors across the spectrum unprecedented access and diversification in this asset class.
PeerStreet is experiencing rapid growth, but is still a small company with fewer than 100 employees. The investor profile section, direct contact from a company representative, and detailed FAQ’s are nice personal touches. I like working with companies that take time to understand my goals and are willing to help me learn more about investing.
Progress Toward First Investment
The whole process for setting up my PeerStreet account was easy and fast. I received an email to validate my account and then another one to remind me to fund my account. The website has a user friendly progress bar that walks you through each step toward the first investment.
In the second post in this series I will share the next step in the process – funding the account.