Back in September I opened my PeerStreet account, funded it, and made my first investment. In this post I will provide an update on how the investments are performing and share what I’ve learned about PeerStreet’s automated investing tool, plus the birthday gift they recently sent me.
I originally set the automated investing tool to 7%+ interest rate, “Up to 65%” LTV, and “Up to 24 months” loan term. My hope was that the tool would grab the highest interest rate opportunities with better loan-to-value ratios, but this didn’t happen. The tool grabs the lower interest rate properties first. This wasn’t a problem because investors have 24 hours to cancel the automated transaction. If you are wanting to invest in the higher interest rate offerings then my recommendation is that you set the interest rate at the level you want and change the LTV to “Up to 75%” and terms to “Up to 60 months”. It is unlikely that you will get a higher interest loan that goes beyond 24 months. The automated investment tool will increase the chances you catch one of the higher rates, because they fill up fast when they are posted. Loans in the 7% range are offered regularly and easy to grab without the automated tool.
I funded my PeerStreet account with $10,000 and started investing $2000 per loan in late September. After figuring out what kind of loans the automated investing tool would grab and cancelling out of three loans, I spread the money across a range of interest rates and loan terms. The total interest for the portfolio is 7.85%. All loans are currently performing.
The loans are paying at different times and I received a partial month payment for the four loans that had one or more business weeks in September (Carmel-by-the-Sea, Los Angeles, and both San Diego properties). So far I’m pleased with PeerStreet because my cash is making way more money than it would locked up in a CD or other fixed income instrument.
There are downsides that investors to think about before using PeerStreet. These loans are locking up my money even more than a CD does because I can’t sell these loans. I have to wait until the borrower pays off the loan before I get my money back. I also don’t have the same guarantees as a CD would give me. The borrower can pay the loan off early or they could never pay it back. The ability to pay back the loan early is part of the value proposition to the borrower and helps create the opportunity for me to invest with PeerStreet, so this doesn’t bother me. It is possible that the borrower could default on the loan, however PeerStreet is sitting in first position to get repaid and the loan is backed by real estate with some equity available. So in a default situation my money would remain tied up, but PeerStreet will deal with the headache of getting repaid. As long as I’m not investing money I’m going to need to access in the short-term (fewer than 5 years) then I feel good about this kind of investment.
Birthday Present from PeerStreet
It was my 45th birthday recently and the nice people at PeerStreet sent me a gift. They gave me a 1% yield bump on my next investment! Very cool. Thank you!!!