The PeerStreet Experiment

PeerStreetMustacheTransparent-2-6ayhghrpwerci8q192cr2p7sq1niwmx218dgdsfee68In April of 2016, I invested $10,000 into the new field of peer-to-peer real estate loans. I chose PeerStreet as the most promising subject at the time, and wrote about it in this article:

High Efficiency Real Estate Investing with PeerStreet

This tracks the results of the investment and keep up with news on the company and its industry. Here are the results as of February 24, 2017 (roughly 10 months in to the experiment).

peerstreet-feb24-2017

 

peerstreet-positions-feb24-2017Since starting this account in mid-April, there has been a bit of interesting action. Four loans have been paid off early – not a great thing for investors because you presumably wanted to keep collecting interest instead of waiting for that money to be invested elsewhere. Also, returns will tend to lag in the short term because you get paid at the end of each month.

On the other hand, the money has automaticaly deployed across five properties, and the account value of $10,718 means that we are indeed making reasonable returns.

Strategy Considerations:

I set my account to “automatic investing” mode, with the following settings:

peerstreet automated investing settings

If there is spare cash in the account, the PeerStreet system will automatically put it into qualifying new offerings as they enter their system, and send me an email with the news. I then have a day to review and opt out of anything that doesn’t look quite right to me.

A conservative banker friend taught me to look for low loan-to-value ratios, and to prefer properties that are in healthy but not hopelessly bubbly markets. Admittedly, some of my first investments are still in insanely expensive coastal LA projects, so we can see how those go as well.

If you have questions, comments, or suggestions, feel free to leave them in the comments and we can work together to make this experiment more educational and comprehensive. Thanks for reading and thanks to the PeerStreet staff for helping to teach me all this new stuff so far.

A May 2017 Update/Bonus

If you’re interested in trying out some investing with PeerStreet yourself, I have negotiated a special offer with the company where they give a double signup bonus to you (two 1% yield bumps), and none to me. (I still have no affiliation with the company, but figured having the only site where this better offer is available might bring more people to my blog.) – here’s the URL for that:

http://www.peerstreet.com/join?ref=1tnupvu

  • Wesley May 2, 2016, 4:12 pm

    MMM,

    Do you know if investments in Peerstreet are available to Canadian citizens?

    Cheers,
    Wes

    Reply
  • Andy May 2, 2016, 8:13 pm

    Esteemed Mr. Mustache,

    It should be pointed out that, per Peerstreet’s FAQ, it is only open to millionaires…

    …the so-much-more-trusted-with-our-their-dough Accredited Investors. AKA, only those with net worths >$1,000,000 or two consecutive years of $200,000 in income are eligible to invest with Peerstreet (and many other new niche investment platforms). I sorta had to dig to find that, as well. So I’m flagging it in the comment. I’m a happy LendingClub-goer, but fall some $700k short of, ahem, Peerstreet’s (and the SEC’s) admission policy.

    This is the second or third non-mainline P2P option I’ve investigated only to be turned away and bummed out because I’m not yet sufficiently rich. Poop. I’d also hazard a guess that the lion’s share of MMM readers do not meet the ai threshold – so it should be highlighted when a post is basically “not for them.” I kinda got my hopes up. A lot of the exciting options are just not for those of us still saving.

    I’m sure many of these companies would rather be open to non-millionaires as well, but the operating beyond the SEC exemption-space in which they are percolating must simply be too difficult or otherwise not worth it to pursue… maybe only once a lender wants to grow beyond a certain size.

    I love your site. I will meet accredited investor status a lot sooner because of it. I wish companies like Peerstreet could help me get there.

    Alas,
    Andy

    Reply
    • Brian May 3, 2016, 1:07 am

      The SEC telling us what individuals can do with their own money. What would we do if it weren’t for them to babysit our bank accounts, and limit what investments we can pursue?

      I HATE the SEC, I read this MMM article at 4am when I woke up, and the SEC had already successfully pissed me off.

      Reply
      • Brett Crosby May 6, 2016, 12:02 pm

        This comment both cracked me up and made me sad. Yes, unfortunately, due to SEC regulations, PeerStreet is currently only available to accredited investors. Our goal at PeerStreet is to open this asset class and investing model to as many people as possible. We’ve succeeded in making it a lot easier to invest and diversify in the asset class (smaller investments in each loan), but haven’t yet been able to open up to non-accredited investors or people outside the US. As we grow and we can take on much larger legal challenges, we’ll definitely try to change that.

        Reply
        • Anne May 12, 2016, 3:52 am

          Hi Brett,
          Would you be able to post a comment here when this happens please? I live abroad as well.
          Thanks a lot.

          Reply
    • Tom May 6, 2016, 12:06 pm

      Andy, and everyone without high incomes and/or net worths,

      The SEC accredited investor laws are bullshit.

      Luckily for us, we can join any real estate websites we want. I’ve joined at least 3 other real estate and investment sites that screen for accredited investors.

      Just flip a cheerful bird to the SEC and invest anyway. These rules only harm the little guys.

      Tom

      P.S. The SEC also has another garbage law just like “accredited investors”. It’s called the Pattern Day Trader rule, or PDT. If you’ve got more than $25k in your onshore trading account, you can daytrade as you like, but if you’ve got <$25k in an onshore trading account, and you make more than 4 roundtrip trades in 3 days (I forget the specifics, even though I've tripped the PDT at least 4 times in the past few years) they freeze trading in the account for 180 days (closing trades is ok). What this does is make it so little guys face MORE risk because they can't execute stop-loss trades to mitigate risk, nor close positions each afternoon. Nothing about having $25k in an account, having $1m in assets, or earning consistently high incomes for multiple years makes a person "better" at trading or investing or less likely to behave recklessly and lose money.

      The only way to learn how not to lose money is take risks and get familiar and comfortable with the inherent risks in trading and investing and building businesses. Do NOT outsource this pain to anyone, or you will never grow into a responsible, financially strong person. It's like hiring someone to do your squats for you; you won't get any stronger! Be grateful for every lesson your failures teach you. MMM would be a much weaker investor and landlord if he hadn't had the shitty partner in that awful deal.

      http://www.mrmoneymustache.com/2012/02/01/mr-money-mustaches-big-mistake/

      Reply
      • Brian May 10, 2016, 7:15 pm

        Have you had any issues with doing this, or do you anticipate any? For example in reporting gains due to accredited investments on your taxes, do you think this could every come up and be problematic?

        Reply
        • Farmer/diplomat in Georgia May 10, 2016, 7:47 pm

          Brian,
          No, this is totally an SEC issue, there are no IRS or tax implications if you should happen to invest in an accredited investor only investment even if you aren’t one.
          An issuer, like Peerstreet, could potentially get onto trouble with the SEC if they knowingly allowed non-accredited investors to invest, but I don’t know how the SEC polices this, or even if they do. I don’t think this is high on their enforcement radar.
          Tom, totally agree with your sentiments.
          There has has been talk of the SEC lowering the accredited investor thresholds. It wouldn’t hurt for the MMM community to urge the SEC to do so.

          Reply
    • Dr. Awesome May 25, 2016, 8:44 pm

      Hey Andy, I too found it difficult to determine if being an accredited investor was a requirement of PeerStreet but I expected as much. I know that GroundFloor, mentioned in the article, doesn’t require accreditation but does have an investment cap. I recall it being fairly small and they are not available to investors in all states. It’s the only non-mainstream P2P & ‘Hard Money’ place I know of.

      Best of luck to the magical 1M mark to satisfy the SEC (Secret Enemy of Capitalism) so you can invest as you like.

      Similar side note to others: As an accredited investor I can say that of the times I’ve had to ‘prove’ my accreditation was only once. Just like in Vegas; don’t bet what you can’t afford loose.

      Reply
      • Daid B April 19, 2017, 7:54 am

        What is the penalty if you can’t prove your accreditation?

        Reply
  • Mattbkk May 2, 2016, 9:24 pm

    Surprising to learn that this is not available to non-US residents. I live in Thailand and can invest in Lending Club with no problem. Hopefully this policy will change later. It’s got to be better for Peerstreet to have access to worldwide capital than just US money. And for the international investor who wants to be in USD and not in the bubbly stock market, this could be an ideal solution.

    Reply
    • Brett Crosby May 6, 2016, 12:05 pm

      Yes, we’d like to open up beyond the US, but due to regulatory reasons, it takes time and massive legal effort to do so. Over time we hope to allow for non-US investors to directly invest in PeerStreet.

      Reply
  • Susan May 3, 2016, 5:53 am

    Please clarify this statement, “A conservative banker friend taught me to look for low loan-to-value ratios….” It looks to me as though you’ve chosen the highest LTV available, not a low one as your friend advised. Are you ignoring the advice, or am I misreading something?

    Reply
    • Miniwing May 4, 2016, 9:00 am

      I believe he picked this as part of his test of the viability of the project. He wants to see how much potential his 10k can generate in a short period of time.

      Reply
      • Mr. Money Mustache May 4, 2016, 9:55 am

        Susan is right, I need to clean up that paragraph a little. Although I set my auto-investing category to the highest risk/return combo, once you dig into each project you find that there is lots of variation.

        For example, suppose there are two houses, both bought for $200k with $50k of cash from the developer and a $150k loan (so, a 75% loan-to-value).

        One developer might be doing the work in Seattle, plus funding all the subsequent construction with cash-on hand. So the place would be worth $500k when finished, meaning only a 40% final LTV.
        A second developer might be renovating in New Jersey, and pulling out money to pay for construction as it proceeds. The final place might be worth $300k, with a loan of $200k (66% LTV).

        Even though both projects start out the same, the first one ends up safer in my opinion, because the deal is less likely to end up underwater in the event of a housing market crash.

        Reply
        • Gunn_Show May 13, 2016, 4:39 pm

          So, MMM, how are you determining the final (potential) valuation (ie 500k in Seattle vs 300k in New Jersey) at this stage in your loan selection? I have browsed the PeerStreet Q&A sections of their site but not signed up yet, so forgive me if that data is in the listing description or something on the loan offer. Your thesis and idea is a good one however, when considering LTV and location. I like it. Just curious how you are coming up with your potential sale values on the properties themselves. Thx

          Reply
        • Zach Weisman June 21, 2016, 3:56 pm

          When speaking of LTV, aren’t we referring to the LTV at the time the loan is granted?

          I understand how the exit LTV is different from the entry LTV, but when making your choice on the Peer Street platform aren’t you only choosing it based on the entry LTV?

          Reply
        • Brett Poole June 19, 2017, 1:42 pm

          Be careful, 75% LTV doesn’t necessarily mean that the developer has ponied up any cash at all. It merely reflects the fact that the appraised value is higher than the investor paid for the property. Those of us that were investing in real estate back in 2006 know how quickly appraised value can change. Peer Street does show the “skin in the game” for each loan and it is usually zero.

          Reply
  • Roger May 3, 2016, 3:01 pm

    Why did you choose the 2k increment? Seems like a lower increment spread over a greater number vehicles would mitigate your risks.

    Reply
  • Tiffany Alexy May 3, 2016, 7:08 pm

    Few questions:
    1) What kind of fees is PeerStreet taking?
    2) Are there options besides automatic investing… i.e. can you go through choose the individual properties you want to loan on?
    3) Are these loans primarily on flips (what I’m assuming “value add” means)?

    Reply
    • Brett Crosby May 6, 2016, 12:11 pm

      1) Fees: PeerStreet typically takes a 1% servicing fee. There is a tremendous amount of work that goes into the platform, so IMO that’s a fairly modest fee considering.
      2) Options: you can pick and choose each and every deal or set up Automated Investing or do both.
      3) Loans: Yes, primarily flips or buy to fix up and rent properties.

      Reply
  • Lee May 4, 2016, 9:40 am

    Thanks for the headsup! I read your first email/post about PeerStreet and opened an account. I’ve long wanted to get into short-term RE financing but didn’t want to tie up a significant chuck of my capital in any one property.

    There are other P2P real estate investment options that are open to non-qualified (per the SEC, not my term) investors. (Google p2p real estate lending). Not sure which, if any, allow foreign accounts.

    BTW, I’ve lived off and on in SoCal for 40 years and the properties have almost always been “over-valued” by common metrics. And yes, they have periodic declines but over the long-term, people love living in SoCal and many will pay a premium to do so.

    Reply
    • Tom B May 31, 2016, 11:59 am

      I really liked the last comment. I used to live in LA and NYC (Manhattan) and common metrics that people would use to determine if a market is “overheated” would practically always tell you that investing in those large, well established market is for fools.

      I would contend this is only true for small but up-and-coming cities. If I find that the price of housing is significantly outpacing the local economy, I would be concerned. Charlotte, for instance, has a booming housing market but when you compare the housing prices to the national averages as well as compare it to how the job market is doing in the area, I would venture to say that housing prices are not out of line.

      But as for the large markets there is only so much space in Manhattan and quite frankly, if NYC is tanking, chances are so is the rest of the economy.

      Reply
  • OnlyKetchup May 4, 2016, 4:17 pm

    So if the minimum investment is $1000 per loan and you get paid interest monthly I assume, if you weren’t adding to your account it would take 12+ months for the interest to get re-invested (assuming a 10k investment and 10% interest)? Does the non invested interest earn interest on its own, or does it represent cash drag?

    Reply
    • Brett Crosby May 6, 2016, 12:08 pm

      Great question. Ideally you’d be able to reinvest interest payments in smaller minimum chunks. That’s something we’re looking into, but is not currently a feature.

      Reply
      • V May 16, 2016, 3:26 pm

        Could I pull my interest monthly to put elsewhere during the 12-month period referred to?

        Reply
        • Greg Porter September 30, 2016, 10:48 am

          Yes. Interest paid on an outstanding investment goes to your cash position and can be re-invested in another deeal.

          Reply
      • Ryan Nichols June 3, 2017, 7:20 am

        any update here, or would you suggest withdraw interest until those withdraws total another “buy” sum. then refund account to invest in another position?

        Reply
  • Widjet May 6, 2016, 1:43 pm

    So MMM has covered peer-to-peer personal loans and now peer-to-peer hard money real estate loans. What is next? Perhaps peer-to-peer angel investing via someone like Wefunder? The peer-to-peer space seems to be having its moment right now. I am interested in the diversification options this opens up. Markets have moved in such lockstep recently that it is difficult to find investments that add meaningful diversity. My primary concern with the new investment vehicles is fees and the lack of up-front plain English disclosure as to what those are.

    Reply
    • Brett Crosby May 8, 2016, 7:43 am

      https://info.peerstreet.com/faqs/what-are-peerstreets-fees/

      PeerStreet may apply a servicing fee on each loan offered for investment. The servicing fee is a “spread” between the interest rate payable on a loan and the interest rate you receive as an investor. With this structure, PeerStreet has aligned our interests with our investors as we will only get paid when our investors get paid. Generally, this fee should be in the range of 0.25%-1.00% and it will always be disclosed.

      Reply
  • HRuxe May 8, 2016, 7:50 am

    My biggest issue here is that you need to make sure that if someone has to foreclose on the real estate that there will be someone besides PeerStreet to do it, since they may be out of business if that happens. What controls are in place for PS to address this?

    Reply
  • Ursula May 18, 2016, 12:47 pm

    Hello Mr. Money Mustache,
    I just looked at your account entry for the Ontario loan and did the calculation on this loan you held for 14 days. If I do the calculation of $2,000 at 8.5% simple interest, that would give me $170 per year in interest. On a daily basis (using 360 days per year), that would be $.47 – multiply that by the 14 days you held the loan, would equal to $6.61 in earnings. Yet you only show 50% of that, namely $3.31. What happened to the other 50%? Even considering the 1% servicing fee taken by PeerStreet it does not add up.
    Just wondering….

    Reply
    • Mr. Money Mustache May 20, 2016, 7:05 am

      Very good question Ursula, and thanks for running the calculator on that one.

      I checked with PeerStreet on this, and the answer is that the loan was only really in the borrower’s hands for 7 days until they paid it back. It just took another 7 days to get distributed back in to investor accounts.

      For normal loans, this effect of cash tied up between payback and availability would be much smaller because the loans are 12 months or longer. But it’s still worth watching the effect as the experiment goes on.

      Reply
  • John June 8, 2016, 12:39 pm

    When I first read this post, my interest was piqued. As a fan of the Boglehead method of investing, I jumped over to their site to see what they thought.

    Doesn’t look like the members who responded are too crazy about it.

    https://www.bogleheads.org/forum/viewtopic.php?t=190512

    I think I’ll stick with my boring index funds.

    Reply
    • wishicouldsurf January 25, 2017, 1:34 pm

      I agree with your thoughts, John. My only issue is that I don’t feel good about having ALL my investments tied up in index funds (stock and bonds). I learned about the efficient frontier in B school and I don’t try to get too complicated but I think having some of your income earning assets in an alternative investment vehicle like Peer Street just makes sense as it correlates differently to the stock market. I’ve been investing with them for over 18 months and I’m quite happy with my returns and no losses to date.

      Reply
  • Sean June 16, 2016, 10:41 am

    Hey MMM, I’m assuming you saw but Peerstreet just changed the auto-invest options. Would you be willing to share your new settings with the group? Also, why stick to just 1 year loans? Given the transaction time between loans it seems you will lose almost a month of interest each time the loan turns over.

    Reply
    • William July 19, 2016, 4:01 pm

      >> Also, why stick to just 1 year loans?

      Thanks for pointing out the turn-over time on the loans – I hadn’t noticed that.

      After reading this article, I started my own PeerStreet experiment. As a previous commentator noted, the minimum PeerStreet investment is currently $1,000, so to re-invest PeerStreet earnings you can:
      – Add more cash to reach $1k and make a new investment.
      – Wait for your earnings to reach $1k and use them to buy a new investment. This will take awhile for small accounts like mine.
      – Add your earnings to a roll-over from a previous investment into a new investment. This requires a roll-over event and a bit of active management.

      Favoring the last option, I picked a few < 1 year investments in my initial batch of investments so I would have opportunities to reinvest earnings before waiting nearly a year. MMM's account has already started to spread the maturity dates and I expect by year two or three he will have 5 opportunities more-or-less evenly spread across a year to re-invest earnings.

      In summary, shorter term investments increase the number of opportunities to re-invest earnings, but incur additional idle time for your money while the loans turn over. I expect an analysis to determine which is a bigger factor could be done, but my laziness overwhelmed my curiosity at this point.

      PeerStreet Team: if you happen to read this, adding a method to re-invest earnings to the AI tool would be nice. For instance, I currently have $90 in earnings in my account. It would be nice if my next AI investment would be for $1090 (specified investment of $1000 + available earnings). Of course, I can do this manually by adjusting my minimum investment every time I get paid, but I like to be lazy :-).

      Reply
      • Brett September 1, 2016, 4:54 pm

        I’m always pleased to meet someone with both the intellectual curiosity and practical laziness to rival my own. :-)

        Yes, idle cash is best put to work from a modeling perspective, but may not necessarily match your personal needs for that cash.

        The reinvestment idea for smaller amounts through Automated Investing is a great point and something we think makes a lot of sense; basically an Interest Reinvestment Program. LMK if you have other product ideas. This is a good one.

        Reply
        • William October 27, 2016, 8:09 am

          Glad you like the idea. I think of it like automatic dividend reinvestment in a stock holding.

          That was probably my best idea for PeerStreet. For the user’s convenience (i.e. so I can be lazy), it would be nice if PeerStreet reported a metric for account performance like the IRR.

          Reply
  • McD July 31, 2016, 6:20 pm

    This piqued my interest but I was unclear as to the tax implications. I looked up 1099-C but what can I offset these losses against – L/S Term Capital Gains? Interest Income?

    Reply
    • wishicouldsurf November 9, 2016, 7:50 pm

      Interest income. No long or short term capital gains. Your investment is structured as debt rather than equity so you earn only interest income which is taxed at your highest marginal tax rate. Your “investment” is debt principal which earns a stated income rate on the principal amount and that amount can never go up. When a loan pays off and that capital is freed up, you can redeploy it into new loans OR use it to meet personal cash flow needs without capital gains tax implications.

      Reply
    • The Wealthy Accountant November 10, 2016, 9:30 am

      McD, losses from charged off loans are considered short-term capital loss unless you are in the business of writing loans which is then a loss against ordinary income. Most people claim the loss as a capital loss, limited by your capital gains, plus $3,000 federal. Some states, like Wisconsin, only allow an additional $500 per year. If the loss is significant you will need capital gains to benefit from the losses. Review “Bad Debt” rules for more info on how the taxes are handled.

      Reply
      • wishicouldsurf November 15, 2016, 12:20 pm

        The Wealthy Accountant, thank you for that information. So far I’ve been investing in Peer Street for a 16 months and haven’t had any loan losses like you do in a Lending Club account but it’s good to keep in mind the tax treatment for those losses, if and when they happen. At some point, I fully expect there to be some minimal losses but because the loans are collateralized by actual real estate, so I expect that at least a portion of the principal balance will be returned (if I had to make an educated guess, 50%). You also receive some OID income for any “yield bumps” – is that treated differently from a tax perspective than interest income?

        Reply
        • The Wealthy Accountant November 16, 2016, 10:12 am

          Nope. OID will be treated as any other interest in this case. If anyone knows of any OID adjustments situations in these cases, let me know so I can comment.

          Reply
  • Jacky August 19, 2016, 6:41 pm

    I’m very excited about this new class of investment, which sounds pretty low risk (first liens on the property) and very good return. I’m still reading up and trying to get my hands around this. Quick question: great job in keeping the delinquency to zero at the moment! It speaks either to the high-quality of your loans, great lender and loan screening process, great luck in timing to market, or combination of all. Since you’re not a private company, what is your policy in disclosing the delinquency information regularly? Many thanks!

    Reply
    • Brett September 1, 2016, 5:03 pm

      PeerStreet has filed 1 notice of default out of 300+ loans, but that’s being worked out.

      Reply
      • Jacky October 1, 2016, 8:10 pm

        Great! Good to know. Via automatic investment, I’ve made 3 investments already. Looking forward for more and greater investments with PeerStreet down the road. Cheers!
        Oh, one thing, is there a section on your website or a blog that talks about tax implication? Google doesn’t get me there. Thanks!

        Reply
  • Guy M. August 20, 2016, 1:39 pm

    I like the overall investment. Unfortunately, per my follow-up questions with Peer Street Customer Service, they do not offer joint accounts. So, for my wife and I, that is a deal killer until they offer it.

    Reply
  • Russell August 22, 2016, 1:42 pm

    Hi MMM, will you be updating your PeerStreet positions on this page anytime soon?

    Reply
  • BH November 1, 2016, 9:05 am

    MMM:

    I am curious by what you mean by “experiment” in the title of this posting. Does this mean that you ate not sure yet if Peerstreet is a good place to invest money and you need to finish your experiment before investing more money? Would you recommend that readers who also want to participate only invest a very small percentage of their net worth with Peerstreet until the experiment has proven itself? I also have the same question regarding Lending Club “Experiment”. Thanks

    Reply
  • Brian Gibb November 20, 2016, 8:00 am

    I started my own experiment at about the same time. I’ve gradually invested about 20x MMM’s balance. I’ve seen similar trend. 10 or so loans paid off early and the XIRR as a result is much less than I was anticipating. I’ve achieved about 5.7% in the 5 month period. Not bad but not the 8-10% I was anticipating given the loan interest rates. I’ve also seen a couple of loans go into default state. So am waiting to see what happens with those.

    Brian

    Reply
  • Joseph Dunham November 23, 2016, 1:34 pm

    My experience hasn’t been so hot. I had one loan that failed to make its very first payment, it is now in default and foreclosure proceedings are beginning. I have another loan that is 30 days late. PeerStreet doesn’t underwrite these loans as the ‘hard’ money lenders/originators do that. I would avoid loans initiated by Consortium Capital.

    Reply
    • Brian Gibb November 25, 2016, 11:52 am

      Hey, Joseph. Read my post that follows. I also had those 2 loans and now I’ll avoid loans originated by that group and I hope that Peer Street leadership carefully considers their own trust in them.

      I feel for you, man. I was thinking earlier about how it would suck if you got PS eventual first defaults in your first few loans. I guess we’ll see how much we recover as MMM points out below. We also have to keep in mind that even with a reasonably low default rate, assuming each loan is a reasonably low % of portfolio value, that we’re still likely to make an above market average return.

      Reply
  • Brian Gibb November 24, 2016, 1:15 pm

    An important update to my recent post. It appears that Peer Street may about to have it’s first loan defaults. I have 2 properties in my portfolio in Danville, CA (originated by Consortium Equity in August 2016) that Peer Street has started foreclosure process and indicates that they expect to file default paperwork next week. If it happens, it will be telling in terms of recovery process, results, and impact to Peer Street’s ability to attract investors at the same rate. I know many people like myself have been impressed that there had been no defaults to impact returns.

    Reply
    • Mr. Money Mustache November 24, 2016, 1:45 pm

      Thanks for the update Brian!

      Keep us posted – PeerStreet’s first-lien model should mean that you get your money back even in the event of project failures like this, but this is exactly where we find out if this is true. Our experiment is serving its purpose of gathering data.

      Reply
      • Brian Gibb November 29, 2016, 6:50 am

        MMM – I’m happy to provide a positive update on this situation. PS started the notice of default and before recorded, the borrower wired money to bring the two loans current. This is very encouraging to me and provides further evidence that the PS team is seasoned and proactive. I will continue to invest in this experiment now that I’ve seen a loan default resolved successfully. The one thing that I have not researched yet is whether late fees were collected and if so, distributed along with the substantially late payments. This of course also affects the investment’s performance. I’ll continue to provide updates on my own experiment so that we can compare with yours and others in the forum.

        Brian

        Reply
        • Mr. Money Mustache December 1, 2016, 10:56 am

          Excellent, thanks for the update Brian! This is exactly the kind of stuff that makes this website useful – feedback from people with broader experience than myself.

          Reply
          • Varun March 3, 2017, 6:34 pm

            MMM – Peerstreet has filed a Notice of sale on this property (multiple loans). I presume this means once they sell, and assuming they get at least the amount that is loaned out, the principal will be paid back. If they get less than loan amount, then the we’ll lose some of the principal.

            thx
            V

            Reply
        • Ryan January 25, 2017, 3:21 pm

          Boy the more I read these posts about delinquencies and defaults, I am scared for the two loans I’ve invested in – both are currently deliquent and have only received half of the first interest payment on one before they walked away with my $10k!!! WATCH OUT!

          Reply
          • wishicouldsurf January 26, 2017, 9:21 am

            Ryan, I’ve been investing with Peer Street for over 18 months now and so far no defaults. Loans will go late from time to time, but I’ve not had any losses and they have eventually all gotten up to date. Remember these loans are secured by 1st trust deeds on real estate so in the event the deal goes sideways, Peer Street gets to foreclose on the property. Here’s my two cents on the loans you might want to invest in – 1) look for how much cash injection the Borrower has into the deal – if it looks like a good chunk then the Borrower has a lot more to lose if they don’t pay the loan back. 2) Personal credit scores – Not to offend anybody here because I know there are extenuating circumstances, but I’ve always thought as personal credit as a good proxy for character. I only choose investments with 650 or higher personal credit scores. Yes, they can be manipulated and it’s not perfect but it’s just a rule of thumb for me. 3) I don’t have any data to back this up, but I tend to see the lower credit scores correlate with the deals that are “refinances” where there is a smaller cash injection or none at all, so no skin in the game. I wouldn’t say that you should automatically exclude these from what you want to invest in, but if the deal is a refinance with no cash into it with a low credit score, it might be a little riskier. Case in point: recent Apple Valley, CA refinance transaction – https://www.peerstreet.com/loans/1570361244?ref=table .

            Reply
            • Ryan February 9, 2017, 1:12 pm

              wishicouldsurf I really appreciate the response and advice. However both of the two loans I invested in are now delinquent – one over 30 days! Of the $10k I invested, I’ve seen one partial payment for $29.00! I must be some rare exception as both borrowers defaulted almost immediately.

              Reply
              • wishicouldsurf February 14, 2017, 4:35 pm

                Ryan, I’ve been investing pretty heavily in Peer Street since August 2015 now and have a bunch of different loans of different sizes but as I reinvest funds, I’m setting the amount about $2,000 and things are starting to diversify. I’ve had a really good experience so far but I did invest in 3 different Houston loans from the same Borrower that are all more than 30 days past due! I was excited to put some money in a different geography. It’s scary when that happens but over the past 19 months, I’ve had stuff go past due, a guarantor pass away, and some pay off early but that’s kind of the nature of the beast with these transactions. They are called “hard money loans” for a reason. I’m curious to see what will happen with these Houston loans and when I dig into the details on those ones again, I noticed that I seem to have ignored my own rules about “skin in the game” that I had set for my Peer Street investing – I was enamored with the 10% rate and the out of California geography and ignored that these loans when the junior lien is included in the amounts were above the loan to value I like to see. I still like the investment platform but I would definitely beware of loans originated by Noble Capital out of Texas. I hope your loans pay off. I’ve had 42 loans since I started pay off and received the cash flow stream of payments from them and another 50 or so current active investments. I did my own little spreadsheet on the actual returns based on the days invested and I’m running upwards of 8% right now on them as a whole.

    • JM November 28, 2016, 9:20 am

      Will be interesting to see how PeerStreet deals with this. I am a bit perplexed as to why they have not updated the “status” in the “Active Investments” view. Seems odd they just keep those Danville, CA loans there acting like all is well and not note them with some kind of indicator of non-performance. Seems like they should be clearly marked as another status of some kind so investors can fully get a grasp that not everything is performing in the world of PeerStreet. Further, it seems like they should be updating the originator(s) profile to include non-performing stats in addition to the current stats of, Available Loans, Performing Loans and Paid off Loans. Again, will be curious to see how this plays out, but not to impressed that I have two different loans in non-performing status within their first month of closing.

      Reply
    • Debbie November 30, 2016, 5:39 am

      Hi,
      Sorry to hear about your investments. I am also invested in peer street. This originator of theses Danville loans appears to have many loans on their site. And asJM notes in his comment the Danville loans appear to be making payments as expected. Have they resolved the situation for you? Hope it all goes well and you get your cash as promised.

      Reply
  • Amanda November 29, 2016, 2:09 pm

    When I invested in Peer Street, I took a little comfort in knowing they had never had a default…..I figured “what are the odds that one of my investments would be the first default”. But a week ago Peer Street starting filing the foreclosure paperwork on one of investments. HOWEVER, a few days later I received payment and notice that the borrower had wired funds and brought the loan current….so yippee! let’s hope the borrower can continue to pay. I hope the rest of you have good luck with your investments as well.

    Reply
  • dennis johnson December 2, 2016, 10:18 am

    I have been investing for several months and currently diversified across roughly 30 loans. I have a different one starting the default process and will update what happens and how much is eventually returned. Been very interested in seeing what exactly happens with a default and how much in principal it will eventually cost. The loan is “cleveland heights, oh”

    Reply
  • Jon December 14, 2016, 12:52 pm

    This is an interesting alternative investment category. I’m currently investing a small portion of my portfolio in Prosper, which offers much higher interest rates with the obvious caveat that the loans are non-recourse (MMM already has a running experiment for the P2P loans, although I forget if it’s Prosper or Lending Club).

    For PeerStreet-type investments, I wonder if it makes sense to just buy a REIT with a high dividend yield for the better tax treatment of earnings (assuming the investor is in a high tax bracket), and liquidity? The overall returns of PS seem moderate enough that I would consider a high-return REIT as an alternative. I suppose time will tell how risky PS is (i.e., how effectively they recover on defaulted loans). If they are very effective, I would think the low-risk would outweigh the tax benefits of a REIT, and the REIT’s potential for very high volatility. Looking forward to MMM’s continued updates on this “experiment.”

    Reply
    • Jon December 14, 2016, 12:54 pm

      *REITs also obviously provide much greater diversification, which is an obvious benefit over PS–even if you spread out over several different loans. I’m not trying to criticize P2P real estate investing–just considering whether the benefits outweigh the other more mainstream investment options.

      Reply
      • Jon December 14, 2016, 1:19 pm

        Re-thinking this a bit, the tax benefits of REITs are probably pretty insignificant, as most of the disbursements are taxed as ordinary income (like interest), and only a portion would be taxed at the capital gains rate (or deferred until sale, if for instance the disbursement came from depreciation). Still, for diversification, liquidity, and potential for capital appreciation, REITs are attractive if you want to get into the real estate sector.

        I promise this will be my last reply to myself ha

        Reply
        • wishicouldsurf January 25, 2017, 1:46 pm

          Jon! I have a reply. :) In my experience with REITS, I could never dig into the granular details of each property – like the credit scores of the Borrowers, the loan to value, the amount of cash invested in the deal, etc. I like this better because of those details. I can cancel investments I don’t like in that 24 hour window (for whatever reason) and I can diversify over geographic areas. Also, when the loan is repaid, the principal is returned to my account and there is NO taxable event when that happens. I can take that money out and put it elsewhere, use it for spending money, or invest in another peer street loan. I love the flexibility of it. I have been doing this since the summer of 2015 and at this point, my Peer Street account is like a CD ladder except earning MUCH higher rates of returns than CDs, albeit with more risk. But I think I am managing the risk by the transparent nature of the transaction.

          Reply
  • Winston December 15, 2016, 1:26 pm

    It appears your are only receiving interest each payment period. Why? I would expect a portion of the principal to be repaid monthly, allowing one to reinvest more quickly than waiting for the loan to mature. This essentially defeats compound interest.

    Reply
    • wishicouldsurf January 25, 2017, 1:41 pm

      Winston, if you look at most of the loans, the repayment terms are interest only and the principal is due and payable at maturity. That’s why none of the principal gets repaid on a monthly basis. That is a common feature in short term bridge type loans on real estate. The Peer Street loan is a placeholder, if you will, while the property is being rehabbed to be sold or perhaps even to establish a rental history so that it can be rented out long term. The expected repayment for these loans is through long term permanent financing either through the sale or a refinance once a rental history is established.

      Reply
  • JM December 23, 2016, 8:30 am

    As an update to my Nov. 28 post and Amanda’s Nov. 29 post, the loan Danville, CA loan(s) never really became current based on the Dec. 22 update provided by PS:

    “The payment described in the November 28, 2016 notification did not clear. However, PeerStreet will not remove your share of such payment from your account. Because the payment did not clear, PeerStreet has directed its agent to proceed with the foreclosure process and the Notice of Default was recorded on December 15, 2016.

    Not sure why the long delay in letting know investors 1) the payment failed and 2) that NOD was filed over a week ago. Guess they did not want the holiday present to be given early to investors?

    With the Danville, CA staying essentially in default and the addition of another Consortium Equity originated loan, Big Bear Lake, CA, (seeing a trend here?) that brings two properties currently behind on the loans in less than one quarter’s time originated by the same lender, who is still being used to offer new investments (Carson, CA) and no indicator on the “About” page that they have some loans that are not performing. I wonder what PS policy is at to the criteria to stop using “poor performing” originators? I am not suggesting I expected the originators behind these two loans are needing to be “booted” but again, I think more transparency would be helpful instead of the generic statement on the site currently. When does track records within the PS space carry more weighting for an originator than their prior history that got them into the PS circle to begin with?

    “We also carefully vet originators and allow only experienced private lenders with great industry track records on to the platform.”

    Really beginning to wonder about the long-term viability and suitability of PS. They clearly have made efforts to offer more loans to invest in (due to recent funding raise and associated performance expectations that come with that funding), but they appear to me to be mostly concentrated in CA now and continue to be doing a disservice to investors by not being truly transparent to investors/potential investors about performance/status of loans. This limits the appeal/ability of being able to try to build a diverse geographical portfolio of loans via the platform. Lastly, the “Active Investments” still do not provide any indicator of a loan’s current status, which again I think is a bit misleading for current/potential investors trying to gauge actual performance of PS, maybe some of that Series A funding that continues to splashed about in media form/outlet can be spend making some of these enhancements?

    Again, still early in my go with PS and willing to give them the chance to prove their mettle if/when an actual foreclosure does materialize and see how well their reliance on appraisals/LTV/skills in recovery are.

    Reply
  • Rel3 January 23, 2017, 6:44 pm

    I have been an investor since May ’16. So far have had several loans fall behind and am invested in same OH loan Dennis noted. It is approx 5 monts behind and foreclosure process started but I saw a recent update that properties could be sold soon to satisfy loan.

    I agree with other posts it would be very helpful to ser detailed performance data on all loans and not just updates on loans you are invested in

    Reply
  • Rel3 January 23, 2017, 7:10 pm

    I read thru Danville, Big Bear Lake and Carson

    Odd how all 3 had purchase values well below the recent appraisals – seems like it could be a red flag.

    Reply
  • Ryan January 25, 2017, 12:51 pm

    You’d be wise to be careful with this company. MM won’t tell you this because he’s in bed with them.

    I’ve now placed two investments with them for several thousand – Nov 2016 and Jan 2017. Both are already delinquent after first partial interest payment. They don’t tell you about this upfront but when I inquired after the fact the response I got was “oh yeah, late payment and delinquencies are common.” WATCH OUT~!

    Reply
    • Mr. Money Mustache January 25, 2017, 2:58 pm

      Ryan, you are mistaken – I have no financial or other business relationship with Peerstreet.

      Also, if I understand correctly, late payments happen occasionally but they have never lost investor money on any investment: a property of the first-lienholder structure of their loans, which is the whole reason the company is interesting.

      Reply
      • Ryan January 25, 2017, 3:29 pm

        B.S. – they have lost investor’s money and interest. I can see more than one foreclosure they have going in 2017, alone. And although they may have recovered principal, many of investor have lost out on months of interest payments while there money is locked up with some deadbeat borrower, so please don’t misrepresent the true fact that they loans are extremely risky.

        Reply
        • wishicouldsurf January 26, 2017, 9:39 am

          Ryan, no foreclosures in 2016 according the a recent Peer Street email. I think that it’s healthy to have some skepticism, but I’m curious about how much interest you are talking about that’s “locked up”. If I have $2,000 invested at 7%, I’m only earning $11.67/month and if that takes a couple of months to get that money, it’s not going to break the bank. The principal amounts don’t get repaid until the loan pays off. Having the collateral of the real estate makes me comfortable.

          Reply
  • Brandon February 2, 2017, 7:57 am

    Have you done any research into how non-accredited investors can get into this space. I recently looked into groundfloor because they operate in my state and as my own experiment discovered a couple of things that I really liked. I had incredibly small investment of only 120 dollars. I found out they have first liens on all loans similar to other sites like patches of land. But I also discovered that they charge borrowers 3 months interest even if they pay the loan off in under 1 month. This happened with my 120 dollars and I earned 3.75 dollars in interest in less than a month. I would love to find a site that shows comparisons of real estate crowdfunding on individual properties for non-accredited investors. As for me I will not be focusing a lot of effort in this area as I am still working on maxing my IRA on top of my 401k. But once I hit that sweet 25k saved a year (Yes I know not very mustachian of me) I’ll be looking for good options for my taxable money.

    Reply
  • Yasmeen Ritata February 7, 2017, 8:44 am

    Hey MMM – can you do a quick update post on HOW you are investing in PeerStreet? Are you still doing the Automatic investing from your original post, or have you switched strategies on that? (And if you are doing Automatic Investing, can you share your overall returns? Maybe via an update post so we don’t have to scroll through a million comments?)

    If you are selecting your own loans, a super quick tutorial on what factors you are using to help guide those choices would be amazing. We’re just jumping into PeerStreet for the first time and would love some high level advice.

    Reply
  • Brian Gibb February 11, 2017, 3:59 pm

    There seems to be a lot of interest in this investment because of the advertised high return rates and the recent foreclosure. I am an accredited and experienced P2P investor with a 6-digit stake in Peer Street. I’ve also been concerned (posts earlier in thread) because of the first foreclosure and so I’ve researched more closely. Here’s my take that will hopefully help others a bit. I started my portfolio in May 2016 as an “experiment” as MMM was doing. I’ve used automated investing. My XIRR calculated return as of this post is sitting right at 7%. This is appreciably lower than the weighted average rate of my notes which is 8.67%. I’ve determined the primary cause to be that many loans are either paid late or are paid off early. Overall, I’m satisfied with the 7% as long as it holds because it’s comparable to my long term Lending Club rates and PS provides a level of diversification into real estate with little effort. I am a bit concerned that PS may have been pressured to take on more risky or less vetted loans to satisfy the overwhelming demand that I see when a new higher rate note is available. You basically have to be in a lottery to secure those at this point. I’m also a bit unhappy with the way that the PS site conveys certain information, especially the status of an loan. You have to read the detailed comments and from the general dashboard everything appears solid. I inquired with PS folks and they are working on this type of status for a future platform release. Regarding, defaults, foreclosure and recovery, I think it’s good in some ways that we’re experiencing a few. The PS folks tout significant vetting by a very experienced team as well as the first-lien advantage. I’m optimistic at this point as I’ve noticed they are in negotations on one of the Danville properties with the originator to bring the note current. So it may not go into foreclosure at all. So net for me is this. You shouldn’t invest in P2P lending if you don’t understand or can’t accept that there are risks. This investment is no different but I consider it to be more secure and less effort than other options. I think it’s probably good that these type of alternative, hedge-fund like assets are only available to accredited investors who typically have more investing experience and discretionary money to take risks with. I will provide another update toward the end of the quarter but for now, I’m staying with PS but paring my investment back by about 20%. I am curious to see if others do the same and if the inbound investment levels decrease or not.

    Reply
    • RazorStubble February 13, 2017, 1:07 pm

      I agree with your comments, and I’ll throw my 2 cents in. I have a little over 100k at PeerStreet (started in Oct. 2016) and it seems almost impossible, or at least unlikely, to get into many loans currently. Anything over 8% fills up pretty much instantly and you don’t get in frequently. I’m not keen on getting less than 7% – 7.5% or so. There is usually no time to look before you buy, but you can always cancel your automated orders if you decide against an automated loan. It didn’t used to be like this, so either there are more investors or investors are buying larger chunks of loans, or robo-investors, non-accredited investors, or something? Victims of their own success?

      I wouldn’t transfer too much there at once, keep it earning 1% at Ally or wherever and move it in smaller chunks. PeerStreet does let you start investing right away when you transfer funds, so that is pretty cool. But don’t think you’re going to get 100k earning 10%+ or more invested in 40 or 50 loans in a week or two. But I would say overall the future is bright with PeerStreet as a platform and industry, and the staff are very helpful. They have room to grow, hopefully they will keep up the good work and grow into other markets, as long as they keep their standards high!

      Reply
    • wishicouldsurf February 14, 2017, 4:54 pm

      I agree with both Brian and RazorStubble’s comments. I’ve been a PS investor since August 2015 and while there are some limitations with the platform, I still like it and like the returns…I’m guessing operationally managing how this all works is a bit of a bear which is why I’ve been tracking my returns pretty closely to see how I was doing. I expected there to be issues with payments going late and the nature of the transactions. I am earning upwards of 8% on the spreadsheet I put together which counts the actual days invested. I don’t really like that PS doesn’t give us the actual rate of return on their dashboard but I can do the math myself. I’ve had 42 loans pay off so far and have over 50 still invested. I am planning on continuing to reinvest all the principal amounts that pay off and the interest payments I’m receiving for the time being, though I feel like there isn’t enough volume to meet the demand and I’m hoping that credit quality doesn’t deteriorate. If I have a few loans pay off at once, I do move the money out of PS into a different account because it does take time for that cash to reinvest. What I’m liking about this and what I expected, is the actual mechanics of how this all works. To me, it’s sort of like a CD ladder (except much higher rates of return). Now that I have my PS investments staggered over different time frames, it seems that 2-3 loans pay off every month. I’m about to retire from full time work and live off these passive income streams and to me, the mechanics of something like Peer Street is attractive because I can use that principal, if I so choose, to meet my monthly spend requirements without incurring a capital gain. To me, it creates more flexibility.

      Reply
  • Kelly February 17, 2017, 6:07 am

    MMM,

    I have been using Peer Street for about a now now. I have positions in 8 investment sites, and of those 7 are past due.
    Now that you have had longer term investing, are you seeing the same issues with borrowers getting payments in?

    Cheers,
    Kelly

    Reply
    • Dave April 3, 2017, 11:26 am

      Kelly, any updates to your loans?
      Thanks

      Reply
  • DownHomeDave February 18, 2017, 7:40 am

    I have several positions in Peer Street, but am slowly cashing out. It also bothers me that when you search active loans, they don’t list the ones that are not current.
    I have several that aren’t current, but none has actually gone into default. But when the late ones become current, I don’t think you are paid additional interest (e.g., a September payment that finally gets booked in February) or share in any of the late fees.
    As a high income investor, it also bothers me that all income from the site will be taxed at ordinary income (39.6%), but if I write off losses, they will probably be >1 year old, thus long-term capital losses only worth 20%.
    I invested in prosper.com in 2007 and 2008, and a whole lot of my loans from creditors assigned “A” risk went into default, so I was a net loser in prosper. But after the lawsuits against prosper, I receive a small pittance from time to time.
    With the incomplete information on their website, I believe Peer Street will also be the loser of class action lawsuits in the years to come.

    Reply
  • Jackie Lees February 26, 2017, 12:36 pm

    what are the tax liabilities of this investment? Do you you need to file in each state invested in?

    Reply
    • wishicouldsurf April 10, 2017, 7:04 pm

      You just get a 1099 showing your interest… You are taxed on your interest income at your highest personal marginal tax rate. No capital gains though.

      Reply
  • RazorStubble March 7, 2017, 1:18 pm

    Well I guess this might explain (some of) the lack of availability of upper percentage loans and loans filling up so fast (and doesn’t bode well for small investors going forward)? Had to happen eventually I guess. I don’t know what they charge for fees, but apparently if you don’t make 9% it’s free. The diversity might make it worth it though, less of a chore, multiple platforms, etc.

    “On February 29th, the AlphaFlow Exchange went live, giving investors a single site from which they can evaluate opportunities from many of the industry’s leading platforms like PeerStreet and LendingHome.”

    https://www.crowdfundinsider.com/2016/03/82593-alphaflow-wants-to-be-the-etrade-of-p2p-real-estate-investing/

    Reply
  • Dave April 3, 2017, 11:07 am

    Update from PeerStreet about their one foreclosure (Venice Beach):
    “Yes, the Venice property was paid in full last week. We were able to recover all principal balances as well as pay some accrued interest over the time period.”
    http://www.peerstreet.com/join?ref=hadmf6

    Reply
    • Dave May 26, 2017, 3:00 pm

      I have had good luck at PS. Eleven investments so far, average APR slightly above 9.25%, my max LTV is 70%.

      Reply
  • Lucas Jackson May 1, 2017, 6:04 pm

    Is there a way to tell if a current investment is delinquent if you’re not investing in it? I’m in 16 positions and 2 are not current with payments. It would be good for us to pool the info on our properties that are behind so we can determine what factors they have in common (and avoid those next time around). I like the auto-investing feature, but I’m guessing that there are some warning signs that we should all avoid (like 0% skin in the game by the investing financial firm). If I set up a Google Sheet for people to help enter info into, would folks be up for entering that info so we can supplement what it shown on the Peerstreet site with what we can see as investors?

    Reply
    • Dave May 3, 2017, 3:25 pm

      If / when I have any problems I would be glad to contribute my data. When you say 2 are not current, how late are they?

      Reply
    • Jill May 19, 2017, 3:54 pm

      Peer Street does not appear to have any public view of delinquent loans – they don’t even make it easy for a current investor to see it. In my opinion this detracts from their appeal – I don’t plan to reinvest in this platfor.

      A Google Sheet (with high SEO) is a great idea.

      I am currently invested in 3 loans (1 delinquent) and other than proactively checking the transaction history, I would never know. All my loans are due to pay off by November 2017. My delinquent loan was due to mature on 5/1/2017 (18 days ago). The last payment I received was 3/15/2017 (for interest 2/1 to 2/28). I had contacted Peer Street back in April to inquire about the missing payment for March interest – and specifically request that they post a comment to the loan so that ALL investors could view. Peer Street did not comply – they sent me an individual note back only. So, now I’m awaiting 2 months interest plus pay-off.

      Reply
    • Lisa July 6, 2017, 2:48 pm

      Lucas, Did you ever set up the Google Sheet – if so I’d be interested. I only have 1 loan with PS, and unfortunately it is now delinquent. Although I think the loan/property quality is good, I think their site is lacking in the fact that even existing investors cannot see that the loan is delinquent and there is no communication as to the intended course of action. I did speak with PS (very responsive) and I’d agree with others who thought they approach seems a little relaxed. Sounds to me like they won’t do much until a loan is 60 days in arrears, and then they will address with the original underwriters (outside 3rd party). I’m unclear if they have an in-house workout department. I’m waiting before making any other investments here. From the comments here it does sound like their delinquency rates are creeping up, even if foreclosures remain minimal. Although it does seem like they have strong underwriting criteria and I like that they stick with LTV not ARV.

      Mr. MM – this is my first comment – just a shout out on your site – its always a great read!

      Reply
  • el jefe May 2, 2017, 10:33 am

    yes, that’s a good idea Lucas. Another PS investor with a mid 6 figure PS portfolio.. Palm Springs, Ca refinance (series 1) . Note matured march 1 Notice of default just filed at the end of April. PS attitude seems to be very laid back and casual from the blog response I received. i.e. Property is for sale. Meanwhile, borrower has been unresponsive for two months.

    Reply
    • el jefe May 2, 2017, 10:56 am

      Just to add, according to realtor.com and Zillow the house is not on the market for sale. Realtor suggests it worth $1.5mm, which is not good considering the PS loan is $1.8mm. I think we are looking at a foreclosure and principal lost on this one..

      Reply
      • Dave May 4, 2017, 6:53 pm

        el jefe,
        What was the credit score on the Palm Springs borrower?

        Reply
        • El jefe May 7, 2017, 1:40 pm

          650 – 699

          Described as the credit score for the managing member of the borrower, Colorado LLC.

          Reply
  • Half Empty May 9, 2017, 11:43 am

    I prefer not lending on refinances where the borrower is basically cashing out. Much better chance with loans for initial property acquisition and repair.

    Reply
  • Mike May 12, 2017, 1:14 pm

    I would suggest everyone stay away from this kind of investing. I have 3 investments that now have default notices served and one that is pending a 3 month extension for 3 months now with the only update being they are waiting for the borrower to sign. PS is very slow to act and provide updates to investors. When they do provide a update it is usually less than 5 words. They should summarize what the next actions will be.

    Reply
    • Mr. Money Mustache May 13, 2017, 7:16 pm

      Mike – not to diminish your concerns or anything, but what if you totally ignored the day-to-day of the loan management and checked in on more of a quarterly or semi-annual basis? I personally really only want to know if a loan is dead with no chance of recovery. So far, this has been incredibly rare or nonexistent at Peerstreet.

      Reply
      • Mike July 31, 2017, 12:19 pm

        Peerstreet is almost at the point of being a complete disaster. I now have 6 out of 10 properties having default notices served, I suggest everyone stay as far away as possible from this as possible. Mr MM I suggest you update your review or atleast ask peerstreet to send actual performance data . PS makes lendingclub look amazing right now. that’s how bad it is.

        Reply
  • Virg June 5, 2017, 6:51 am

    I have personal experience I can share. I invested over the last 15 months or so about $100K, spread out in chunks of $10k or less. Two points I would make: Don’t be fooled into thinking that if your average “return” is say, 9%, that you will actually get that. While the actual default rate on PS is low, the non-payment rate is higher than I expected. I have one in default now, and another hasn’t payed for months. All expected in this type of investing. What has been interesting, however, is how many loans are paid off early (I’ve had several that were 12 or 18 month loans paid back in 1-2 months) which means your cash has to churn through the investment process again, taking a month or two to start drawing interest again. Again, just part of the process. My average “real” return has been in the neighborhood of 6%. Nothing to get really excited over. I have also been investing in litigation finance over at YeildStreet. A different beast, with it’s own risks and event based payment scheme, but the real returns have been much better.

    Reply
  • Stay Calm June 28, 2017, 11:55 am

    I enjoyed reading the multiple perspective people here have on PS. I just invested in 2 yesterday($15K total) so I’ll see how all this pans out. For now at least I’m sticking to scores > 700 and term <= 12 mos. Overall given the speed at which these fill out I do fear that we're in a debt bubble. And I say this with the perspective of being in the mortgage business since 2001.

    Reply
  • Matt Brand August 26, 2017, 7:29 pm

    I love this asset class, especially right now with both Shiller’s CAPE and the Buffett Yardstick at historic heights. And with Bogle’s current Expected gross returns of 4% for 100% stock portfolios over the next 10+ years. Here’s an article with some high level understanding and perspective on the hard money asset class. It really stresses the wisdom of seeking low LTV’s of 50-70%. With an LTV of 70% if the property drops 30% you’re still whole. If the stock market drops 30% you’re down 30%. Here’s an interesting excerpt:

    “So what I‘m doing instead is investing in hard-money loan funds that can cherry pick lower LTV loans because they originate them. You can find plenty of moderate 65% to 70% max LTV funds (including Broadmark and Arixa). And there are even a few rare funds (like Lone Oak) with conservative 50% to 60% max LTV. I don’t think it’s coincidence that in 14 years, Lone Oak has never lost principal on a foreclosure and always made a positive return for investors on top of it… even through the Great Recession.”

    https://www.therealestatecrowdfundingreview.com/hard-money-loan-roulette-2

    Reply
  • Sean Benderly September 18, 2017, 3:40 pm

    I have been investing with peerstreet since around the time MMM got in (thank to his article). Out of 15 or so investments, I have 1 that has been in the foreclosure process for a almost a year now and I have another that just entered foreclosure. I also have one that is 90 days late, but no mention of foreclosure yet. I am curious what percent I get back from the foreclosures, but either way I’m out. They claim to have only 3 foreclosures ever but I don’t see how that is possible given I am 2 for 15. It feels like they have grown so fast that they potentially aren’t vetting their deals as well. Just my thoughts – I’m curious if MMM is still in?

    Reply

Have a Comment?

connect

welcome new readers

Take a look around. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.

For more casual sampling, have a look at this complete list of all posts since the beginning of time. Go ahead and click on any titles that intrigue you, and I hope to see you around here more often.

Love, Mr. Money Mustache

latest tweets