This tracks the results of the investment and keep up with news on the company and its industry.
Final Update: I ran this experiment from 2016 through 2018, and it was a moderate success. Most loans paid out at the expected rate of interest, and one of them failed ($1k, which was about 8% of my portfolio at that time). This gave me a chance to see how the foreclosure/reclamation process went for PeerStreet. It was very slow – it’s still in process after over two years and made me very glad I’m not in this line of business myself! But my overall returns were still positive and it didn’t cause me any personal stress.
If this can happen even in my small sample size of loans, and even in a booming economy and housing market, I figured there would be more foreclosures whenever the next crash hits. Foreclosures don’t mean you lose all your investment, but the clunky nature of our legal system and property ownership rules means they cause a very long delay where your money may not be earning any interest for you.
So I decided to disable automatic reinvestment and pull the rest of my money out. It’s all back in normal index funds now.
Since the purpose of experiments is to learn something, I still consider it a success – and thanks for following along.
Since starting this account in 2016, there has been a bit of interesting action. Twelve loans have been paid off, many of them ahead of schedule. While this sounds good, it’s not necessarily a great thing for investors because you presumably wanted to keep collecting interest instead of waiting for that money to be invested elsewhere.
On the positive side, it does make your account a bit more liquid than it would otherwise be – easier to pull out money if you ever need it, if you simply disable automatic reinvestments.
Right now, the money has automatically deployed across five properties, and the account value of $11,652 means that we have made about 16.5% over 23 months.
Although accounts occasionally go into late payment mode, the deed-secured model of these loans should make it much harder for the money to truly go missing in the long run (unlike Lending Club where my defaults have more than eaten up all my interest payments for the past two years!)
With PeerStreet, the late payers have always caught up. So, let the experiment continue!
I set my account to “automatic investing” mode, with the following 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: