PeerStreet, designed to function as an E-Trade for the real estate industry, allows investors to establish a portfolio of their choosing using real estate-backed securities. In the past, the level of investments offered via PeerStreet was only available to a select few. Now the public can take full advantage of the investment opportunities available via PeerStreet.
The company serves as an intermediary between lenders and members, who have the option of investing as little as $1,000 in the platform's deals. Once a loan is filled, it is then purchased from lenders, with investors receiving payments via annualized interest rates on a monthly basis.
Filling a Niche in the Investment Sector
One of the reasons that the loans now available on PeerStreet were once limited to only a small class of investors is the fact that such loans typically require a massive amount of upfront capital. As a result, investors interested in such deals would need to pony up hundreds of thousands of dollars simply to participate in the investment projects. Making matters even more complicated is the fact that investors would also need to have the right connections to even gain access to such deals. In this regard, PeerStreet is filling a distinct need within the investment community.
In order to participate in deals on PeerStreet, members must be accredited investors. Participating members receive an alert whenever a new loan is made available. Web and mobile tools are made available to help members in evaluating prospective deals. Furthermore, members are able to take advantage of the opportunity to reinvest funds when they are paid back. PeerStreet also offers the opportunity to view photos of properties that are currently available for investment.
For the last year, deals on PeerStreet have been available on an invitation-only basis. To date, PeerStreet has collected several hundred members. Now that the platform is available to the public, prospective members are able to leverage technology in order to invest in loans in a much more direct and transparent manner. Additionally, PeerStreet offers far greater control over investments.
Reducing Risk for Investments on PeerStreet
In order to reduce potential risk, PeerStreet utilizes multiple data-driven algorithms. Those algorithms are used for stress testing loans against historic downturns. In the event such tests show the loan would not be viable in such circumstances, it is removed from consideration. Should an investment go badly, investors can still enjoy peace of mind in knowing that properties can be claimed and then sold in order to recover investments. To date, there has never been a need for this to take place on the platform.
With $6.1 million in seed financing, PeerStreet certainly has the power behind it to fuel growth. Backers of the startup include Rembrandt Venture Partners and Felicis Ventures. As peer-to-peer lending becomes more popular, platforms such as PeerStreet are granting both developers and investors greater flexibility in terms of borrowing funds and locating quality investment opportunities.