Is PeerStreet Legitimate or Scam? PeerStreet Better Business Bureau Complaints. Are PeerStreet Loans Safe and Insured?



Overview of PeerStreet


A new investment opportunity is gaining traction, but it doesn’t offer stocks or bonds. PeerStreet provides peer-to-peer loans on real estate. Instead of investing in securities or bank products that pay 1% or 6%, at PeerStreet you can provide a real estate loan at 7% or higher. Some investors may have some questions and concerns about this financial company, which we will now try to address.


Is PeerStreet Safe and Legitimate? Is it a Scam?


PeerStreet is not a broker-dealer, so it is not a member of any securities regulatory body. It was founded in 2013 as a corporation, and there is no reason to believe it is a scam. It is a legitimate business that provides loans to real estate buyers. The company earns a profit by taking up to 1% of a loan’s interest rate, while the lender takes the rest.

PeerStreet is licensed as a real estate broker in the state of California. Its license number is 01984664, and this can be verified at dre.ca.gov. The corporation’s license is valid through June of 2019, and it currently has no disciplinary actions. The designated officer of the company is Jason Robert Harris, who is a licensed real estate broker in the state of California. His license page shows no disciplinary actions, either.

The real estate company also has a financial lenders license with the state of California. It is 60DBO-45398, which can be verified on dbo.ca.gov. The license information page shows no enforcement actions since the license was granted in 2015.

PeerStreet’s employees have on average 13 years of experience in the real estate industry. They also have legal and compliance experts who ensure the company’s business practices meet or exceed ethical standards.

Based on the company’s government-issued certificates and on-line reviews, it is safe to conclude that PeerStreet is a legitimate business.


See Their Rates


Historical APRs Between 7% - 12%


Is PeerStreet Insured?


The PeerStreet business model is based on mortgage-dependent promissory notes. Investors purchase these notes, which carry interest payments. It is these interest payments that make the investment worthwhile. There is no insurance, government or private, on these notes. The company states on its website, “The Notes are not guaranteed or insured by any governmental agency or instrumentality, any third party or by PeerStreet.” The notes are not considered securities, which means that America’s securities regulators have no jurisdiction over them.

The lack of insurance does not necessarily mean that the notes wouldn’t be good investments. Stocks and bonds themselves have no guaranteed value.

Funds that are transferred to PeerStreet are held by City National Bank until they are used to purchase a note. During this time, the funds are protected by the FDIC, through City National Bank, up to $250,000.


How Does PeerStreet Make Money?


Every loan on the PeerStreet platform has a servicing fee. This is a spread between the interest rate the borrower pays and the rate the lender receives. The company usually charges between 25 and 100 basis points. The exact fee is disclosed in each loan.


PeerStreet Loans


Loans on the PeerStreet platform are secured with liens. This ensures property can be sold in the case a borrower defaults. So a house or other property serves as collateral. A typical loan through PeerStreet is only 6 to 24 months, which further decreases risk.

The company also ensures that loan-to-value ratios are below 75%. This figure is calculated by dividing the loan amount by the fair market value of the property. For example, if a loan is for $150,000, and the fair market value is $200,000, the LTV would be 75%.


Risks of Investing Through PeerStreet


Like any other real estate loan, or any other loan at all for that matter, there is a risk of default. PeerStreet tries to mitigate this risk by running thorough due diligence on its loan partners and the loans that appear on its site. The company runs background checks on origination partners, reviews their track records and licenses, and goes through other compliance checks.

PeerStreet does an independent underwriting of all its loans. It does this by using manual processes combined with data analytics. The company has an in-house team that ensures every loan complies with the company’s underwriting standards.


PeerStreet v. Other Real Estate Investments


PeerStreet’s business model is very different than a REIT. When you purchase a REIT, you invest in a security that is a basket of properties. Because there are many properties in the portfolio, the REIT is diversified. Since a REIT is a security, it is also tightly regulated by several securities agencies, including FINRA, SIPC, and state or federal regulators.

A REIT also tends to be highly liquid as it can be traded whenever the U.S. stock market is open. It is fairly easy to find a buyer if you decide it’s time to sell. Also, before you have time to make a decision on a particular borrower, the loan may already be taken. Whereas with a REIT, shares are always available. A lot of third-party information is also available on REIT’s, which makes finding information on them quick and easy.

The notes that PeerStreet sells don’t have as much information publicly available on them. They are not long-term investments, either, with most of them expiring in less than 2 years.

On the other hand, PeerStreet tries to keep loan returns between six and twelve percent ( Historical APRs Between 7% - 12% ), which is higher than many alternative investments can deliver. For example, Fidelity’s REIT mutual fund, FRIFX, has returned 7.64% annually over a ten-year period. Boston Properties, a US-listed REIT, went up just 0.74% in 2016.


Is PeerStreet Safe Summary


PeerStreet is a new P2P lending site that links real estate borrowers with lenders. While it is a legitimate business with significant return potential, there are notable investment risks.


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Updated on 8/7/2017.



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