Investors now have a new avenue to get access to real estate debt. The co-founders of PeerStreet Brett Crosby, Alex Perelman and Brew Johnson have tea
Investors now have a new avenue to get access to real estate debt. The co-founders of PeerStreet Brett Crosby, Alex Perelman and Brew Johnson have teamed up with investors like Dr. Michael Burry. Dr. Burry doesn’t need any introduction as he was the one who was portrayed by Christian Bale in The Big Short.
Making the loan by oneself or investing alongside investors has been the historical way of getting exposure to real estate debt. It is very much possible that investors were placing their entire money in a single investment if the loan was for $250,000.l
Thanks to PeerStreet, investors can now have their minimum exposure lowered to $1,000 per loan. PeerStreet, does not stop just at lowering the minimum exposure but goes beyond by underwriting due diligence on all the loans before exposing its customers to a new investment opportunity.
However, we have two problems here that need to be addressed before moving ahead. The first one is that investors who are not very serious about investment fail to understand the difference between the real estate ETF (Exchange Traded-Fund) and real estate debt. PeerStreet approaches this problem by way of offering an automated portfolio builder that can invest money in loans thereby encouraging diversification.
The second problem is the investor guidelines set by SEC (Securities and Exchange Commission) that set a benchmark for prospective Wall Street investors. The guideline states that alternative asset classes should have a yearly income of $200,000 or should have a net worth of million dollar.
In the last month, even after exclusion of significant investor population, the platform touched $11 million in investments. So far, the investment is $75 million. Brett and Brew are taking extra care of new users as investors were rattled and are in the lookout for safer alternative investments because of the recent events that occurred at Lending Club where the CEO has resigned.
PeerStreet makes money by collecting 1 percent off investor’s interest payment. The rest 99 percent of the amount is available to investor through their FDIC insured accounts at City National Bank. All the loans that PeerStreet underwrites will have backing from real estate for collateral. PeerStreet has good network of local lenders and it has strong belief about the value proposition that local loans can bring to the tables. Investors at PeerStreet can feel safe about their money as it is financing businesses buying properties to rehabilitate people. Even if there is going to be a foreclosure, it will affect the speculative real estate investor but it does not displace families.
Brett and Brew believe that their platform can bring smiles into the families by improving their neighborhoods.