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PeerStreet lowers barriers for accredited investors who want access to real estate debt

TechCrunch TechCrunch 22/06/2016 John Mannes

Vive la révolution financière!

PeerStreet co-founders, Brew Johnson, Brett Crosby, and Alex Perelman, have been working alongside famed investors like Dr. Michael Burry to provide investors access to real estate debt. Dr. Burry is famous for having been portrayed by Christian Bale in The Big Short.

Historically, the only way to get exposure to real estate debt was to either make the loan yourself or invest alongside investors. If a loan was for $250 thousand, it is quite possible that investors were putting all their eggs in one basket.

PeerStreet lowers that minimum exposure to $1,000 per loan. The company also does underwriting due diligence on all its loans and visits each property before giving users access to a new investment opportunity.

Sure, democracy for everything sounds nice, but there is a lot to consider when, “Leveling the playing field between Wall Street and Main Street.”

First there is the matter of information. Everyday casual investors typically don’t understand the difference between real estate debt and a real estate ETF. Second, there is the small matter of the Securities and Exchange Commission (SEC). The SEC, with its accredited investor guidelines, sets a benchmark for armchair Wall Street wannabes. Investors in some alternative asset classes must hit a benchmark of either a million dollar net worth or yearly income of $200 thousand.

PeerStreet mostly solves the first problem by offering an automated portfolio builder that invests money in loans to encourage diversification.

Even with a significant population of investors excluded, the platform saw $11 million in new investments, just last month. Thus far $75 million has been invested on the platform. Brew and Brett are paying special attention to incoming users looking for safer alternative investments given recent events that have rattled investors at Lending Club.

PeerStreet gets paid when investors get paid. The company takes 1 percent off interest payments from their loans. The company sends the other 99 percent to accounts in City National Bank where investors can withdraw their money from FDIC insured accounts.

Loans that PeerStreet underwrites are backed by real estate for collateral. This is very different from opportunities on other alternative investment platforms.

The company primarily works with local lenders and has strong convictions about the value proposition of local loans.

Investors on PeerStreet can sleep-tight knowing that their money is financing businesses buying properties to rehabilitate rather than residential homebuyers. If a foreclosure does occur, it’s going to upset speculative real estate investors rather than displace families.

Brew and Brett believe that money invested through their platform has the potential to improve neighborhoods.

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