PeerStreet Real Estate-Backed Loan: Near-Foreclosure Example

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I’ve invested in multiple real estate crowdfunding companies, and the one that I’ve put the most money into is PeerStreet. I posted my overall statistics in my PeerStreet review 2019, but here is a specific example of a loan that looked like it was going bad, but was paid off suddenly at the beginning of the foreclosure process. This is the kind of information that I would have liked to see before investing myself, so I wanted to share the real-world details.

Initial investment details.

  • Property: 2 bedroom, 1 bath, 975 sf condo in Salem, MA.
  • Net Investor Rate/Term: 8.50% APR.
  • Amount invested: $1,073.
  • Term: 24 months with extension option.
  • Total loan amount: $123,750 from Peerstreet and $13,250 from loan originator (10% “skin in the game”).
  • Appraised at $199,000 = 62% LTV.
  • Loan secured by the property in first position.
  • Stated goal is buy-to-rent.

Here is the Zillow listing. The buyer appeared to get a condo for a good price ($130k). The unit last sold for $155k in 2016.

Timeline.

  • May 2017. Loan originated. Maturity is set for June 2018.
  • May 2017 to June 2018. Interest-only payments made as agreed upon. (My portion was taken out July 2017.)
  • June 2018. Borrower requests extension.
  • August 2018. 6-month extension approved and extension fee paid.
  • November 2018. Borrower requests another extension. Additional 4-month extension granted.
  • April 2019. Payments stop coming in. Loan is late. Full balance of loan is due.
  • June 2019. Now 60+ days late. Still no payments. Demand letter sent. Foreclosure process initiated.
  • July 2019. At around 90 days late, the loan was suddenly brought current and paid off. All back interest (including default interest) and fees paid.

If you look at the MLS data, they tried to list it in March 2019 for $288,000 and then reduced to $249,000 in May 2019. The listed was removed, so I’m not sure who paid off the loan, perhaps the borrower or the loan originator somehow refinanced it elsewhere. The price wasn’t unreasonable, as the neighboring unit sold for $268,000 in May 2018 (2 bed/1 bath/1,000 sf). Notice that for this note, the loan originator put up 10% of the loan, so it had “skin in the game”. I don’t know if that made a difference.

Final numbers. I invested $1,073 in July 2019 and got paid $192.27 of interest and $1,073 of principal for a total of $1,265.27 as of July 2019. (This was an automated reinvestment which included whatever cash was in my account, thus the odd numbers.) This works out to a 17.92% total return over two years, which is 8.59% annualized return. The number was a little higher than the stated interest rate due the various penalty fees the borrower paid. These numbers are net of all PeerStreet fees.

I haven’t had a Peerstreet loan go through the entire process of foreclosure yet, but will write another update if/when that happens.

Bottom line. The vast majority of my Peerstreet loans have been paid back in full in a timely manner. Some of them end up with issues like late payments, sporadic payments, and/or repeated loan extensions, like this one. This one ended up as an example of an investment that looked like it was heading for foreclosure at nearly 90 days late with little communication, but bounced back and ended up being paid in full.

If you are interested and are an accredited investor, you can sign up and browse investments at PeerStreet for free before depositing any funds or making any investments.

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Comments

  1. Well, you are in luck. It was a different story with Realtyshares. They were touted as the best and underwater now. They have been very lax about the process from the beginning and the media and the blogs etc projected as the best market player. I have peerstreet and the investments are doing fine. But I just wanted to throw a word of caution.

    If any of you are feeling the pinch of realtyshares debacle, please share your stories.

  2. PeerStreet is definitely better compared to other platforms. I had a harrowing experience with RealtyShares. My lessons learnt are document here https://financialfreedomcountdown.com/how-to-evaluate-real-estate-deals-that-will-help-you-avoid-losing-money/

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