Tellus App: “High-Yield Savings” That Isn’t FDIC-Insured, Backed by Vague Promises

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A few readers asked about the Tellus app, which compares itself to savings accounts and pays 3.00% APY with no caps. (4.50% APY is only up to $2,500.) Here’s a quick explanation of why it’s an easy pass. Tellus investments are not FDIC-insured and they only provide a very vague description how your money is actually invested. From their FAQ:

How does Tellus afford to pay me such a high interest rate?

Tellus generates its revenues as a non-bank lender. We provide mortgages – loans secured by residential real estate. We use technology and proprietary data to choose opportunities so that we can minimize loss and fraud; this lets us pass the profits onto you in the form of highly competitive yields.

That’s a lot of fancy words, but my translation is “Tellus lends your money out at a lot more than 3.00% APY on unknown residential real estate of unknown quality, in unknown geographic areas, at unknown loan-to-value ratios”.

Mystery underlying investments. Think of all the properties in the world that could fall under “US-based real estate”. With a more transparent structure like that of Peerstreet, I can choose the exact address of the house or building that I am investing in. I can see the original appraisal. I see the borrower terms and interest rate. I can find the purchase history, the tax records, and look up comparable properties nearby. I know I’m earning 7-9% interest rates and Peerstreet is taking about 1%. With Fundrise, I get updates with the address and pictures of the exact apartment building they just bought, and they are SEC-registered private REITs. With Tellus, I have none of this. They are asking for a lot of trust for a new startup company. Are the loans wrapped in a bankruptcy-remote vehicle? Are they registered with the SEC?

Questionable promises of safety. When lending out on residential real estate, I also accept that I can lose money on the deal, because that’s how the world works. That’s honest. From their FAQ:

Is my money safe? Can I always get my money back?
Yes, your money is safe. All transactions and personal identifying data is protected by bank-level, 256-bit AES encryption. You can trust that your money and data are secure with Tellus. You will always get your money back and you can withdraw at any time.

In my opinion, this is not honest. If you’ve paid attention at all during the crypto crisis, you know that “You will always get your money back and you can withdraw at any time” really means “Your money is really the assets of a young start-up company, and if something bad happens then we may instantly freeze all withdrawals”. Real estate loans can go bad. Startup companies can go bankrupt.

This reminds me of the biggest red flag from peer-to-peer lending: The more profusely someone promises to pay you back, the less likely they are to pay you back.

Low returns for level of risk. Even if I knew Tellus lent money using conservative underwriting and everything goes perfectly, you will never get more than the promised APY. 3% APY is far too low. A 90-day Treasury bill pays more than 3%. I would expect at least double their interest rate for the risk involved in real estate lending, which means Tellus might be taking a big cut for themselves (they don’t disclose their cut either). I regularly post FDIC-insured deals at effective rates of 4%+ APY with 100% certainty that I will get 100% of my money back.

Tellus could be run by well-meaning, honest geniuses, but there is no way I’m taking this much risk for limited upside with my hard-earned money. Look beyond the slick marketing and stock photos of happy families. There are many alternatives earning a higher return with more easy assessable level of risk.

Bottom line. Tellus advertises “high yield” and “safety”, when in my opinion it offers the opposite: relatively low returns for the level of risk you are taking on (which is completely unknowable since you have no idea what they are investing in). You are risking complete loss of your investment in a young startup that is not FDIC-insured, and thus it is an easy pass for me. Be careful.

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  1. Thank you Jonathan! Appreciate the thorough breakdown and helping see through the slick marketing; will not be putting more than I can chew on this app.

  2. The interest rate is very low considering that you can get a treasury bill short term for around 3.5% or more.

  3. I’ve been looking at Tellus too. Can you share the link to the FAQ you’re referencing above? I can’t find it. Is there a separate FAQ somewhere?

    Found this in Tellus’ home page FAQ:

    How is Tellus powered by real estate?

    We earn our money by providing mortgages secured on single family real estate properties. Tellus mortgages are typically 6-18 month loans and are always over collateralized. We hold these loans on our balance sheet, and they generate a predictable stream of income for us. Our property management ecosystem provides both a distribution pipeline for these mortgages and proprietary data that help us predict cash flow and home values so we can better manage the risk of our loan portfolio.

  4. I just wanted to mention that I was a customer of Tellus at the start of the year until just recently and was treated very well with superior customer service and performance via their app. They score 100% on that front. The issue I had was they require you to let them hold a substantial amount (6 figures) to get higher rates. My rate was 3 3/4% when I participated as I met their requirement. I’m not sure what they are doing now, and you need to ask for the higher rate and ask to get into their white glove group. It’s not automatic. Now that US treasury’s and online banks are actually paying decent interest, as a retiree who doesn’t need any more risk, I decided to go that route to save. I can’t really disagree with anything the review up above spells out, but I did want to mention they treated me well and very consistently with withdrawals and other matters. I would definitely consider them again in another environment. Absolutely. I hope to see some interesting offers from them as the months go by.

  5. richard sachs says

    I came over to Tellus after two incidents at Outlet which made me very skeptical and nervous. Outlet is backed by crypto and Tellus is real estate. Customer service is excellent as well.

  6. I would not think that chase would be involved in anything that tarnished their name and so I trust Tellus with my cash reserves.

    • I mostly loved my time with Tellus but you need nerves of steel after Sam Bankman Fried. They offer strange promotions like 10% for 5 days. Uhh ok. The secrecy of the company is just too much. They are beating my Ally No Penalty CD by .55% right now. But with Ally, I know they won’t be pulling a Sam on me. Again, Sam probably ruined places lie Tellus, but I do hope their finances are OK and wish them well. As I stated, they treated me well earlier in the year.

    • Uncle Duke says

      And if you read this week’s Barrons Magazine, you will learn that JPMC and Wells are NOT “banking partners.”

  7. I have funds in Tellus but am trying to find if there is a way to make a cash withdrawal via Chase who they say holds the money.

    Anyone know if or how a cash withdrawal is possible?

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