Cash Flow Update
For years, I wanted to become a first trust deed lender.
The idea of owning the mortgage or investing in a pooled fund always seemed like a no-brainer.
It’s a yielding asset backed by every one’s favorite hard asset: the single-family home.
Today, the FinTech sector has made this possible without ever going to Wall Street. This idea is NOT a REIT, it doesn’t trade on the public markets, and it’s run by some of the smartest people in the industry.
Brett Crosby, founder of Urchin Software Corp. (basically Google Analytics), which was acquired by Google, as well as other top names in the technology, real estate, and finance space have created a revolutionary company calledPeer Street Inc.
One of the original investors and advisors to this company was Dr. Michael Burry. He’s the star of the movie The Big Short, in which he was played byChristian Bale.
Peer Street is a crowdfunded mortgage purchaser. In every real estate market, there is a need for unconventional loans.
These could be for investors who need financing for a fixer-upper or a homeowner who needs a bridge loan in between the sale of their current home on the market and the one they’re buying.
The big banks, who rely on government-qualified loans, have completely ignored this space and left it to local hard money lenders. This is where Peer Street comes in. By partnering with loan originators, they are able to enter these markets on a national scale.
Each house is vetted with appraisals, local valuations, and a search for public comparables.
These loans are based off of value. There is plenty of equity available to investors in case of default, which also gives plenty of incentive for borrowers to make their payments.
They have skin in the game, coming in with 25%-plus down payments.
You can personally set your criteria to mortgages that have a loan-to-value as low as 60%.
The choice to have interest rates over 7% — or even 10% — can be set in your own personal criteria before making any investments.
The minimum investment is $1,000, with the length of the loan terms ranging from 12 to 60 months.
I’ve now participated in the funding of 2,335 loans since December of 2016 and have yet to experience a single default. My investments range from $1,000 to $5,000 per mortgage.
Here is a glance at some of my active loans.
I consider this a safe 7% return strategy.
When I spoke with Brett Crosby, he actually told me about the one default the company saw. The loan originator was so concerned with how Peer Street would view this that they immediately came in and bought the loan back in full.
By providing liquidity to all of these originators, many of whom continue to remain an investor alongside us in these mortgages, Peer Street has become a VIP investor for them.
To learn more about Peer Street, click here.
Like Lending Club, this is a very passive income idea, and for those who are looking for additional protection, these loans are all backed by homes with plenty of equity.
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