We’ve been covering several income ideas that are completely outside of Wall Street, and I wanted to give you a direct update on two: Lending Club and PeerStreet.
Our experience with Lending Club continues to remain positive, though our adjusted yield has fallen from 11%, when we last updated you, to 8.78%. Overall, out of 4,926 loans I’ve helped fund, the vast majority are current.
Keep in mind that I am only funding $25 per loan. These loans can range from $1,000 to $25,000, however, they are crowdfunded, so for each loan, my personal exposure (risk) is only 25 bucks. 51 have been charged off, 2 are in default, and I have 87 that are a month or more behind on their payments.
Lending Club, of course, is completely turn-key. They do all the collections, creditor phone calls to collect payment, and the accounting for current payments.
Lending Club is a great way for you to be the bank.
I am more impressed with this company than any other I’ve interacted with. First of all, Brett Crosby, one of the founders, is the guy who created Google Analytics. This is a brilliant team of entrepreneurs who are trying to disrupt the entire mortgage industry.
A key investor in the company is Dr. Michael Burry. He was the star of the movie The Big Short, played by the actor Christian Bale. You can help crowdfund a short-term mortgage, 3 to 5 years, at interest rates of 7 to 9%. You can also choose to set a conservative loan-to-value below 70%, offering up plenty of equity in case of foreclosure.
PeerStreet handles it all, of course. All you have to do is choose how much you want to participate in each mortgage that comes available.
The minimum investment amount is $1,000. I’ve personally kept it between $2,000 and $5,000 in order to diversify my holdings nationwide and limit my risk in a worst-case scenario situation.
Of the 67 loans I’ve participated in, 4 have been paid off, 5 are late and being contacted for payment, and 58 are making their mortgage payments monthly, giving me a yield of about 7.5%.
This is a very passive way to invest for cash flow, and I have to admit, I prefer PeerStreet since it is asset-backed. Like Lending Club, all you’re doing is being the bank, and in this case, you’re the bank with an asset you can easily foreclose on if things go south.
For true wealth, always focus on income.