Here is a similar idea to our LendingClub suggestion, only this new idea is backed by real estate. It also has Dr. Michael Burry, star of “The Big Short,” as a strategic investor-advisor.
A quick update on LendingClub: so far, we’ve had a great experience with an adjusted net annualized return of 11.33%. Here is the breakdown for the 3,094 loans I made during 2016.
All of the loans are for $25 each. The entire loan is for thousands of dollars, but my personal exposure and contribution is always the same: twenty-five bucks. In search of additional income through lending, we’ve come across several tied to real estate, but only one stood out.
PeerStreet has some very credible people that are part of it, which is why we gave it a second glance. Just like LendingClub, we’re essentially participating in a crowdfunding loan, only these loans are backed by real estate. They’re loans backed by hard assets, with a loan-to-value ratio at or below 75%.
Typically, the liens they offer are first liens against single-family homes or small commercial properties. Real estate investors looking for short-term 6- to 24-month loans for rehabbing often seek out specialty loans, which is the ideal investment for PeerStreet. The investment minimum is $1,000, which we love. The biggest downside is that you do have to be an accredited investor, which limits the availability to many investors looking for additional yield outside of Wall Street.
Bureaucrats at the SEC are fine with investors buying individual stocks like Enron and Lehman Brothers and over-priced mutual funds that can’t even match a random index fund, but God forbid everyday investors have access to the same exact type of investments JP Morgan and Bank of America do.
If you’re not sure what an accredited investor is, here is a link to the SEC guidelines. I probably shouldn’t say this, but I started checking that box long before I ever became one. Even as a broke teenager, I realized that investments deemed “only for the rich” were probably something I might want to be a part of.
As for PeerStreet.com, I am going to deposit funds this week and will keep you updated on my results with this new income idea in 2017. These real estate loans are offered up in many different states and provide a good diversification for income investors.
Of course, nothing is more thrilling than the wealth-gaining potential of our small growth companies we will recommend to you next year, but always remember that your core focus for financial prosperity should be to surround your life with income.
Multiple streams of income, both passive and active, will help you sleep like a baby.
President, FutureMoneyTrends.comRelentless Wealth Podcast: Alton Hill just released a new interview with Collin Kettell, and what a story this young man has to tell. Launching his first business at age 11, he was earning $20,000 a year as a kid! I’ve also personally spoken to Collin, and I have to say that this is one of the smartest 26-year-olds on the planet.Click here to listen to Relentless Wealth.