Technological advancement often brings disruption and democratization. It replaces the old with the new and facilitates the rapid expansion of access to specialized tools and information that previously had been the purview of a select few. And nowhere is this more true in the 21st century than the financial services industry. The first big wave came when online trading platforms like E-Trade democratized stock market investing. Now, newer fintech startups like PeerStreet are using crowdfunding technology to revolutionize the world of real estate investing.
In the past, if you wanted to borrow a large sum of money to start a business or buy a house, your only option was to go to a bank and apply for a loan. Thus, only banks had access to highly profitable debt investments. And, obviously, they had no interest in letting anybody else have a share of that pie. However, in reality banks are just middlemen. They make a profit by loaning out the money they get from everyday people.
Now companies like PeerStreet are using technology to remove the middlemen. And it’s a pretty huge deal.
PeerStreet is a peer-to-peer real estate investing platform that uses technology popularized by sites like Kickstarter and GoFundMe to create a revolutionary new microlending system. It’s crowdfunding for mortgages that breaks standard real estate loans into smaller pieces that individuals can purchase. Investors get to earn 10-percent or more on their investments, and borrowers get the money they need to buy a house or run a business.
By doing this, PeerStreet connects investors with borrowers in a way never before possible, busting the centuries-old monopoly on real estate-backed debt investments that banks have enjoyed.
The entire process is guided by high-tech data analytics. PeerStreet shops for loans from reputable private lenders across the United States. Then they use their own proprietary AI analytics engine to evaluate each loan and curate a pool of safe, high-quality real estate debt investments. PeerStreet then sells pieces of these loans to its investors.
Of course, curating a pool of loans is only the beginning. PeerStreet also uses award-winning Automated Investing technology to take the guesswork out of building investment portfolios. With PeerStreet’s Automated Investing, all you have to do is select your investment criteria, such as interest rate or loan term, and you will be notified when loans that meet your criteria become available.
Unfortunately, because peer-to-peer investing is relatively new, right now the PeerStreet platform is only available to accredited investors. According to current SEC regulation, “accredited investors” are individuals with a net worth greater than $1 million or an annual income greater than $200,000.
Luckily, if you don’t fit into that category, there’s reason to hope things might change soon. Back in 2015 the SEC officially opened up the crowdfunding marketplace to non-accredited investors. There are still strict rules in place that limit the amount you can invest per year to either $2,000 or 5% of your yearly income or net worth, whichever is greater. But that’s way better than nothing. And it means PeerStreet’s revolutionary automated investing tech might one day be available to everyone.
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