Real Estate Investing Has Finally Evolved Thanks to This Innovative Peer-to-Peer Platform
Platforms like PeerStreet are the future of real estate loans.
Everybody should have the right to plan their own financial future. Unfortunately, for well over a century, large financial institutions have completely monopolized certain asset classes, severely limiting how individuals invest their money. This is especially true in the lucrative world of real estate investing. But now, finally, that’s starting to change thanks to revolutionary fintech startups like PeerStreet.
Fintech has been one of the biggest buzzwords in the world of finance over the last few years. It’s short for financial technologies, and it’s exactly what it sounds like: new technologies that are either applied to or specifically designed for the financial services sector. While some of these new technologies are designed to work in harmony with the traditional financial services sector, others are designed to disrupt it by bringing in new players who were previously denied access to the game.
The best example of new technology being applied to and disrupting the financial services industry is crowdfunding. Originally developed to help small businesses on platforms like Kickstarter or Indiegogo, crowdfunding is now starting to change the way people invest and borrow money.
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 with a hefty interest rate. Thus, only banks had access to highly profitable debt investments. But of course banks are really just middlemen. All the money they loan out comes from the people who keep their money at the bank. And crowdfunding technology is democratizing the process by removing the middlemen.
Today, online peer-to-peer platforms are connecting borrowers with private investors by the thousand, creating an entirely new, mutually beneficial asset class in the process. And one of the fastest growing peer-to-peer investing services out there is PeerStreet.
PeerStreet was founded in 2013 with the backing of several prominent venture capital firms. In 2017 it was named the Best Peer-to-Peer Lending Platform by the fintech Breakthrough Awards. Today it might be doing more to disrupt the traditional world of real estate investing than anyone else.
PeerStreet is an online marketplace for real estate backed loans. It’s crowdfunding for mortgages that breaks standard loans up into smaller pieces so individuals can become microlenders. In this way PeerStreet connects investors with borrowers in a way never before possible. Investors get to earn 10% or more on their investments, and borrowers get the money they need to buy a house or run a business.
The entire process is guided by high-tech data analytics. PeerStreet shops for real estate debt from reputable private lenders from across the United States. They review each lender’s track record and run individual loans through their proprietary analytics engine, using advanced AI algorithms and data science to curate a pool of safe, high-quality real estate debt investments. PeerStreet then sells pieces of these loans to its investors.
PeerStreet’s fintech innovation doesn’t stop merely at crowdfunding mortgages, though. They also use cutting edge Automated Investing technology to take the guesswork out of building your investment portfolio. 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.
If you don’t fit into that category, there is some reason to hope things might change. 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 at some point, PeerStreet’s automated investing tech might be available to everyone.
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