Author Topic: PeerStreet Ongoing  (Read 1463 times)

threepacballer

  • 5 O'Clock Shadow
  • *
  • Posts: 14
PeerStreet Ongoing
« on: April 02, 2019, 11:45:37 AM »
Have not seen any updates on PeerStreet in awhile. I am continuing to get 7% return every month for some time but I have seen more properties showing late and a few in default. I don't see it on the recommended list anymore? I wonder if Mustache is still using?

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 3846
Re: PeerStreet Ongoing
« Reply #1 on: April 02, 2019, 10:04:20 PM »
I doubt your money doubles every year (7%/month = 1.07 ^^ 12 = 2.25, or a +125% return).  Reviews mention 8%/year, so maybe you meant a 7%/year return?

Car Jack

  • Handlebar Stache
  • *****
  • Posts: 1833
Re: PeerStreet Ongoing
« Reply #2 on: April 03, 2019, 06:50:44 AM »
I followed Pete right into the Lending Club debacle.  Lucky for me, I'm not a big risk investor so while his investments went from initial 10%ish kinds of annual returns with D,E,F loans, and I matched his returns with A,B loans, when things went down the toilet, his returns went negative while mine stayed 9%ish.  I sold off everything as it was too sketchy for me.

I see Peer Street the same way.  Big risk for not enough reward.

MarciaB

  • Pencil Stache
  • ****
  • Posts: 500
  • Age: 59
  • Location: Oregon
Re: PeerStreet Ongoing
« Reply #3 on: April 18, 2019, 09:51:49 AM »
One of my few remaining loans with PS just paid off (all of the back interest and full return of principal) after a long stretch of bankruptcy and default and whatnot. I've got another one that I'm skeptical about - I might not see much in return (which would then wipe out a couple years gains from the other performing loans).

I initially invested about $10,000 a few years ago and reinvested when a loan came due. But over the past 18 months or so have just withdrawn any principal that was returned and now have only a few loans left with them (in mixed states of performing and non-performing).

I totally get that the higher returns come with higher risk...but it's hard to watch in real time! I have to remind myself that even though the 7% loans (on the lower end of the interest scale) are "low" for PS, that's still quite a decent return (compared to the 2.75% I am getting on CDs for instance).

I'm glad I tried this, but also glad to be retreating to a safer harbor. It was good to test my risk tolerance.

fredbear

  • Stubble
  • **
  • Posts: 158
Re: PeerStreet Ongoing
« Reply #4 on: May 13, 2021, 11:14:31 AM »
I am very gradually getting out of Peer Street.  5 remaining loans, of which one is current, one late 90+, 3 in default. 

1) Peer Street's collection efforts on delinquent loans have been derisory - a note every month saying "efforts are being undertaken to contact the borrower and originator."  After 6 months thus, notes that they will entertain the idea of actually sending a demand letter.  Extensions of the due date, sometimes as many as 3 or 4, pushing the date out 3 years or so, with no attempts to get make the borrower get current first or to exact a good-faith token payment.  More threats of actually sending a real-live demand letter.  Some of these loans have not made more than 1 or 2 payments, then nothing for years.  This seems to me clearly fraudulent but Peer Street never attempts to contact the local district attorneys.  Their whole system could be summed up as saying, "Attention borrowers!  Under no circumstances take us seriously.  We stand with you, not with the people whose money we gave you." 
2) Peer Street's accounting has been great for Peer Street; not so great for the investor.  They have overpaid, even double-paid, insisted the payment was correct and confirmed, belatedly discovered their error, and  then abstracted any future payments from any performing loan until they made themselves whole.  They do not manifest any such solitude or activity against non-performing borrowers.
3) Customer support has been painful.  Representatives I have talked to have largely not seemed to understand what business they are in or how they operate.  "Was the payment confirmed?"  "Yes, the payment was confirmed."  "Why are you taking it back if it was confirmed?"  "We're not really taking it back, just reversing it."  "When I withdrew the funds, I relied on it being confirmed.  Should I not rely on confirmation statements from Peer Street?"  "No, you can rely on it , if we says it's confirmed, it is confirmed."  "Why would you tell me it is confirmed when you are going to..."  Lather, rinse.  The closest I came to a comprehensible philosophy was when I was told, "Never forget that borrowers have rights," after a borrower had paid one month, suspended payment for 6 or 8, and might - conceivably, just maybe - have to undergo the torment of an actual written demand letter.
4)  The only safe approach to this operation is actuarial - you are going to get defaults that don't cure, and some that do but take so long they reduce the time-value of your investment to an asymptotic approach to 0.  If you can do enough investments and wait long enough, the real return - while MUCH LOWER than the nominal return, may still be positive.  But to select, originate, and especially to track enough loans to obtain a positive value, is not worth your time.  At normal individual-investor loan levels, one or two sour loans out of, say, 30, wipes out your positive return.  The mental/emotional energy to do 50 or 100 loans, which might end up positive, could be better spent on managing a property you actually own - or on buying an index fund and spending the time catching up on reading Jane Austen novels.

brellis1vt

  • 5 O'Clock Shadow
  • *
  • Posts: 26
Re: PeerStreet Ongoing
« Reply #5 on: May 13, 2021, 02:54:08 PM »
I started with PeerStreet when returns were 10% plus. overall, I have been highly disappointed in their customer service and the platform in general.  I tried to diversify away from the market with this platform but it's been a bad experience overall.  I'll stick to some high return REITs in the future and am getting out of PeerStreet as soon as I can get some of my money back.  Yieldstreet seems to be a better organization but I am going to get out of that as well.  The return is just not worth the illiquidity of these assets.

Mr. Green

  • Magnum Stache
  • ******
  • Posts: 2951
  • Age: 37
  • Location: Wandering
Re: PeerStreet Ongoing
« Reply #6 on: May 13, 2021, 08:41:19 PM »
This is clearly a pattern. LendingClub, RealtyShares, PeerStreet. It seems very easy for companies to disguise just how risky lending can be while attracting a group of people who are usually the least equipped to understand that risk.

fredbear

  • Stubble
  • **
  • Posts: 158
Re: PeerStreet Ongoing
« Reply #7 on: May 14, 2021, 08:41:26 AM »
This is clearly a pattern. LendingClub, RealtyShares, PeerStreet. It seems very easy for companies to disguise just how risky lending can be while attracting a group of people who are usually the least equipped to understand that risk.

Sir, respectfully disagree.  It is not so much that the risk is disguised - the credit figures, appraisals, and loan-to-value percentages are there, and someone reasonably au courant on state behaviors knows enough not to lend in Illinois, New York, California, New Jersey, Connecticut, etc.  As I see it the problem is moral hazard; by their failure to make any real effort to collect, Peer Street induced a risk that would not be present in a rigorously-conducted lending environment.  You could see it take hold back in Prospers, where even the A level borrowers started to go late or default when they learned there would be no meaningful effort to collect and no repercussions via reporting delinquency to the credit bureaus.  So here - borrowers needed only a few months of "efforts to contact being undertaken," and a few more months of "this time I really mean it, I'll really - Really - REALLY - start seriously thinking about sending a demand letter soon," and a few "negotiations to extend the due date another year,"  or "yet another year," for a borrower to decide (putting it mildly) that paying Peer Street is not a priority, at least not a priority like paying the tradespeople and the materials suppliers.  Every new landlord has to learn that they either act like they are their tenants' first priority, or their tenants will make them their last priority.  But Peer Street makes money initially, and what happens later is merely a hassle for them, though it is real losses of real money to the lenders. 

Now, as to there being a pattern across all these platforms, you are certainly correct.  Of the three - borrower, administrator, money source - the money source ends up being slighted.  Probably what happens is the administrator realizes they can seek out actuarial sources - money suppliers so big that a predicted failure cohort doesn't imperil an averaged bottom-line.  The initial little-guy lenders are stepping stones to the big-money lenders. 

Mr. Green

  • Magnum Stache
  • ******
  • Posts: 2951
  • Age: 37
  • Location: Wandering
Re: PeerStreet Ongoing
« Reply #8 on: May 14, 2021, 04:55:12 PM »
This is clearly a pattern. LendingClub, RealtyShares, PeerStreet. It seems very easy for companies to disguise just how risky lending can be while attracting a group of people who are usually the least equipped to understand that risk.

Sir, respectfully disagree.  It is not so much that the risk is disguised - the credit figures, appraisals, and loan-to-value percentages are there, and someone reasonably au courant on state behaviors knows enough not to lend in Illinois, New York, California, New Jersey, Connecticut, etc.  As I see it the problem is moral hazard; by their failure to make any real effort to collect, Peer Street induced a risk that would not be present in a rigorously-conducted lending environment.  You could see it take hold back in Prospers, where even the A level borrowers started to go late or default when they learned there would be no meaningful effort to collect and no repercussions via reporting delinquency to the credit bureaus.  So here - borrowers needed only a few months of "efforts to contact being undertaken," and a few more months of "this time I really mean it, I'll really - Really - REALLY - start seriously thinking about sending a demand letter soon," and a few "negotiations to extend the due date another year,"  or "yet another year," for a borrower to decide (putting it mildly) that paying Peer Street is not a priority, at least not a priority like paying the tradespeople and the materials suppliers.  Every new landlord has to learn that they either act like they are their tenants' first priority, or their tenants will make them their last priority.  But Peer Street makes money initially, and what happens later is merely a hassle for them, though it is real losses of real money to the lenders. 

Now, as to there being a pattern across all these platforms, you are certainly correct.  Of the three - borrower, administrator, money source - the money source ends up being slighted.  Probably what happens is the administrator realizes they can seek out actuarial sources - money suppliers so big that a predicted failure cohort doesn't imperil an averaged bottom-line.  The initial little-guy lenders are stepping stones to the big-money lenders.
Collection is part of the risk in lending. Even if the numbers look good, if borrowers learn the administrator is a pushover and the folks lending the money are regular joes with no power at all, well that's about as close to a free lunch as it gets. It's a very multi-faceted problem, and I quite liked the nature of some of my early deals on RealtyShares. I think had they continued with smaller loan amounts for specific projects with respectable interest rates it could have been very successful, but the same downfall seems to recur. Administrators chase larger investments, the popularity of the platform drives down rates paid to investors, and quality control in the lending process is compromised with growth. And the end result is investors getting burned with no recourse, and an unsustainable business model. Some times the sweet spot is a smaller total revenue number and there's nothing wrong with that.