I wrote about PeerStreet for the first time back in March of 2017 after I had been invited to visit their HQ and interview their founders. Since then I have aggressively grown my investment accounts with them in a little less than 5 months. I want to take a deeper dive into the platform and the investments I’m holding in one of my two accounts (it’s a self-directed IRA).
Navigating the Platform
Assuming you have already set up your account, the first screen you see after logging in the investments tab that gives you a high-level view of your account as well as available investments:
One thing I have noticed is that new investments come in waves and it does take some time to become fully invested. The hard money lending space is a $16B market, according to the founders of PeerStreet, and they are constantly working on the supply of loans for investors. As a new platform, with a growing user base, I can appreciate the challenge of doing this in a way that does not diminish the quality of the investments let through the funnel.
When it comes to making investments, you have two options:
- You can manually invest in the loans that fit your requirements (I did this for the first 7 loans I invested in)
- You can set up automated investing
To give you an idea of how long it takes to become fully invested. My initial deposit into my self-directed IRA was $50,000 and it took about 3 weeks to become fully invested with the following automated investment criteria:
As you can see from the screenshot above, I have set the following criteria for my investments:
- Interest rate of 7% or greater
- Max LTV of 75% or less
- Loan term of 12 months or less
- With $2,000 per loan
I’m confident that if I would have been open to longer term loans that the time to become fully invested would have taken less time.
The last piece of the platform that we will dive into is the Dashboard:
On the dashboard, you get a nice overview of your account along with a chart that shows you how much interest you have collected to date. You can see the lag time between when I opened my account sometime in March, to when interest started trickling in in April and building through June. Based on the mix of my current investments, I should be collecting about $400/month in interest.
Speaking of the mix of my investments, let’s take a look under the hood.
My Loan Portfolio on PeerStreet
When I first started writing this post, I was going to just take a screenshot directly from the “Positions” tab in the dashboard I shared above, but then realized that there were a few metrics that I wanted to be able to track and share with all of you. So, I exported the positions to Excel and added the information I wanted to see.
I should point out that I chose to use $2,000 per loan based on the size of the account. As I mentioned above, I opened this account with $50,000, and I decided that I didn’t want any one loan to make up more than 5% of the portfolio. At the time, this puts each loan at 4% of the total portfolio value. Since then I transferred another $19,000 and some change, which has diluted the size of each loan to about 2.8% of the total portfolio value.
In the screenshot above, with my current investments, I added in two columns that don’t exist on the PeerStreet platform:
LTV – You get to see the LTV on the investment page, but for some reason, the developers have not brought this over to the positions page once it becomes an investment. I brought this in not only to see what the individual LTV’s were for each loan but because I also wanted to see with the weighted portfolio LTV was. My current mix has a weighted average LTV of 69%, which tells me that I have a 31% equity cushion shielding me from potential losses. I like that margin of safety!
Estimated Interest – The positions tab shows you the cumulative interest collected on each loan, but I also wanted to see the annualized interest, to get an idea of what I could expect on a forward 12-month run rate.
Total – The total at the bottom has some of the data points you see at the top of the positions page, but I added this in order to see the following: Total Investment, Average LTV, Average Interest Rate, Average Duration, and Run Rate of Anticipated Interest.
Note: You may be wondering why the total in the positions summary is different than the total you see in the other screenshots. This is because the total investment column is displaying the original investment and not what the outstanding principal is. One of my loans paid off part of the principal early.
I do have another portfolio with PeerStreet that has about $7,000 in it. It is an after-tax account that I set up initially before my self-directed IRA. Because the interest on these investments will be taxed at ordinary income rates, I decided that it would be more efficient from a tax perspective, to make these investments in a pre-tax account, especially given the high marginal tax rate we are currently in. So, I will actually slowly wind down the after-tax account as the 7 $1,000 loans I made mature, and then transfer the money out for other investments.
At this point, I don’t plan to add to the self-directed IRA, but rather just leave the automated investing turned on, and see how it performs over the next 12-24 months.
Is anyone else investing on the PeerStreet platform? What else do you look at? Are you using the automated investing feature?
– Gen Y Finance Guy
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