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Author Topic: Downside for PeerStreet

J
  • Posts: 21
Downside for PeerStreet
OP: March 12, 2017, 11:00:00 PM
I have been pretty impressed with PeerStreet lately. It is not too hard to average 7-8% interest rate on hard money loans with maximum 75% loan to value ratio. My question is - what is the likely downside. I do not know a ton about funding real estate, but I have my ideas on how to estimate. Here are my thoughts. Let me know if any of this sounds off.

First, the good times. It seems reasonable to expect 1-2% foreclosure rates during the good times. This is what I have found at a couple web sites. It also matches PeerStreet's relatively short history. With a 75% loan to value ratio, I would expect to lose very little principle. I would still expect to make about 7-8%.

Second, the recession times. About every 4-5 years, expect a recession with loss of jobs, regional areas of high unemployment, and higher foreclosures. Maybe expect 10% foreclosure rate each year? With a 75% loan to value ratio, expect to lose a fair amount of interest and some principle. Maybe lose 4% of my investment for a total of 7%-4% = 3% gain during these years. Does this seem reasonable?

Then there are the major correction years. These are the 2006 - type years. These occur roughly every 16 years. Real Estate prices across the country would drop 10% - 50%. With a 75% loan to value ratio, expect to lose maybe 10% on my investment for the year.

If all this is true, then I would stand to make 5-6% or so long term. This sounds pretty good to me. This assumes the quality in the loans do not degrade. Does any of this look way off base?

Thanks for your thoughts.
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D
  • Posts: 2
Downside for PeerStreet
#1: April 02, 2017, 11:00:00 PM
Update from PeerStreet about their one foreclosure (Venice Beach):

"Yes, the Venice property was paid in full last week. We were able to recover all principal balances as well as pay some accrued interest over the time period."

1% yield bump link for anyone to use on their 1st investment:
http://www.peerstreet.com/join?ref=hadmf6

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r
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a
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Downside for PeerStreet
#3: December 09, 2017, 12:00:00 AM
If you start with a 75% LTV then you can afford a 25% drop with no loss.
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T
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Downside for PeerStreet
#4: December 17, 2017, 12:00:00 AM
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T
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Downside for PeerStreet
#5: December 29, 2017, 12:00:00 AM
OK, how come that is not how it plays out? Because things take years to sort out the foreclosure, etc.?

Thanks.
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K
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Downside for PeerStreet
#7: July 21, 2019, 11:00:00 PM
Thanks for the clarification!
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