Recent experiences w/ Peer Street and Fund that Flip?

Question

Hey BPers, I've been casually reading about Peer Street and Fund that Flip and am curious about people's recent and long-term experiences with these services. We decided several years ago that landlording was not the right fit for our family, and I'm thinking of toe-dipping into the crowdfunding services to see if it works for us.

What have these places been like for you? I've read some of the older postings but want to solicit the latest feedback. Thank you!

What have these places been like for you?  I've read some of the older postings but want to solicit the latest feedback.  Thank you!

Mitch Provost · Answer

@Karen M., I've been invested in several projects at Fund That Flip since Jan with my SDIRA. All projects have paid on time without fail. Average return is around 9.5%. So far, FTF has performed as advertised and I get timely and thorough reports on status for each project with financials, progress, risk profile and photos.

There is a bit more risk associated with these one-off investments, however the low entry makes that more tolerable. I'm also invested in one of the funds that @Ian Ippolito refers to and actually make higher returns on it with more diversification (over 100 loans).

Steve O'Keefe · Answer

Hi Karen, I don't have much long-term experience with PeerStreet since I only started investing with them in July.  I have one rental property and also decided landlording is not something I am interesting in scaling further at this time.  I have 21 relatively small investments (between $1,000-$1,615) with a little over $31k total invested.  I recently made the decision to make a new $1,000-$1,500 investment every 2 months or so ($450/mo recurring investment plus whatever interest has accumulated gets reinvested).  Of my 21 positions, currently 3 of them are late (90+ days, 60+ days, and 60+ days).  While not ideal, this was expected and I baked that risk into my objectives.  Speaking of objectives, you will likely notice that their rates used to be much higher (I saw a lot of older posts with 9-11% rates being pretty standard) than they are now.  My current average rate is 7.4% but obviously that gets lowered with each loan that does not get paid off.  Some investors will say that's too much risk for not enough return, especially with many note funds still offering that 9-11% rate.

Therefore, I think Ian is certainly right to consider a fund depending on your objectives.  I am invested in a note fund myself, but I also like the low minimums, flexibility, and ease of use of PeerStreet.  Most note funds or other syndicated investments require high minimums (often $20k+), whereas with PeerStreet I can put my money to work quicker.  I also like that you can choose the terms and make it as short-term as you want.  This allows you to ladder investments if you're saving up for a big deposit or if you just want the option every few months to extract principal or reinvest.  I plan to just keep building up the account slowly while focusing the majority of my savings on 401k, HSA, and hopefully at least one larger syndication deal each year.

Ian Ippolito · Answer

Karen, I've talked to hundreds of investors about their experiences on both of those platforms, as well as many others. PeerStreet and Fund That Flip are both in the top (#1 and #3  respectively) for investor satisfaction. Other competitors that also have positive investor satisfaction are ShareStates and Zeus Crowdfunding. There are also other platforms that have had some significant negative things spoken about them.

Peer Street is the larger of the two and has more volume, but the top deals are still snapped up really quickly. Many people say that you have to choose auto invest to have a chance to get them (and you have the chance to decline if they don't match). Fund that flip is smaller, but also less investors, so at least the deals are not funded in just a few seconds.

Both platforms suffer from some of the problems that pretty much all of the hard money loan platforms do: not enough volume for someone wanting to maintain a large portfolio, not enough conservative 65% LTV loans, too may loans and judicial only states (where it's extremely expensive and time-consuming if you need to foreclose which can cause losses), and single note risk (i.e not diversified). For this reason, you may also want to consider investing in a fund instead of a platform. A fund will diversify you into perhaps 100 notes, and you can choose a fund that is more conservatively underwritten and won't lend in judicial only states for example. In my opinion if you have a large position in hard money loans, it's the only way to go, unless you want to be continually doing due diligence on new loans as old ones come due and payoff. I'm personally in Broadmark and Arixa and considering Iron Bridge.

Karen M. · Answer

Thanks Ian, I was looking at your site yesterday. What I think I'm looking for is a small pond where I can start small and see how things feel, before going bigger.  It takes me a while to develop a comfort level.

Josh Rowley · Answer

I have a friend who has money with FTF and it seems like everything’s in limbo right now. Apparently the fund transfer processor they were using went bankrupt.

Kang-Li Cheng · Answer

I can also attest to this. I understand the processor bankruptcy caused a big disruption but it also seems like FTF (Upright) was overly leveraged because they've proceeded mass sell their loan book, which means if you held one of the loans that will be sold you will receive no interest until due diligence is completed and possibly a hit to principal depending on the final price the buyer pays.

For loans that aren't being sold, interest is being waived since borrowers cannot receive draws. Finally, not sure if this is just a coincidence but default and delinquency rates have shot up since May. FTF gives borrowers a lot of leeway in making the repayment.

TLDR: The first lien position sounds nice in theory. In practice, legal proceedings are very costly and time consuming (from a few months up to 2-3 years). The delays can be a significant opportunity cost too. LTV estimates are sometimes overly optimistic, so many loans that don't get paid off by the borrower become worth very little.

John Kirby · Answer

Hello everyone,    I’ve been investing with FTF for two yrs and it has been great making as much as 13% on one particular investment. The individual investments may say it’s a 6 month term but the majority of time the borrower or builder needs to extend the term 1 or 2 months but that’s no problem I get a late fee plus more monthly interest.  I’m currently invested in 3 and have 4 others that have paid off returning my principal.I like the low LTV and the 1st. Position that FTF takes . They also tell you if the borrower has done additional projects with FTF and there credit score. FTF is extremely transparent showing you everything you need to know.

Recent experiences w/ Peer Street and Fund that Flip?

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