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How can they advertise "High quality loans" that pay 6%-12%? That sounds super shady. Plus they take a 0.25%-1% spread on top of it! This should be marketed as
by d--b 11y ago
How can they advertise "High quality loans" that pay 6%-12%? That sounds super shady. Plus they take a 0.25%-1% spread on top of it!
This should be marketed as high yield, super risky investments, but they try and make it sound that it is great and safe. It's one thing to have good originators, and another to have bad credit loans that actually get repaid.
- bko 11y agoMy guess is that they are bridge loans (A “bridge loan” is basically a short term loan taken out by a borrower against their current property to finance the purchase of a new property) which are often much higher rate. That or there is a leverage where there is some structure to the cashflow. So for instance, a loan can pay 4% and can be separated into two pieces, one pays 2% and the other pays 6%. When there is a loss, the 6% would take a bigger loss that the 2% piece. It's probably the former though since it appears to be very short. Edit: It's neither: > As an investor, you’re usually funding loans, which are then used to buy and improve real properties, and you get paid for doing so. But because you’re not competing in the well-developed 30-year residential mortgage market, you can expect to collect annual interest in the 7-10% range, rather than the 3-4% that mortgage securities pay their owners. So essentially its more like a REIT. [0] http://www.mrmoneymustache.com/2016/05/02/peerstreet/ http://www.mrmoneymustache.com/2016/05/02/peerstreet/
- Domenic_S 11y agoI don't get it, why not a HELOC at those LTVs? Any HELOC can beat 10%...
- brettpeerstreet 11y agoThese are first position liens on business purpose, non-owner occupied properties. Often these are fix and flip or buy to rent properties.
- Domenic_S 11y agoAh, I see. Thanks.