YieldStreet is a unique crowdfunded lending platform. While it offers shorter-term loans secured by commercial and multifamily real estate, it has expanded its offerings significantly in recent years to include real estate equity and investments backed by art, aviation, legal, and marine assets. That enables investors on its platform to potentially earn passive income backed by a variety of alternative asset classes, allowing them to diversify their portfolio and reduce its correlation to the volatile stock market.
Most of the loans it offers have terms of three years or less (with many less than two years). It also offers fund options, equity deals, and shorter-term investment opportunities.
Finally, while most of YieldStreet’s offerings are only available to accredited investors, it has opened one of its offerings to non-accredited investors.
Like with any other platform, there is a risk, particularly if you’re investing in debt secured by an asset you may not be familiar with or capable of value, but there’s also potential reward, based on the higher interest rates paid by the offerings on YieldStreet.
What are YieldStreet’s pros and cons?
- A mix of assets: Alternative assets (e.g., legal, aviation, art, and marine) beyond just real estate could make the platform even more compelling for investors looking to diversify.
- Low minimum investment: Most investments have a $10,000 minimum, which is lower than most other platforms geared towards accredited investors. YieldStreet has also started offering options with even lower minimums of $1,000 geared towards non-accredited investors or those seeking a place to stash their uninvested cash for the short term.
- Short-term choices: Many of the loans on its platform are less than two years in length, which is shorter than most platforms targeting real estate projects that will take three to five years — or more — to complete. If you’re looking to add shorter-term investments to your portfolio, YieldStreet may be a great fit.
- Reasonable fees: 0% to 2% fees on most of its offerings are lower than you will find on many other platforms. Its fees are higher on some of its fund options, depending on the structure.
- Diversified fund options: YieldStreet has started offering more diversified fund options over the past year.
- Most offerings are only open to accredited investors: If you have less than $1 million in net worth and/or earn less than $200,000 per year, you can’t invest in most YieldStreet deals.
- A mix of assets: YieldStreet might not be the best place for investors looking for crowdfunded real estate deals, given its diversification into other asset classes.
- Higher-risk loans: While collateral like art, real estate, and marine vessels back YieldStreet’s loans, they’re riskier debt investments with a higher likelihood of default.
- IRA limitations: If you want to use a self-directed IRA (SDIRA), you have to create a new one that you can only invest in through YieldStreet. This could result in paying more fees if you want to use your SDIRA for other investments as well, as you’ll need more than one. Most other platforms work with multiple third-party IRA custodians.
Is YieldStreet legit? How strong is it?
YieldStreet’s founders and managing executives are high-profile, known figures in alternative finance and technology entrepreneurs. The company also has the financial backing of major investors like George Soros via a substantial credit facility, and it signed a huge deal with Citi (NYSE: C), which said it will use the YieldStreet platform to invest $2 billion for its wealth clients over the next couple of years. Further, at the time of this review, it was reportedly exploring the possibility of setting up a special purpose acquisition company (SPAC) to either go public or co-sponsor to raise additional capital.
Overall, investors have invested nearly $1.3 billion with YieldStreet. The platform has returned nearly $750 million of capital to investors through early 2021, including almost $140 million in interest, earning investors a net IRR of 11.54%. Sounds pretty legitimate to us.
However, it hasn’t all been smooth sailing for YieldStreet investors, as borrowers have defaulted on their loans in the past. A notable default came from loans tied to vessel deconstruction as the borrower defrauded YieldStreet and other investors. Both the SEC and the FBI investigated the company and investors brought a class-action lawsuit. YieldStreet sued the borrower and won a $77 million judgment, allowing it to seize assets to satisfy the loans.
Unfair Advantages: How Real Estate Became a Billionaire Factory
You probably know that real estate has long been the playground for the rich and well connected and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why. But those barriers have come crashing down – and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.