December 23, 2018

YieldStreet Review

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The stock market isn't the only place you can invest your money. If you are an accredited investor with at least $5,000 available now, YieldStreet offers asset-based "alternative" investments.

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YieldStreet was founded on the principle that only the "super wealthy" could invest in alternative investments, such as real estate, litigation loans, or commercial loans. CEO Milind Mehere created the crowdfunding platform to help "other investors" get a piece of the action.

YieldStreet offers investments that are not correlated with the stock market's performance. Their mission is to provide investment positions that don't rely on the economy, but rather have stability in the face of economic uncertainty.

Keep reading to see if YieldStreet may be a good fit for you.

Shortcut: If you are really eager to start investing, one of our recommended choices is Betterment. They have no minimum balance, low fees and good returns. It's a great choice for beginners and the app is very easy to use.

How YieldStreet Works

In order to invest with YieldStreet, you have to meet two requirements:

  • Have at least $5,000 to invest
  • Be an accredited investor

If you do meet those requirements, you can create an account and start investing in YieldStreet's investments. Each investment follows their 5-point policy, which means:

  • The debt must be asset-based
  • The investment should have little correlation to the stock market
  • The asset managers of the investment must be highly experienced and successful
  • The debt should be short-term (1 - 3 years)
  • The investment must offer a targeted return between 8% and 20%

You can see YieldStreet's available investments on the Investment Offerings tab on their website. It's not unusual to see just one investment available at a time. But, you can scroll through past offerings to help you decide if this is something you'd like to try. Typically, investment opportunities fill up fast, so it's important to act quickly if you are interested in an investment.

If you decide to invest with YieldStreet, you sign up for an account and link your funding bank account to your YieldStreet account. You determine how much you will invest, with a minimum of $5,000 and the maximum stated in the loan listing. Once you fund the loan and the offering closes, you start earning interest on a pro-rated basis. For example, if the loan originator needed $1,000,000 and you invested $20,000, you own 2% of the investment.

Is YieldStreet Legit? YieldStreet has an A+ rating with the Better Business Bureau and no registered complaints thus far. As with any investment, though, you should do your own due diligence. Every investment, no matter who it's with, carries a risk.

Types of Investments

YieldStreet only offers alternative investments. The investments are usually debt-based and have collateral. Each loan is backed by a tangible asset, such as real estate or legal settlement funds. YieldStreet takes first lien positions on real estate debt and first payment position on litigation funds.

You may see opportunities for pre-settlement financing, post-settlement financing, or real estate. The investment vehicle you choose should depend on your investment needs:

  • Do you need consistent monthly payments? Real estate investments usually offer this type of predictable payout.

  • Can you wait for an "event" to get paid back? Litigation financing usually depends on the outcome of the lawsuit. You receive full payment (principal and interest) when the case settles.

What Are the Fees?

YieldStreet charges two fees:

  • Listing fee: YieldStreet charges the loan originator a listing fee. It's usually a flat fee. You may or may not see the fee disclosed on the offering page.

  • Management fee: YieldStreet collects a management fee in addition to the listing fee. This fee covers the work YieldStreet does to vet the investment, offer it, and manage it once funded. The typical fee ranges between 1% and 4% and is disclosed on the offering page.

YieldStreet displays the "target return" on your offering page. This return is net of the above fees. The targeted return is based on full repayment of the loan on time and barring any other unusual circumstances.

Why We Like YieldStreet

  • You can open your account without investing. If you want to look around and see the types of investments that are available, you can start slow. Open your account and just get a feel for the platform. You can then do your due diligence, deciding if investing your money with YieldStreet is a wise choice. Remember, you'll need to act fast if an offer comes up, though, as they usually fund quickly.

  • You can learn why the originator needs the funds. Right under the basic details including the term and rate, you can read why the funds are needed. For example, it may say vehicle purchase, vehicle lease, bridge loan, advance, or litigation loan.

  • YieldStreet is very transparent with their investments. You can view a large number of details on the investment. This includes the agreements, terms of service, parties involved, payment structure, factors to consider, and information on the collateral.

  • YieldStreet includes a "Why We Like This Investment Section" in offerings. In this section they list the reasons they think this investment is a good choice. This can give you more factors to consider as you decide if the investment is right for you.

  • You know the frequency of payouts before you invest. Right on the investment listing, you'll see the expected payout frequency. They offer two types of payouts. Pre-determined payments may occur weekly, bi-weekly, monthly, quarterly, or be event-based. Litigation investments are typically event-based, meaning you get paid when the case settles.

  • Each investment has collateral backing it. YieldStreet offers only asset-based investments. This gives you a little peace of mind should the borrower default. YieldStreet takes possession of the asset and tries to recoup the money invested. YieldStreet only takes first-lien position, which helps ensure you'll receive payment upon liquidation of the asset.

  • Many of the investment opportunities on YieldStreet are portfolio-based. You may invest in one specific investment or a portfolio of investments. Litigation portfolios are the most common, diversifying your risk over a series of court cases, rather than relying on one outcome.

  • YieldStreet carefully vets each opportunity. If an investment doesn't meet their five "rules," they don't accept the investment opportunity.

  • The investments may not be tied to the stock market. One of YieldStreet's criteria for investments is lack of correlation to the stock market. This means you don't have to watch the market like a hawk as you would if you invested in the stock market itself.

  • You may start earning interest as soon as 3 to 5 business days after you invest in a prefunded opportunity. Once you request and fund your investment, it takes 3 to 5 business days to process the investment. Once complete, you start earning interest right away.

Why You May Want to Look Elsewhere

  • You need at least $5,000 to start investing. Each investment has its own minimum requirement, which may be higher than $5,000, but no investment is less than $5,000. This may exclude some beginning investors trying to get started in investing.

    Counterpoint: If $5000 is too much of an initial investment for you, check out Fundrise. It's a great way to make passive income. The real estate crowdfunding platform lets you get started with just $500.

  • Your investment is illiquid. There is no secondary market to sell your investment to should you decide to jump ship early. Your money is tied up until the maturity date of the investment. YieldStreet claims the average investment is between 1 and 3 years.

  • There are only a few investment opportunities. Unlike the stock market, mutual funds, ETFs, or bonds, the investment opportunities are few and far between. Because of their popularity, the available investments often fill up fast. You have to be vigilant about checking the upcoming investment tab and knowing the date the investments open for funding.

What's an Accredited Investor? In order to invest with YieldStreet, you must be an accredited investor. This means:

  • You have a net worth of at least $1 million
  • You can prove you made at least $200,000 per year for the last 2 years

You must get approved as an accredited investor through YieldStreet before you can request an investment.

Complaints About YieldStreet

The most common complaint made about YieldStreet is in their lack of communication regarding payments once you've invested. While their platform states when you should expect payments, they often are delayed in communicating regarding them. Once you do receive payment, it just shows up in your account. It often takes days for your dashboard to show the updated payments for you to correlate the amounts with what was expected.

How It Compares

LendingClub: Non-accredited investors can invest with LendingClub, a peer-to-peer platform. With just $1,000, you can invest in one or multiple investments (minimum $25 investment each). LendingClub's investments aren't tied to the stock market, but they are consumer loans, which also carry a high risk of default. The investments aren't backed by collateral.

Fundrise: You don't have to be an accredited investor to invest in Fundrise. With Fundrise, you invest in commercial real estate through real estate investment trusts. The REIT invests in a diversified pool of real estate properties to help minimize your risk. You can invest with as little as $500 for this stock market alternative investment.

Bottom Line

If you are an accredited investor looking for alternatives to the stock market, YieldStreet may provide the opportunity you want. YieldStreet professionals do all of the hard work. All you have to do is review their provided documents to decide if an investment is right for you.

We don't recommend relying solely on YieldStreet just for the fact that the investment opportunities are few and far between. If you see an investment that appeals to you, though, you can invest in an asset-based investment that has the potential to provide you with a decent return.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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