YieldStreet – A 2019 Review

YieldStreet is a lending platform that connects investors with asset-based investments as an alternative to investing in the stock market.  The target return is 8 – 15% with a 1 to 3-year duration.  YieldStreet focuses on such investments as litigation finance, real estate, commercial finance, and consumer finance.   Traditionally these types of investments have only been available to the super wealthy, however you still must be an accredited investor to participate in YieldStreet’s platform.

An Alternative to the Stock Market

YieldStreet focuses its investment offerings in areas outside of the stock market in order to give individual investors access to high-yield asset based alternative investments.

Pre-settlement financing is a form of litigation finance that provides advances to plaintiffs while their cases are being litigated.  Often one of the most commonly overlooked forms of alternative investments, it is one of the most featured investments on YieldStreet.  Post and Pre-Settlement cases are offered in a wide range of cases including assault, FELA cases, wrongful imprisonment, and labor law cases.

Real Estate is the second most common investment offered.  YieldStreet typically invests in real estate projects in urban areas with low loan to value ratios.  Often, they will take a senior secured position on the properties.

You need a minimum investment of $5000 to get in on an investment, but investors have invested several million.

What is an Accredited Investor?

First, you must be an accredited investor to participate in YieldStreet’s offerings.  So, what are the criteria to be an accredited investor?  The definition is complex, but when it is broken down into simpler terms, an accredited investor is an individual or business entity who can deal in securities not registered with the SEC.  Accredited investors are often high net worth individuals, banks, insurance companies, brokers, and trusts.  They have access to complex and higher risk investments such as hedge funds, venture capital investments, and angel investments.

To be accredited you must have or be:

  • An income of $200,000 annually or $300,000 if filing joint for at least the 2 prior years.
  • Have a net worth of at least $1 million dollars.
  • A private business with assets exceeding $5 million dollars.
  • A registered broker or investment advisor.
  • An individual who has demonstrated knowledge and experience dealing in unregistered securities.

This criterion does limit who can participate in YieldStreet’s offerings, but those who meet the criteria of an accredited investor can take advantage of their platform.  It makes finding and investing in such deals much easier and more convenient than it would be otherwise.

The YieldStreet Philosophy

CEO Milind Mehere was frustrated at the lack of investment opportunities outside of the stock market.  YieldStreet was created to give accredited investors access to high-yield investments in a convenient easy to use platform that traditionally was only available to the super-wealthy.

Features of YieldStreet

  • Minimum investment amount = $5000
  • Fees = Average is 2% annually but varies by deal
  • Duration = 12 to 36 months
  • Accredited Investor = Yes
  • Opening an Account = Free once you are verified as an accredited investor
  • Investment Offerings = Over 90% of deals are rejected by YieldStreet’s advisors, as they do not meet their investment criteria. Most are real estate and litigation based.
  • Returns = The target return is between 8% and 15%.
  • Payout = Varies by deal but usually monthly or quarterly.
  • Risk = Correlation to market volatility is low due to the investments being backed by tangible assets. However, offerings are not backed by the SEC and total loss is possible.
  • Transparency = All opportunities can be viewed in detail on the site allowing investors to make educated investment choices.

Summary

YieldStreet is a crowdfunding based investment platform that grants nonstock market-based investment opportunities to accredited investors in a convenient and easy to use site.  Investments can have high returns at a relatively reasonable fee, but there are drawbacks.  Not everyone has access; accredited investors only.  Investments are not backed by the SEC and total loss is possible.  Once invested, your funds will be tied up for the duration of the investment with no cash out option.

YieldStreet’s accredited investor requirement is probably its largest drawback, as other crowdsourcing sites don’t have this requirement.  However, YieldStreet has issued well over $100 million in investments with 0 defaults so far.  Also, more than half of its investors have returned to invest again in additional investments.  If you meet the criteria of an accredited investor and are looking for opportunities outside of Wall Street, then YieldStreet is worth a look.

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