Next video:
Loading the player...

There is a moment in the film “The Big Short”, directed by Adam McKay, where Michael Burry (played by Christian Bale), is explaining to two of his biggest investors why he has taken a enormous short position on the U.S. housing market, essentially contradicting every bank and top economist in the country. With two sentences, he sends an arrow through the entire premise of the American Dream:

 “Average take home pay is flat yet home prices are soaring. That means homes are debts, not assets.”

Burry was talking about the U.S. housing market in 2007, but a decade later with the scars of the 2008-09 crisis still visible, his words are still prescient. Whether he stills feels this way or not, Burry has placed a different bet on the U.S. housing market by becoming an investor in PeerStreet, a peer to peer marketplace that allows investors to buy into the debt of real estate investments. Think Lending Club, but for real estate, where investors can access prime traunches​ of real estate debt. It’s real estate loan securtization​ by any other name, but by investing in the debt of a real estate investment at low loan to value ratios, PeerStreet is offering a new alternative for real estate investing. If things go sour, debt investors are paid off ahead of equity investors, thereby cushioning the risk. Furthermore, PeerStreet advertises 6-12% annualized returns, and the loan periods are as short as 6 months to a just a couple years, but only for accredited investors.

Co-Founders Brew Johnson and Brett Crosby are banking their bet on offering choice loans, picked by real estate investing experts in local markets around the country. They are using a peer to peer marketplace via a simple technology interface honed by the founders’ combined experiences at Google for Crosby and real estate law for Johnson to pair up investors with loans.  As home values soar in top markets amid stagnant wages, tight inventories and rising mortgage rates, you can almost hear Michael Burry’s ominous warning from, “The Big Short”, ringing out nearly a decade later. Instead, Burry is an investor and advocate for the company, joining other investors including Andressen-Horowitz and Rembrandt Partners, among others. Its list of advisors is stacked with a mix of real estate executives, technologists and Wall Street veterans, including Barry Ritholtz, and Howard Lindzon, founder of StockTwits.

Instead of a warning, Burry gets the pole position quote on PeerStreet’s homepage:

"PeerStreet’s investments have similar yields to LendingClub, but are backed by real estate and carry very attractive loan-to-value ratios. Simply a smarter way to invest.”

Burry’s track record of betting against the US real estate market has been well documented and celebrated, earning Christian Bale an Oscar for his portrayal. His bet, and PeerStreet’s approach to opening up the U.S. housing market to retail investors, is still being written.

Related Articles
  1. Investing

    10 Habits of Highly Effective Real Estate Investors

    The best real estate investors all share these traits and practices.
  2. Financial Advisor

    How to Invest in Real Estate Without Buying Property

    Investing in real estate can require more capital than most investors have available, but there are options to invest in real estate for less.
  3. Investing

    Key Reasons To Invest In Real Estate

    There has been a lot of negativity over the real estate sector since 2008. Here are the reasons why you should be investing in it.
  4. Investing

    The Risks Of Real Estate Sector Funds

    Discover the risks and rewards of investing in real estate funds, as well as some of the best and worst performers.
  5. Investing

    4 Key Factors That Drive the Real Estate Market

    Whether you are investing directly or indirectly in property, you need to know the factors that affect its value.
  6. Investing

    4 Key Factors That Drive The Real Estate Market

    The size of the real estate market make it an attractive sector for many investors, but understanding the factors that drive it is essential.
  7. Insights

    The Big Short Explained

    Oscar-nominated film the Big Short explains the complex financial instruments that helped fuel the financial crisis.
  8. Retirement

    Is Real Estate Your Retirement's Secret Weapon?

    With stocks maybe peaking and fixed-income investments paying less and less, real estate could be the growth opportunity for your retirement portfolio.
  9. Investing

    Is Now A Good Time To Invest In Real Estate?

    From carrying costs to investment risk, there's a lot to consider before you invest in real estate.
  10. Financial Advisor

    Top 4 Global Real Estate Mutual Funds

    Read about four of the best global real estate mutual funds, which invest in the securities of real estate companies or real estate investment trusts (REITs).
Hot Definitions
  1. Leveraged Buyout - LBO

    The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. ...
  2. Current Assets

    A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable ...
  4. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  5. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  6. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
Trading Center