When 'invest like the 1%' fails: How Yieldstreet's real estate bets left customers with massive losses

When Justin Klish stumbled upon an advertisement for Yieldstreet successful February 2022, helium said, it was the company's tagline that stuck successful his head.

"Invest similar the 1%," the startup said.

The advertisement spoke to his tendency to physique wealthiness and diversify distant from stocks, which were past successful freefall, Klish said. Yieldstreet says it gives retail investors specified arsenic Klish entree to the types of deals that were antecedently lone the domain of Wall Street firms oregon the ultrarich.

So Klish, a 46-year-old fiscal services idiosyncratic surviving successful Miami, logged connected to Yieldstreet's platform, wherever a brace of offerings jumped retired to him.

He invested $400,000 successful 2 existent property projects: A luxury flat building successful downtown Nashville overseen by erstwhile WeWork CEO Adam Neumann's household office, and a three-building renovation successful the Chelsea vicinity of New York. Each task had targeted yearly returns of astir 20%.

Three years later, Klish said helium has small anticipation of ever seeing his wealth again. Yieldstreet declared the Nashville task a full nonaccomplishment successful May, according to an capitalist letter, wiping retired $300,000 of his funds. The Chelsea woody needs to rise caller superior to debar a akin fate, according to different letter. Both letters were reviewed by CNBC.

"There isn't a time that goes by without maine saying, 'I can't judge what happened,'" Klish told CNBC. "I mislaid $400,000 successful Yieldstreet. I see myself moderately financially savvy, and I got duped by this company. I conscionable interest that it's going to support happening to others."

Yieldstreet, founded successful 2015, is 1 of the best-known examples of American startups with the stated ngo of democratizing entree to assets specified arsenic existent estate, litigation proceeds and backstage credit. To bash so, it gathers funds from thousands of investors specified arsenic Klish, who typically enactment successful astatine slightest $10,000 each for projects vetted by Yieldstreet managers.

The startup's cardinal premise is that the satellite beyond nationalist stocks and bonds — often called alternate assets oregon backstage marketplace investments — provides some smoother sailing and the anticipation of higher returns, a win-win proposition. This month, President Donald Trump signed an executive order designed to let private marketplace investments successful U.S. status plans.

But Yieldstreet customers who participated successful its existent property deals successful caller years accidental they've learned the flip broadside of the backstage markets: They look immense losses connected investments that turned retired acold riskier than they thought, portion their wealth has been locked up for years with small to amusement for it too frustration.

The institution said successful a connection that its existent property equity offerings from 2021 and 2022 were "significantly impacted" by rising involvement rates and marketplace conditions that pressured valuations industrywide.

This nonfiction is based connected dozens of capitalist letters that were sent to customers by Yieldstreet and reviewed by CNBC.

The documents amusement investors enactment much than $370 cardinal into 30 existent property projects that person already recognized $78 cardinal successful defaults successful the past year. Yieldstreet customers who spoke to CNBC accidental they expect heavy oregon full losses connected the remainder.

The breadth of Yieldstreet's struggles successful existent property — its biggest azygous concern class — hasn't antecedently been reported.

CNBC's investigation covers a wide swath of deals that the institution offered betwixt 2021 and 2024, but doesn't see each project, of which determination were astatine slightest 55, according to Yieldstreet.

The troubled projects vary. They see flat complexes successful boomtowns specified arsenic Atlanta, Dallas and Nashville, Tennessee; developments successful coastal cities including New York, Boston and Portland, Oregon; flat buildings successful the Midwest and single-family rental homes crossed Florida, Georgia and North Carolina.

Of the 30 deals that CNBC reviewed accusation on, 4 person been declared full losses by Yieldstreet. Of the rest, 23 are deemed to beryllium connected "watchlist" by the startup arsenic it seeks to recoup worth for investors, sometimes by raising much funds from members. Three deals are listed arsenic "active," though they person stopped making scheduled payouts, according to the documents.

Additionally, Yieldstreet unopen down a existent property concern spot made up of six of the supra projects past twelvemonth arsenic its worth plunged by astir half, locking up lawsuit wealth for astatine slightest 2 years.

Yieldstreet's wide returns successful existent property person plunged successful the past 2 years; the class went from a 9.4% yearly instrumentality complaint in 2023 to a 2% instrumentality complaint successful the company's astir caller update connected its website.

But lone customers participating successful a circumstantial money get accusation astir its performance, and Yieldstreet labels its capitalist updates "confidential," informing customers that the accusation successful them can't beryllium shared without consent from the startup. While not uncommon successful the backstage markets, those limitations marque it hard for investors to cognize if their acquisition is unique.

Klish said helium began to interest astir his investments successful aboriginal 2023 erstwhile updates became precocious and began to hint astatine deteriorating marketplace conditions.

Frustrated by those delays and what helium described arsenic a deficiency of candor from Yieldstreet astir his sinking investments, Klish turned to forums connected Facebook and Reddit for a consciousness of the bigger picture. There helium said helium recovered a fewer twelve different customers who shared their Yieldstreet experiences.

"When I dug into the different deals, I realized that this is systemic," said Klish. "Almost each azygous woody is successful trouble."

In July, Klish filed a complaint, which CNBC has reviewed, with the U.S. Securities and Exchange Commission alleging that Yieldstreet misled its investors. Klish said helium has yet to person a effect to his complaint.

Yieldstreet calls itself the starring level offering entree to the backstage markets, a class that has boomed implicit the past decennary arsenic nonrecreational investors question sources of output beyond stocks and bonds.

Founded 10 years agone by Michael Weisz and Milind Mehere, the institution has well-known VC backers including Khosla Ventures, Thrive Capital and General Catalyst. Yieldstreet was portion of a question of fintech startups created successful the aftermath of the 2008 fiscal crisis, including Robinhood and Chime, with a populist message.

"Our ngo astatine Yieldstreet is, however bash we assistance make fiscal independency for millions of people?" Weisz said during a 2020 CNBC interview. "You bash that by helping radical make consistent, passive income."

Weisz, who became CEO of Yieldstreet successful 2023, brought acquisition successful litigation finance, wherever hedge funds lend wealth to plaintiffs for a portion of the payout if the suit wins. Mehere, a erstwhile bundle technologist who had co-founded online selling startup Yodle, was the much method of the pair.

Yieldstreet declined to marque the co-founders oregon different executives disposable for this article.

In aboriginal 2020, Yieldstreet announced a concern with BlackRock, the biggest plus manager successful the world. The startup said astatine the clip that its caller Prism money would incorporate a premix of its backstage marketplace assets with accepted enslaved funds managed by BlackRock.

Here is the 2020 interrogation with Yieldstreet co-founder Weisz:

The determination seemed to awesome that Yieldstreet was primed for mainstream success. BlackRock had spent 18 months vetting the institution earlier agreeing to the tie-up, Yieldstreet's co-founders told CNBC at the time.

The period aft its nationalist announcement, though, Yieldstreet had tougher quality to share. It was becoming wide that customers successful different 1 of its merchandise lines — loans backed by commercialized ships that are torn isolated for scrap metallic — would endure losses, the steadfast told them successful March, according to a Wall Street Journal report.

Yieldstreet mislaid way of 13 ships successful planetary waters that backed $89 cardinal successful subordinate loans, according to an April 2020 lawsuit filed by the startup against the borrower successful that project, which it accused of fraud. In October 2020, a British tribunal sided with Yieldstreet successful the suit against the borrower, a Dubai-based vessel recycler.

The occurrence frightened disconnected BlackRock, which ended the concern weeks aft it was announced, according to a idiosyncratic acquainted with the substance who asked to stay unnamed truthful they could talk freely astir backstage conversations.

A Yieldstreet spokeswoman astatine the clip told The Wall Street Journal that the BlackRock motorboat was initially palmy but the money "was past faced with the marketplace situation caused by Covid-19."

Three years later, the SEC fined Yieldstreet $1.9 cardinal for selling a $14.5 cardinal marine indebtedness to investors adjacent erstwhile it had crushed to judge the borrower had stolen proceeds from related deals. Yieldstreet besides didn't usage "publicly available" methods to way the ships it was relying connected for collateral, the SEC said.

"YieldStreet aims to unlock the analyzable alternate investments marketplace for retail investors but failed to disclose glaring reddish flags it had astir the information of the collateral backing this offering," an SEC authoritative said successful a 2023 release accompanying the settlement, for which the institution neither denied nor admitted to the agency's findings.

Still, the institution continued to rack up assets connected its platform, successful portion by ramping up activities successful existent estate. By 2023, existent property funds made up 26% of each investments connected the platform, the largest plus class and good up of runners-up specified arsenic backstage credit, Yieldstreet said astatine the time.

Late that year, Yieldstreet announced it had acquired Cadre, a startup co-founded by Jared Kushner that focused connected broadening entree to commercialized existent estate. The companies declined to disclose presumption of the deal, but Yieldstreet said the combined entities' "investment value" was astir $10 billion.

In May 2025, Yieldstreet replaced Weisz arsenic CEO with Mitch Caplan, a erstwhile E-Trade main who joined the startup's committee successful 2021. That's the twelvemonth the task steadfast wherever Caplan serves arsenic president, Tarsadia Investments, took a involvement successful Yieldstreet. The institution declined to accidental wherefore Weisz was replaced.

In July, Yieldstreet announced a $77 million superior raise, led by Tarsadia Investments.

Yieldstreet continued to marque moves successful existent property good aft a seismic displacement that made the manufacture acold harder to navigate had begun.

In aboriginal 2022, the Federal Reserve kicked off its astir assertive rate-hiking rhythm successful decades to combat inflation, turning the economics of galore projects from that play upside down. The worth of multifamily buildings has dropped 19% since 2022, according to Green Street's commercialized spot index.

Projects that Yieldstreet enactment its customers into struggled to deed gross targets amid terms contention oregon had problems filling vacancies oregon raising rents, and frankincense began to autumn down connected indebtedness payments, according to capitalist letters.

Combined with the usage of leverage, oregon borrowing wealth that amplifies some risks and returns, Yieldstreet investors suffered implicit losses connected projects successful Nashville, Atlanta and New York's Upper West Side neighborhood, the letters show.

"After exhausting each options to sphere value, YieldStreet determined determination was nary tenable way to recovery," the steadfast told customers who invested $15 cardinal successful the Upper West Side deal. "We sold our presumption for $1."

It's unclear if Yieldstreet, which makes wealth by charging yearly absorption fees of astir 2% connected invested funds, itself suffered fiscal losses connected the defaults.

In astatine slightest a fractional twelve cases, Yieldstreet went to its idiosyncratic basal again successful 2023 and 2024 to rise rescue funds for troubled deals, telling members that the loans combined the protections of indebtedness with the upside of equity.

But if the task was doomed, a bailout indebtedness was, astatine slightest successful 1 case, efficaciously throwing bully wealth aft bad. A $3.1 cardinal subordinate indebtedness to assistance rescue the Nashville project, located astatine 2010 West End Avenue, was wiped retired successful conscionable months.

"We are reaching retired to stock hard news," Yieldstreet told investors of the Nashville task and its subordinate indebtedness successful May. "Following aggregate restructuring attempts, the spot has been sold to Tishman Speyer ... resulting successful a implicit nonaccomplishment of superior for investors."

In a connection provided successful effect to CNBC's reporting for this article, Yieldstreet said it has offered 149 existent property deals since inception and has delivered affirmative returns connected 94% of matured investments successful the category.

That 94% fig apt doesn't see the distressed projects that CNBC has identified, since those funds aren't yet classified arsenic matured portion Yieldstreet seeks to salvage projects connected its watchlist. The watchlist designation doesn't ever effect successful the nonaccomplishment of capitalist funds, Yieldstreet said successful different statement.

"Of the astir $5 cardinal invested crossed the platform, a acceptable of existent property equity offerings originated during 2021–2022 were importantly impacted by rising involvement rates and broader marketplace conditions that pressured multifamily valuations crossed the industry," Yieldstreet said done a spokeswoman.

On its website, the startup says it offers lone astir 10% of the opportunities it reviews, signaling its discernment erstwhile it comes to risk.

But respective nonrecreational investors pointed to the anticipation that, alternatively of securing lone top-quality deals successful existent estate, Yieldstreet whitethorn beryllium getting ones that are picked implicit by much established players.

"There's nary question you've seen deals that institutions person passed connected that went to the platforms due to the fact that retail investors mightiness person little subject than the organization ones," said Greg Friedman, CEO of Peachtree Group, an Atlanta-based commercialized existent property concern firm.

"It's a reflection of a deficiency of subject successful underwriting and marketplace conditions going against them," Friedman said of Yieldstreet's way record. "Anything done aft 2022, they should person done much cautiously knowing that we are successful a higher-rate environment."

In precocious 2022, Yieldstreet adjacent told investors that existent property was a "safe(er) haven" asset during periods of rising rates and precocious inflation. By then, the Fed's intent to squash ostentation with higher rates was good understood.

"Real property tin beryllium an effectual ostentation hedge, carries debased correlation to accepted markets, and has even benefitted successful times of market downturns, generating outsized returns," the startup said successful a blog post astatine the time.

In the post, Yieldstreet gave the illustration of the Alterra Apartments, a multifamily task successful Tucson, Arizona, wherever it said rent increases and a contractual headdress connected involvement rates protected it from the Fed hikes.

But this year, Yieldstreet told investors successful the $23 cardinal woody that the Tucson improvement was successful method default and headed for a afloat write-off.

Customers interviewed by CNBC impeach the institution of downplaying concern risks and accidental that its disclosures astir show tin beryllium sloppy oregon misleading.

Mark Underhill, a 57-year-old bundle engineer, said helium invested $600,000 crossed 22 Yieldstreet funds and faces $200,000 successful losses connected projects that are connected watchlist and person ne'er made payouts.

"With immoderate investment, there's a hazard of loss," Underhill said. "But there's nary information of these benignant of gut-punch losses. They talked astir however their deals were backed by collateral, and they gave you each these reasons that marque you consciousness there's thing near if the woody goes south."

Underhill, who was treated with chemotherapy for aggregate myeloma past twelvemonth and travels the American West successful a camper van, said his losses are forcing him to enactment beyond his expected status date.

"The happening that is mind-boggling is, however did they neglect truthful severely connected truthful galore deals successful truthful galore markets?" Underhill said.

The offering expanse for the Upper West Side task said income prices would person to plunge 35% for Yieldstreet members to spot immoderate losses, a worse deed than what New York experienced during the 2008 recession, Klish wrote successful his July ailment to the SEC.

But the task defaulted adjacent though prices successful the country didn't autumn by that much, Klish wrote.

In different example, portion participants successful the Nashville deals got letters showing a implicit loss, oregon a -100% return, Yieldstreet's public-facing website listed a 0% interior complaint of return, oregon IRR, giving the mendacious content that investors got each their superior back.

After CNBC asked Yieldstreet for remark connected the discrepancy, the website was updated to bespeak the -100% return.

The institution besides stopped issuing quarterly portfolio snapshots aft early 2023, making it harder for prospective investors to spot however Yieldstreet's wide investments are performing.

So too selling materials, customers are mostly near to trust connected the company's disclosures astir its show arsenic a gauge of whether to put with the startup.

Yieldstreet says it updates its metrics quarterly, and its website shows a 7.4% interior complaint of instrumentality done March 2025 crossed each investments. That play apt excludes the interaction of the Nashville defaults, which were disclosed successful May 2025.

Yieldstreet's existent property woes endanger to hitch retired decades of savings for Louis Litz, a 61-year-old electrical technologist from Ambler, Pennsylvania.

Seeking income and stability, Litz enactment $480,000 into Yieldstreet funds, helium said. Three of those projects person defaulted, portion 7 developments are connected watchlist, helium said.

"At slightest fractional of this worldly is going under," Litz said. "I'm 61, truthful there's nary mode I tin truly recover."

Under its caller CEO, Caplan, Yieldstreet has decided to pivot distant from a concern exemplary of mostly offering bespoke investments similar the ones that cratered for its existent property customers.

This month, Yieldstreet said that it officially became a broker-dealer, allowing it to connection funds from extracurricular plus managers including Goldman Sachs and the Carlyle Group. The program is to go a organisation level wherever 70% of funds are from these established Wall Street giants, Caplan said this month.

The determination is worlds distant from the assurance that Yieldstreet co-founder Weisz had successful the company's archetypal model.

In the 2020 CNBC interview, Weisz said that helium often reminded his unit that "winter is coming" and to hole for turbulence.

Yieldstreet would support its customers from losses due to the fact that of the underlying collateral the steadfast was investing in: existent buildings with tenants successful sought-after locations each implicit the country, Weisz said.

"I'm not present to archer you that Milind and Michael are the world's smartest investors and there's ne'er going to beryllium thing that goes wrong," Weisz said, referencing himself and his co-founder. "We recognize that erstwhile wintertime comes, determination volition beryllium challenges, but we instrumentality comfortableness successful knowing that there's underlying collateral."

"Anybody could enactment wealth out," Weisz said. "It's astir bringing it backmost home."