Investing in real estate vs peer to peer lending

**snafu** · 04-05-2014, 10:51 PM

Do you want to be a landlord? Do you have the skill sets needed to be a landlord? Will $ 30K be 20% of the income property? If you buy in some other region, who will manage it, collect rent, screen tenants, arrange repair and cover minutiae? Have you looked at REITs [similar to a mutual fund]? What is your Risk profile? Google for one of the questionnaires]

Why not split between a Vanguard type Index Fund and Internal Fund?

**aim-high** · 04-06-2014, 08:00 AM

I want to own a house and give it for rent. What i am thinking is that the rent will pay my mortgage (I am expecting to get another 20K or in the next 6 months but I want to plan what i want to do)
So if buying another house is better than peer to peer lending, i will save more money for 2nd house downpayment. If not,I will invest it somewhere else like peer to peer.

I dont know what REIT is and I will research about it.
I already have roll over IRA and Roth IRA invested in Vanguard funds so dont want to invest again.
I am 35 years old and hence i think I want to take more risk .

Is peer to peer lending a bad idea ? Can I actually lose money in that ?

Originally posted by snafu View Post

Do you want to be a landlord? Do you have the skill sets needed to be a landlord? Will $ 30K be 20% of the income property? If you buy in some other region, who will manage it, collect rent, screen tenants, arrange repair and cover minutiae? Have you looked at REITs [similar to a mutual fund]? What is your Risk profile? Google for one of the questionnaires]

Why not split between a Vanguard type Index Fund and Internal Fund?

**97guns** · 04-06-2014, 08:30 AM

you'll be hard pressed to find a property in the bay area that will turn a positive with minimal down payment,

**riverwed070707** · 04-06-2014, 03:20 PM

Of course you can lose money in peer to peer lending. You do understand what it is right? Many (all??) of the borrowers turn to peer to peer for debt consolidation and loans when they can't get lower interest financing elsewhere. Many have poor credit ratings and a significant portion do go into default. The question really isn't whether some of your borrowers will default, rather it's a matter of whether you'll earn enough in interest to exceed losses from defaulted accounts. That said a lot of people are seeing great returns with it

**feh** · 04-07-2014, 06:43 AM

Originally posted by aim-high View Post

I have been researching a lot (in this forum) about alternate investing strategies...

Why are you looking for "alternate" investing strategies? Are you contributing the annual max to an IRA? If you still have more to save, just open a taxable investment account.

**JulieAlbright** · 04-07-2014, 11:39 AM

I can speak a little about Peer to Peer Lending as I have slowly been dabbling in it for a little over a year now. I currently have 51 loans ($25 each) and my return rate hovers around 11%. So as you can see, I don't have much money invested yet in the system. I prefer to go really slow right now and carefully choose each of the loans I invest in so I can better learn how to choose wisely.

I have yet to lose money on a loan. I had one start to go bad last year and I quickly sold it to another investor on the Trading Platform as soon as they missed one payment. I had a couple of loans be slightly late with their payments around Christmas. I held onto them because they had both consistent made on time payments for several months before and they both got caught back up after the holidays. I have one loan right now that is a couple of days late and if I don't see a payment recorded today I'll probably be selling it too.

Now after all that, I'll mention that I invest mostly in the higher rated loans - people with good incomes and Credit Scores over 700. I'm just not that willing at the moment to risk a significant amount of money on some of the higher interest rate/riskier loans.

As for real estate, I think it is a much more proven investment model. I personally however just do not have what it takes to be a Landlord. I'm a lousy judge of good character and an even more terrible judge of knowing a good potential property when I see one. That's why I keep the "real estate" portion of my investing in REIT and Real Estate Exchange Traded funds.

**pomala6** · 06-22-2014, 09:37 PM

You will try to investment with real estate.

**~bs** · 06-23-2014, 04:46 AM

Originally posted by JulieAlbright View Post

I can speak a little about Peer to Peer Lending as I have slowly been dabbling in it for a little over a year now. I currently have 51 loans ($25 each) and my return rate hovers around 11%. So as you can see, I don't have much money invested yet in the system. I prefer to go really slow right now and carefully choose each of the loans I invest in so I can better learn how to choose wisely.

I have yet to lose money on a loan. I had one start to go bad last year and I quickly sold it to another investor on the Trading Platform as soon as they missed one payment. I had a couple of loans be slightly late with their payments around Christmas. I held onto them because they had both consistent made on time payments for several months before and they both got caught back up after the holidays. I have one loan right now that is a couple of days late and if I don't see a payment recorded today I'll probably be selling it too.

Now after all that, I'll mention that I invest mostly in the higher rated loans - people with good incomes and Credit Scores over 700. I'm just not that willing at the moment to risk a significant amount of money on some of the higher interest rate/riskier loans.

As for real estate, I think it is a much more proven investment model. I personally however just do not have what it takes to be a Landlord. I'm a lousy judge of good character and an even more terrible judge of knowing a good potential property when I see one. That's why I keep the "real estate" portion of my investing in REIT and Real Estate Exchange Traded funds.

I do peer to peer lending too, I think the return rates are decent, but it is high risk, especially if the economy crashes again.

My strategy differs, in that I mostly invest in high yielding, long term maturity, low prior delinquency loans. I started around Feb last year, but didnt' really get my portfolio fully invested in until May or so (takes time, as you know). My return is around 15%, with around 1.4% of my loans in grace period or worse, so my real return is around 13.6% so far over that period of time.

for me personally, I don't think it's a good idea to invest a significant chunk of money in. If we're comparing this to real estate, I'd say it's a significant chunk.

**~bs** · 06-23-2014, 04:58 AM

I started with $5,000, Lendingclub

**autoxer** · 06-23-2014, 07:10 AM

Originally posted by aim-high View Post

I want to own a house and give it for rent. What i am thinking is that the rent will pay my mortgage (I am expecting to get another 20K or in the next 6 months but I want to plan what i want to do)
So if buying another house is better than peer to peer lending, i will save more money for 2nd house downpayment. If not,I will invest it somewhere else like peer to peer.

I dont know what REIT is and I will research about it.
I already have roll over IRA and Roth IRA invested in Vanguard funds so dont want to invest again.
I am 35 years old and hence i think I want to take more risk .

There is no correct or incorrect strategy, between real estate and peer to peer lending, because they are vastly different from one another. But you certainly shouldn't invest in something that you don't understand. If you are doing it for fun and enjoy learning the intricacies of those investments, then by all means go ahead and do it. Some people enjoy playing the role of landlord and some people enjoy playing the role of the bank, but don't feel like you are supposed to turn to those alternatives.

My strategy after maxing out the tax advantaged accounts is to buy additional index funds in a taxable brokerage account. I use my asset allocation to give me the amount of risk that I am comfortable with. This keeps things very simple, so I don't have to invest my time into learning about alternative investments.

**97guns** · 11-10-2014, 05:12 AM

look into trust deed investing, secured by real property you can earn up to 12%

**mortgagereport** · 11-15-2014, 12:09 PM

What are some other alternative investment classes?

Don't mean to hijack the thread, but does anyone have a list of other alternative investments like these? I only realized P2P lending was a thing in the last few months.

**sblatner** · 11-15-2014, 02:25 PM

I love Peer to Peer Lending. I use Lending Club. I have had quite a few loans written off but it doesn't matter as the interest I'm receiving from the people who are paying more than makes up for the loans that go bad.

I have been loaning for four years and am averaging 6% including the loans that have been written off. Slow and steady. My account balance is going up.

I focus on mainly A, B & C loans that have low balances - under $5k. I hope that people will be able to afford those payments more than if they were to borrow more.

If you want to try it, set up an account with what you can afford and then add to it each month. I think you will find you do well, too.

**JohnM.Hendricks** · 11-24-2014, 04:13 AM

With a real estate investment property, there are more ways in which to realize a superior return on your investment. Here are ways of real investment returns profit:
Cash Flow from Rental Income
Increases in Value Due to Appreciation
Improving Your Investment Property - More Value at Sale
Inflation is Your Friend When it Comes to Rent
Paying Off Your Mortgage
You Could Just Find that "Steal of a Deal"

Investing in real estate vs peer to peer lending