If you’re like me, you’re trying to figure out the best way to take advantage of the high inventory real estate foreclosure market but you’re a little cautious. You’ve got some cash sitting in your bank account earning a respectable 5% interest but you’d really like to buy some property. The only problem is you don’t know how much worse this market is going to get or when it’s going to recover. So what do you do?
One alternative is joining an online lending community where people can borrow and lend money essentially bypassing the banks thus getting better rates. You’d be the lender and sites like Prosper.com (aff) and Lendingclub.com would help you build diversified portfolios based on lender preferences. They speak of returns anywhere from 9% to 14% all depending on the amount of risk you decide to take. Here’s an example (aff) of how it works. Lendingclub also has a blog which has some good financial articles.
I think it’s a pretty good idea if you’re looking for a higher return and want a place to park your money until the real estate market settles down. I have signed up for a prosper.com account and started browsing the borrowers but have not yet loaned any money out. If you’ve used either one of these sites before, please let me know how it’s worked out for you.