For investment success, it’s important to create an asset allocation that considers your financial circumstances and long-term goals. Diversification doesn’t ensure gains over losses, but it can help mitigate risk and volatility in one asset class over another. Marketplace lending has become an increasingly valuable investment option for those looking for steady returns in the real estate sector.
How Marketplace Lending Benefits Investors
Marketplace lending can offer several significant benefits to investors, as its driven by the dynamics of the market, or the wisdom of crowds. Through the right MPL platform, it’s possible for investors to achieve significant returns on their investments, from 7-11% on average; more than investing in bonds and with less risk than equity investment options. What’s more, investors will receive monthly interest payments during the life of the loan and a return of capital at maturity.
The short-term nature of MPL real estate loans means that investors get their principle back quickly, as opposed to waiting years for a bond to mature. As an alternative investment channel, investors can diversify their portfolio with a unique product that doesn’t have a direct or causal relationship with the stock market. There are various risk levels associated with each MPL opportunity, which investors can hand-pick to meet their overall investment diversification strategy.
Common Real Estate Investment Options
MPL investments come in many different forms. It’s worth noting that a real-estate investment trust (REIT) and marketplace lending are not one and the same thing. A REIT uses investor money to purchase real estate properties for a portfolio. Shares in REITs are purchased and sold on major exchanges – like a stock. MPL investment in a crowdfunding platform, on the other hand, allows investors to select individual properties they want to invest in; not just a share in a portfolio of properties.
MPL sites allow real estate investors to buy into real estate properties with relatively low minimum investments. Some sites allow investors to input as little as $1,000, which opens the door to many more opportunities for investors to start diversifying their portfolio within the real estate world than before. Investors in the MPL space can cherry pick from specific asset classes, loan types, valuation metrics, risk assessments and more. This offers a new level of control and transparency to those interested in real estate investing versus more opaque options offered by a REIT.
