I keenly remember the excitement that surrounded my first read of a book that has become a financial classic: Rich Dad, Poor Dad by Robert T. Kiyosaki. It wasn’t just the philosophical difference in how assets are traditionally defined (things you own with perceived value) versus the author’s new definition (things that put money into your pocket each month.) No, the real excitement came from the practical application that accompanied that definition: investing in rental property.

For all of the benefits that come along with finding a rental property with positive cash flow, the downsides (even if only perceived to be so) hold people back from such an investment. Even though the author provided many solutions (such as hiring a property manager) to the typical complaints of those opposed to rental property (such as “I don’t want to fix toilets”) there were still some things that were holding me back too. I liked the idea of investing in something that paid me back regularly, but the overhead and management of a rental property business dissuaded me from the investment.

Enter the P2P Loan

When I first heard about P2P loans the excitement I first felt from reading Rich Dad, Poor Dad returned. No, I didn’t become a P2P borrower and start investing in real estate, I became a P2P lender as an alternative application to what I had learned.

P2P loans had so many benefits similar to investing in rental property, with reduced downsides. I could still invest my money in a true asset that would put money in my pocket each month. I didn’t have to worry about finding tenants. Prosper and Lending Club were bringing an abundance of those to me each day. They handled the details of the loans, just like a property manager of a rental property might do, but at a fraction of the cost. P2P loans limited my exposure to risk by allowing me to spread my investment out across many more properties and tenants (i.e. loans and borrowers). This helped to minimize the impact of the inevitable late payment (just like someone being late with the rent), missed payment (similar to a repair expense), or default (lack of tenant/eviction). With a minimal investment I could have many more “properties” with positive cash flow than I would ever be able to do with actual rental property. Lastly, the startup investment for a P2P loan portfolio was significantly less than with real estate. That meant that I could try a few different strategies, and even make some mistakes, with putting myself out of business.

For all of these reasons and more, I have come to think of the people I loan money to as the ideal tenants for my virtual real estate business. I get everything I was looking for to apply the concept of Rich Dad, Poor Dad, in an easy to implement form that scales well and has many of the details handled by the loan facilitator for a modest fee. It doesn’t get much better than that!

If you would like to get started investing in P2P loans like I do, it’s easy to become a lender at any of the major P2P lending sites. Other P2P sites may offer similar opportunities, by I know first hand how great Lending Club is from my experiences blogging for them and lending there.  Sign up with Lending Club today!

Also, get the book that was my inspiration: