p2pfan
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Post by p2pfan on Mar 7, 2020 15:07:59 GMT
Of the next six pending property projects on the platform in March, five are loaning money for one of multiple phases.
There always used to be multi-phase development projects on CP, of course, but the ratio seems to have increased in recent times.
As has commented elsewhere on these forums, doesn't this make CP investments much riskier? While 8% on, say, an existing house that the borrower wants to refurbish is a good return, on major, complicated and lengthy property construction and development projects in which there are numerous points of failure, doesn't it seem less attractive?
Thoughts?
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puddleduck
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Post by puddleduck on Mar 7, 2020 15:58:59 GMT
Agreed - I posted regarding this on the Weymouth thread (https://p2pindependentforum.com/post/360586/thread)
'I don't like the look of this one at all, and haven't been keen on the many recent multi-phase loans from CP either.
As we all know if a project fails - and large development loans have a history of doing so, recoveries will be far lower and a 25-50% recovery is not unfeasible or even to be unexpected.
Anyone using Auto-lend must also take care not to end up over exposed to a particular loan as you could end up sleep walking into funding multiple tranches.'
The risk-reward ratio is not looking good at all on these loans - I haven't been investing in CP for some months, unless a rare single phase loan comes along.
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jonno
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nil satis nisi optimum
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Post by jonno on Mar 7, 2020 16:05:45 GMT
Agreed - I posted regarding this on the Weymouth thread (https://p2pindependentforum.com/post/360586/thread) 'I don't like the look of this one at all, and haven't been keen on the many recent multi-phase loans from CP either.
As we all know if a project fails - and large development loans have a history of doing so, recoveries will be far lower and a 25-50% recovery is not unfeasible or even to be unexpected.
Anyone using Auto-lend must also take care not to end up over exposed to a particular loan as you could end up sleep walking into funding multiple tranches.'The risk-reward ratio is not looking good at all on these loans - I haven't been investing in CP for some months, unless a rare single phase loan comes alone. Also, re auto-lend, don't forget that you can set it to not invest in the next loan , but it then resets itself to loaning on the next project. So if you don't want to loan on, say, the next three projects, you have to turn it off every time. You can of course turn it off altogether.
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easylender
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Post by easylender on Mar 7, 2020 22:54:53 GMT
If it's a long project and the borrower doesn't need all the funds up front then it makes sense to have multiple tranches. It's better for the borrower as it incurs less interest than taking all the funds at the start, and it's safer for the lenders as later tranches are only released after adequate progress has been demonstrated. For sure some loans are riskier than others, but is there any evidence that multiple tranche loans are riskier?
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Post by Ace on Mar 7, 2020 23:32:26 GMT
If it's a long project and the borrower doesn't need all the funds up front then it makes sense to have multiple tranches. It's better for the borrower as it incurs less interest than taking all the funds at the start, and it's safer for the lenders as later tranches are only released after adequate progress has been demonstrated. For sure some loans are riskier than others, but is there any evidence that multiple tranche loans are riskier? Multi-phase loans carry the added risk that later phases might not get funded, leaving the developer with a half finished development that he/she can't complete, which might force them to sell at a knockdown price. This hasn't been a problem for CP so far, but we have seen it on other platforms. One can easily imagine situations where this could occur; where general confidence in P2P collapses, or where specific confidence in CP collapses, perhaps due to rising defaults. I don't personally feel that it is likely, but it is an additional risk that isn't present when all funding is provided upfront in a single phase. As I've said before, you could always choose to invest in only the final phase of multi-phase loans, which might even be seen as lower risk than single-phase loans where the development is nearly complete when you invest, thus eliminating most of the development risk. Having said all of that, I'm happy to invest in early phases currently, mostly based on my confidence in CP to manage these situations. Only time will tell if my confidence is misplaced.
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