victors
Member of DD Central
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Post by victors on May 2, 2018 13:14:54 GMT
Seems a lot of loans to choose from.
What factors do you take into account?
Do you have rules for length of loan, interest rate, LTV, etc?
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ceejay
Posts: 972
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Post by ceejay on May 2, 2018 14:03:59 GMT
Yes, there are a lot to choose from. That's a good thing!
I believe that some people have a strategy of buying a set amount of pretty much anything that comes to market, to get best diversification.
Personally I have definite rules about duration and interest rate, a soft rule about LTV, and there are some business types I won't invest in. If you're going to be at all selective, you should always read the documents. Several times I've looked at a loan that passed my basic hurdles but which, on closer inspection, didn't smell right. If it's just a little whiffy, I might invest a smaller amount than my usual.
We've been told that there are enhancements coming which will allow us to set some semi-automatic trading rules - look for posts from chris about this.
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Post by pikeman on May 2, 2018 14:16:14 GMT
I like to diversify but generally give a miss on turbines and property developments with tranches
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victors
Member of DD Central
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Post by victors on May 2, 2018 14:24:44 GMT
How much importance do people place on LTV v interest rate and do you favour longer loans or shorter loans?
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Post by swissbankers on May 2, 2018 14:32:03 GMT
I spread mine equally across as many loans as possible but nothing under 7%
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ceejay
Posts: 972
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Post by ceejay on May 2, 2018 14:36:24 GMT
How much importance do people place on LTV v interest rate and do you favour longer loans or shorter loans? I don't think you can infer a whole lot from the stated LTV. Not that I ignore it completely, but remember that it is dependent on a whole load of assumptions and estimates. What the asset would realise if it had to be sold may bear no resemblance to the given figure, depending on factors both internal and external to the project. Longer vs. shorter depends on subjective views of the risks involved. Personally I tend to go for shorter loans because in the event that P2P generally takes a bashing, I don't want to be the last one out. But there are many factors you could bring to bear on this question - interest rates now and in the future, how hard you have to work to keep your money invested...
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Post by brightspark on May 2, 2018 15:08:47 GMT
Seems a lot of loans to choose from. What factors do you take into account? Do you have rules for length of loan, interest rate, LTV, etc? Have a look at all the loans in trouble i.e. suspended for other than a technical reason. This will give you an insight into what can go wrong. .
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rick24
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Post by rick24 on May 2, 2018 15:23:49 GMT
I invest small amounts in a large number of loans. I'm looking for 8%, LTV less than 70% (some scope for a trade off between the two - 8% loans these days tend to be on the verge of being too risky for me (there is an inverse relationship between security and interest rate); interest rates have edged down I think). I avoid certain types of loans and sometimes decide not to invest if an internet search turns up something about the borrower. Probably shouldn't say this, but I will tend to accept 6%+ in the ISA version of the MLA if the security is strong - that's because you can't claim tax relief on losses within the ISA so better to have greater security against default in the first place. I keep a close eye on updates.
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Post by valerieb on May 7, 2018 8:31:16 GMT
I also take into account when I may need that money back so, if buying into a long term loan, I choose the smaller loan amounts so that when I need to sell on there hopefully won't be too much of that loan sloshing around in the SM. I always expect property developments to overrun so never bank on that money to be returned promptly but these can be advantageous as there may well be a hike in interest%, albeit small. Generally, I don't buy below 7% interest or above 70% LTV and am a lot more cautious about investing in wind farms. As rates have been dropping over the last year or so across P2P, I set requests for older loans I'd like to hold (or have had to sell in the past to get funds back) as very occasionally small amounts do become available - and by saying this I've probably scuppered my chances of getting these!
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shimself
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Post by shimself on May 11, 2018 9:31:43 GMT
I like to diversify but generally give a miss on turbines and property developments with tranches Tranches. I've learned to love tranches (best thing since sliced bread, sorry). You can come in towards the end of a loan when you know progress has been good. Makes for more work, but say 7% on a near certain thing is a whole lot better than 7% on an if all goes well
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Post by danielbird193 on May 11, 2018 15:09:29 GMT
I like to diversify but generally give a miss on turbines and property developments with tranches Tranches. I've learned to love tranches (best thing since sliced bread, sorry). You can come in towards the end of a loan when you know progress has been good. Makes for more work, but say 7% on a near certain thing is a whole lot better than 7% on an if all goes wellAgreed, getting in at a later stage de-risks the investment but at exactly the same % return. I always read the monitoring surveyor reports for the later tranches to identify any potential cost overruns or time delays. The AC credit reports are sometimes quite selective in their summarisation of the reports!
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69m
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Post by 69m on May 11, 2018 16:27:12 GMT
As diversification is now much easier within the MLA, it has become a lot more attractive.
When choosing loans, I have minimum rate, maximum LTV and maximum term criteria. Windmills, London properties and anything with second-charge security are avoided. Then the supporting documents get reviewed before making a final decision.
Also, I'll often prioritise well-performing secondary-market loans over new loans.
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Post by df on May 11, 2018 21:37:48 GMT
I’m currently in 258 loans. I have maximum limit per loan/borrower, no matter how good it sounds or how high the interest rate is, but I tend to invest smaller amounts in loans with LTV over 60% or any LTGDV’s and 2nd charge loans. My minimum rate is 7%, but I’ve made 3 exceptions for 6.5% loans. I prefer SME amortising loans; if AC had more of them I would probably decrease my contribution in property sector. I’m not investing in loans that I have holdings in my GBBA/GEA accounts unless they are smaller than I would normally invest.
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Post by Ton ⓉⓞⓃ on May 12, 2018 7:58:12 GMT
I like to diversify but generally give a miss on turbines and property developments with tranches Tranches. I've learned to love tranches (best thing since sliced bread, sorry). You can come in towards the end of a loan when you know progress has been good. Makes for more work, but say 7% on a near certain thing is a whole lot better than 7% on an if all goes wellI suppose you're talking about; "when is a loan at it's riskiest?" I agree groundworks are recognized as a risky stage (there are so many unknowns), but also the sales stage has it's risks too. So in the past I have tried to concentrate on the middle of a development (Dev), So I taper at both ends no matter what news comes out, but more so if the Dev is large.
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trium
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Post by trium on May 12, 2018 15:36:25 GMT
I very crudely "score" loans as the sum of free equity/10 plus interest rate, eg 7% at 60% LTV scores 40/10 + 7 = 11. I cut off at LTV > 70% and interest < 6%. I don't rely entirely on the score, but I use it to suggest a shopping list on which to concentrate, also to indicate whether to invest a small sum or a larger one. I avoid 2nd charges and I try to sell "bullet" loans as the end draws near. Of course there are many other factors to consider so it's not an exact science.
I wish the LTV was included in the CSV download - that would make life a lot easier!
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