|
|
Post by mrclondon on Jan 18, 2019 18:54:46 GMT
A few random observations
a) the location pin on the map image FS have provided is the centre of the post code area, the development is actually to the east of the pin, on the east side of W****** Rd. (I'll provide links to Google Maps on DDC shortly)
b) The VR values it as £700k as a new build purchase, but £630k for a subsequent re-sale without the new build premium. FS have used the £700k valuation with a LTV of c. 74%. However if the loan defaults, it will be the resale value that is relevant, and the loan of £517k is 82% of £630k.
The VR states the purchase price of £795k was agreed in Aug 2017 vs an asking price of £845k
c) I live a couple of miles east of here, and had the opportunity to view last summer a very nice quiet local 1st floor 2 bed apartment that was 3 years old, no parking space but 15 minutes walk to the nearest tube station but otherwise in a much better locality. It sold for its asking price of £520k after a couple of months.
d) This one is very close to a main road and railway line both with 24 hour heavy traffic.
e) This is one block in a massive development, there will be over supply (and hence pressure on prices) for several years.
EDIT: The location plans in the VR are also wrong.
|
|
|
|
Post by routlep on Jan 18, 2019 19:05:24 GMT
Certainly not flying off the shelf
|
|
bg
Member of DD Central
Posts: 1,368 
Likes: 1,929
|
Post by bg on Jan 18, 2019 19:19:10 GMT
A few random observations
a) the location pin on the map image FS have provided is the centre of the post code area, the development is actually to the east of the pin, on the east side of W****** Rd. (I'll provide links to Google Maps on DDC shortly)
b) The VR values it as £700k as a new build purchase, but £630k for a subsequent re-sale without the new build premium. FS have used the £700k valuation with a LTV of c. 74%. However if the loan defaults, it will be the resale value that is relevant, and the loan of £517k is 82% of £630k.
The VR states the purchase price of £795k was agreed in Aug 2017 vs an asking price of £845k
c) I live a couple of miles east of here, and had the opportunity to view last summer a very nice quiet local 1st floor 2 bed apartment that was 3 years old, no parking space but 15 minutes walk to the nearest tube station but otherwise in a much better locality. It sold for its asking price of £520k after a couple of months.
d) This one is very close to a main road and railway line both with 24 hour heavy traffic.
e) This is one block in a massive development, there will be over supply (and hence pressure on prices) for several years.
I live a couple of miles from here also and let properties in SW London. Lots of development in E&C but it's a great central location for travel into the city and West End. Area seems to be improving as well. I can see 2 beds in the same area listed for over £700k on Zoopla. I'm not quite sure on the market right now but I would think flats like these would easily sell for £600k. If prices got towards £500k then I would buy it myself - I know it would let easily for over £2k a month. Longer term, once Brexit is out the way and with all the development in the area I can see prices in this area going up....looks like an Ok development with residents gym, communal gardens etc. I see little risk of a capital loss on this loan so will take a slice.
|
|
|
|
Post by df on Jan 18, 2019 19:20:27 GMT
A few random observations
a) the location pin on the map image FS have provided is the centre of the post code area, the development is actually to the east of the pin, on the east side of W****** Rd. (I'll provide links to Google Maps on DDC shortly)
b) The VR values it as £700k as a new build purchase, but £630k for a subsequent re-sale without the new build premium. FS have used the £700k valuation with a LTV of c. 74%. However if the loan defaults, it will be the resale value that is relevant, and the loan of £517k is 82% of £630k.
The VR states the purchase price of £795k was agreed in Aug 2017 vs an asking price of £845k
c) I live a couple of miles east of here, and had the opportunity to view last summer a very nice quiet local 1st floor 2 bed apartment that was 3 years old, no parking space but 15 minutes walk to the nearest tube station but otherwise in a much better locality. It sold for its asking price of £520k after a couple of months.
d) This one is very close to a main road and railway line both with 24 hour heavy traffic.
e) This is one block in a massive development, there will be over supply (and hence pressure on prices) for several years.
I also keep hearing that property prices in London are going down. I don't think 11% is an appropriate rate for the risk presented by this loan. I'll have to give it a miss.
|
|
bg
Member of DD Central
Posts: 1,368
Likes: 1,929
|
Post by bg on Jan 18, 2019 19:24:06 GMT
A few random observations
a) the location pin on the map image FS have provided is the centre of the post code area, the development is actually to the east of the pin, on the east side of W****** Rd. (I'll provide links to Google Maps on DDC shortly)
b) The VR values it as £700k as a new build purchase, but £630k for a subsequent re-sale without the new build premium. FS have used the £700k valuation with a LTV of c. 74%. However if the loan defaults, it will be the resale value that is relevant, and the loan of £517k is 82% of £630k.
The VR states the purchase price of £795k was agreed in Aug 2017 vs an asking price of £845k
c) I live a couple of miles east of here, and had the opportunity to view last summer a very nice quiet local 1st floor 2 bed apartment that was 3 years old, no parking space but 15 minutes walk to the nearest tube station but otherwise in a much better locality. It sold for its asking price of £520k after a couple of months.
d) This one is very close to a main road and railway line both with 24 hour heavy traffic.
e) This is one block in a massive development, there will be over supply (and hence pressure on prices) for several years.
I also keep hearing that property prices in London are going down. I don't think 11% is an appropriate rate for the risk presented by this loan. I'll have to give it a miss. They are but mainly in the £2m+ bracket. One and two bed flats outside prime London are holding up OK.
|
|
r1200gs
Member of DD Central
Posts: 1,336
Likes: 1,883
|
Post by r1200gs on Jan 18, 2019 19:26:53 GMT
Not for me either.
First though was the LTV is too high and the value is probably inflated - On comes our wonderful Mrclondon to confirm my suspicions. It might be a decent area and up and coming and all, but there too little meat on the bone on this one if things even go slightly south and south it might go.
Pass.
|
|
|
|
Post by df on Jan 18, 2019 19:38:28 GMT
Certainly not flying off the shelf Yes, it will take a while to fill. Highest punt so far was 4.5k, it needs many more or those in order to move to "awaiting activation". Bonuses or rate increase could probably help?
|
|
|
|
Post by mrclondon on Jan 18, 2019 19:40:10 GMT
Whilst I tend to agree with bg 's conclusions I'm not quite sure on the market right now but I would think flats like these would easily sell for £600k. [...] I see little risk of a capital loss on this loan so will take a slice. I also agree with df I don't think 11% is an appropriate rate for the risk presented by this loan.
The risk is it will be very slow to sell and the accrued interest is not ultimately covered. Later phases of the development are likely to have lower off-plan prices, and will be better located away from the road / railway. For what is in effect 82% LTV, 13% feels a more appropriate rate.
|
|
rs
Member of DD Central
Posts: 467
Likes: 254
|
Post by rs on Jan 18, 2019 19:47:16 GMT
Any cladding issues with this building? No doubt that would impact the sale price if borrower doesn't refinance within 6 months. I'll give it a miss as seems high LTV for only 11% interest.
|
|
|
|
Post by dan1 on Jan 18, 2019 20:26:26 GMT
... b) The VR values it as £700k as a new build purchase, but £630k for a subsequent re-sale without the new build premium. FS have used the £700k valuation with a LTV of c. 74%. However if the loan defaults, it will be the resale value that is relevant, and the loan of £517k is 82% of £630k. ... Thanks again for your detailed DD mrclondon. I feel uncomfortable with the presentation of the LTV on this loan. I can't decide whether I'm over reacting or if FS are out of order. Thoughts? FWIW I'm not concerned for someone with the time to read VRs like myself but more for those who rely on the information provided by the Executive Summary and the assets tab.
|
|
sarahcount
Member of DD Central
Posts: 359
Likes: 815
|
Post by sarahcount on Jan 18, 2019 20:26:38 GMT
I'm not going south of the river at this time of night.
|
|
|
|
Post by df on Jan 18, 2019 21:17:11 GMT
Any cladding issues with this building? No doubt that would impact the sale price if borrower doesn't refinance within 6 months. I'll give it a miss as seems high LTV for only 11% interest. In the event of borrower is unable to pay 6 months interest to renew the loan, there is likely be a very long wait for "unredeemed" status followed by lengthy process of recovery. Recovery is costly and will eat into whatever price they can sell it for. "A 6 month loan for the purchase of a New Build investment property... The borrower will refinance on to a longer term loan to exit this loan." - to me it sounds like the borrower turned to FS because they can't get a mortgage, but hoping to get one in future. If banks won't give them mortgage today, why would they lend them in 6 months time? If they are going to let the flat @2k pm, it is not going to generate enough income to renew the loan. I could be wrong, but there were so many "exit by refinancing on to a longer term" in the past that never been refinanced.....
|
|
bg
Member of DD Central
Posts: 1,368
Likes: 1,929
|
Post by bg on Jan 18, 2019 21:39:53 GMT
I guess I just see this one differently to others.
Similar (lower floor flats) were selling for in excess of £750k a couple of years ago. I generally see a price increase of £10k a floor in developments such as this I have bought in and this is on the 6th floor with a terrace.
Yes, prices have come off but not that much for 2 bed flats in this price bracket. 10-15% tops I would say from the peak. Like I said, I think it would sell in a flash for £600k....probably fairly quickly for £625-650k. I don't see a big crash in 2 bed flat prices in this area on the horizon.
I'm really not sure about there being such a large new build premium. In my experience it's not like a car, they don't drop in value instantly. Many people buy and flip flats such as these for a profit (in a rising market). There is a small dip if someone moves in the flat and lives there for a while but 10% seems a lot.
I see a loan such as this as much less risky than a 60% LTV commercial property loan, 60% LTV development or a 60% residential loan in NI/Wales. I just can't see it not selling for much less than £600k, even in a fire sale which leaves a fair cushion.
I think if this loan was on AC it would fill within minutes at this rate. If it was on AC it would probably be listed at 7% and noone would bat an eyelid...FS's reputation is counting against them on this one I think....and also its rare to see loans > 70% LTV and < 13% rate.
I'm unsure why the guy couldn't get a mortgage from a bank on this (maybe time was a factor, maybe he can't get a BTL mortgage?).....but even at 90% LTV I would think you could a decent rate ~ 4% 2y fix. That must be the planned exit.
|
|
|
|
Post by mrclondon on Jan 18, 2019 22:34:36 GMT
I'm really not sure about there being such a large new build premium. In my experience it's not like a car, they don't drop in value instantly. Many people buy and flip flats such as these for a profit (in a rising market). There is a small dip if someone moves in the flat and lives there for a while but 10% seems a lot. I just can't see it not selling for much less than £600k, even in a fire sale which leaves a fair cushion.
The interest + FS fees is going to accrue at c. £50k per six months. The headroom between the £517k loan and £630k valuation is £113k, thats just 12 months interest+fees plus an allowance for receivers fees. So the property has to be sold and completed within six months of the loans maturity date to guarantee covering the accrued interest. Not impossible, but would need a degree of luck even if FS defaulted it promptly 14 days after the maturity date.
|
|
|
|
Post by Badly Drawn Stickman on Jan 18, 2019 22:54:55 GMT
I'm really not sure about there being such a large new build premium. In my experience it's not like a car, they don't drop in value instantly. Many people buy and flip flats such as these for a profit (in a rising market). There is a small dip if someone moves in the flat and lives there for a while but 10% seems a lot. I just can't see it not selling for much less than £600k, even in a fire sale which leaves a fair cushion.
The interest + FS fees is going to accrue at c. £50k per six months. The headroom between the £517k loan and £630k valuation is £113k, thats just 12 months interest+fees plus an allowance for receivers fees. So the property has to be sold and completed within six months of the loans maturity date to guarantee covering the accrued interest. Not impossible, but would need a degree of luck even if FS defaulted it promptly 14 days after the maturity date. Probably a few service fees for the property to add to the figures as well, no idea what they are for that kind of property. Obviously if it is rented out there would be an income aspect involved. I'm just not 'buying' a clear exit strategy on this one. For me that is always a fairly important factor.
|
|
