bg
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Post by bg on Jan 25, 2019 22:19:20 GMT
Where did you see he bought it off plan in aug 2017? It's in the valuation report. It sold for £795k with an asking price of £845k. If you look in the VR it also details other recent sales of comparable flats in the same and other developments that give some justification to their valuation. Of course everything is just a matter of opinion, there is no sure fire way of getting an accurate valuation. The first example you give, I wouldn't say is comparable. It looks to be an old town house that has been split into flats. In my experience (of buying flats in London) these aren't as attractive as people generally prefer new builds and they are less secure. The flat does not have a terrace (which the FS flat does) and also the FS development has concierge (very highly valued), communal gardens, residents gym etc. These factors could comfortably add 10-15% to the valuation. The second flat you link to is actually on sale at £635k. The FS flat does have a terrace (see the VR). This flat is also on the first floor. and a tad smaller There is a premium for flats higher up (typically I see an extra £7.5k-10k per floor on London developments) so add £40-50k for a 6th floor flat. That aside, yeah they are more comparable....but this development looks a bit further out. Does it have a residents gym, concierge etc? I wouldn't know without looking into it in more detail. Third one - similar to the first but this one has boarded up windows. Not a luxury flat with all the trimmings. Opinions are what make a market! In my view (and I admit I haven't been looking to buy a flat in London for a couple of years now) is that sub £600k this flat would be decent value. Sub £500k I would consider buying it. Post Brexit I think prices in this area will rise. It sold for £795k 18m ago...I know prices have come off since the but I don't think they have come off by more than a third - which is what would need to happen to see a loss on the loan. We are not talking £20m flats in super prime Mayfair here. Bigger point I was trying to make is that I don't see a big loss on the loan, whatever happens. The really toxic loans are those where you get realisations of 30-40% (or less). That's not happening here. In a nightmare scenario, lets say it sold for £450k.....you're looking at losing 15% topside. I can live with those risks. I see it as a very small risk and I am being compensated very highly for taking it. If I could have a diversified portfolio of loans similar to this, I would be very happy and I'm sure it would make 9-10% a year after defaults. This is just my reasoning behind investing in it. One other point - flash sale at £550k I think you get all your capital back and some interest. Fees would not be £33k. Underwriter fees almost certainly have been paid upfront by FS and there is no way they could ever rank ahead of the loan in a default scenario.
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Post by df on Jan 25, 2019 22:25:47 GMT
Goalposts moving already. Latest update on this loan sounds like underwriter getting nervous hope it's not the landrover people.good luck to everybody in this. Whist I don't like this one at all, I think your interpretation of the updates is wide of the mark. The earlier of the two updates: "As the borrower is looking to complete today, this loan will be closed at £200,000 and the balance will be funded by the underwriter." Any indication of the underwriter getting nervous? Second of the updates: "There has been a change of plan with the borrower. They have agreed an extension on completion of 5 further days. This means we will re-open the loan for funding, still being underwritten at the funding stage. <snip>" Any indication of the underwriter getting nervous? I agree the wording on the final (snipped) sentence ("As the loan is funded, the underwriter will be replaced") could perhaps be less clumsily written to " As the level of platform funding increases, the level underwriter funding will decrease." Well, that's my interpretation and I agree with your 'good luck' sentiment. Not least to the underwriter.  Interesting, the loan is still at funding stage and there are already four updates - many FS loans have no updates at all even when they are overdue. Snipped sentence sounds fine to me, more straight forward than your version Somebody is getting nervous. Shouldn't be the borrower because the loan is underwritten. May be I can't see the obvious, but it looks to me that the underwriter could be uncomfortable with the speed of their "replacement"  Currently they have 51% to offload.
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dApps
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Post by dApps on Jan 25, 2019 22:37:28 GMT
Somebody is getting nervous. Shouldn't be the borrower because the loan is underwritten. May be I can't see the obvious, but it looks to me that the underwriter could be uncomfortable with the speed of their "replacement" Currently they have 51% to offload. The second update from above opened: "There has been a change of plan with the borrower. They have agreed an extension on completion of 5 further days." Is your thinking that the underwriter got nervous (maybe threatened to pull out entirely if the platform level of funding didn't increase?), so FS negotiated a fie day extension with the borrower, who in turn negotiated a five day extension with the developer? Or something else?
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cwah
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Post by cwah on Jan 26, 2019 0:12:35 GMT
Opinions are what make a market! In my view (and I admit I haven't been looking to buy a flat in London for a couple of years now) is that sub £600k this flat would be decent value. Sub £500k I would consider buying it. Post Brexit I think prices in this area will rise. It sold for £795k 18m ago...I know prices have come off since the but I don't think they have come off by more than a third - which is what would need to happen to see a loss on the loan. We are not talking £20m flats in super prime Mayfair here. Bigger point I was trying to make is that I don't see a big loss on the loan, whatever happens. The really toxic loans are those where you get realisations of 30-40% (or less). That's not happening here. In a nightmare scenario, lets say it sold for £450k.....you're looking at losing 15% topside. I can live with those risks. I see it as a very small risk and I am being compensated very highly for taking it. If I could have a diversified portfolio of loans similar to this, I would be very happy and I'm sure it would make 9-10% a year after defaults. This is just my reasoning behind investing in it. One other point - flash sale at £550k I think you get all your capital back and some interest. Fees would not be £33k. Underwriter fees almost certainly have been paid upfront by FS and there is no way they could ever rank ahead of the loan in a default scenario. Thanks for the detailed explaination. I'm also in london and I bought a flat there but I'm in the lower range budget (£350k) and I actually prefer flat with minimum service because concierge means higher service charge. But I understand it may attract other type of buyers which isn't me. Another way to value this property is to go back to fundamental. The estimated rent is £26400. For which i'd remove 10% for rental fee and maintenance and £3500 for service charge and ground rent. So you have net profit of about £20k. So if investor are interested at 3% net yield it would put the flat at £670k. (Unlikely with the current market) At 4% net yield the value would be £500k. Which is what you said you'd buy yourself. And 5% net yield would be the amount where you definitely get investor buying at £400k. So yes flash sales I definitely think it would go between £500-£600k. I however like the fact that the borrower have but a very significant skin in the game, which is a minimum of £278k. But probably more with the stamp duty. His net yield will be very low, but he wouldn't want to sell at £500k and loose so much money. I may put some money in... Why wouldn't the underwritter fee take priority in case of default? I'd see it categorised as an admin fee, so taken first before any repayment is done
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bg
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Post by bg on Jan 26, 2019 8:41:42 GMT
Thanks for the detailed explaination. I'm also in london and I bought a flat there but I'm in the lower range budget (£350k) and I actually prefer flat with minimum service because concierge means higher service charge. But I understand it may attract other type of buyers which isn't me. Yes that is true but it's a big development so it won't add that much. I have flats in similar developments and even to have 24 hour security/concierge you need 3 staff @ around £25k a year. £75k / 300 = £250 extra service charge a year. If you are paying £800k for a flat it really that much of a consideration. When it comes to renting the flat out it makes a big difference, you can charge a premium for it. The tenants feel much more secure and it meas they can get amazon deliveries etc any day with nno stress. If you have a concierge in a small development I would agree, it would not be cost effective. It's hard going back to fundamentals in London. People buy for different considerations, people buy bonds that have a negative yield . There are flats in super prime London that yield less than 1.5% (I would never buy one of these it's true) but it's a supply and demand thing. This is a fantastic location that in a few years could really surge in price. Fees come after repayment of principal when there is a default. The principal amount of the loan is allocated first before any costs from - check the T&C's. Also I underwrite loans on other platforms and the fee either gets paid up front or you lose it if there is a default.
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Post by df on Jan 26, 2019 9:35:02 GMT
Somebody is getting nervous. Shouldn't be the borrower because the loan is underwritten. May be I can't see the obvious, but it looks to me that the underwriter could be uncomfortable with the speed of their "replacement" Currently they have 51% to offload. The second update from above opened: "There has been a change of plan with the borrower. They have agreed an extension on completion of 5 further days." Is your thinking that the underwriter got nervous (maybe threatened to pull out entirely if the platform level of funding didn't increase?), so FS negotiated a fie day extension with the borrower, who in turn negotiated a five day extension with the developer? Or something else? Yes, I'm thinking that the pressure could come from the underwriter, but it's just a guess. We'll see what happens in 5 days.
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dApps
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Post by dApps on Jan 26, 2019 15:27:51 GMT
The second update from above opened: "There has been a change of plan with the borrower. They have agreed an extension on completion of 5 further days." Is your thinking that the underwriter got nervous (maybe threatened to pull out entirely if the platform level of funding didn't increase?), so FS negotiated a fie day extension with the borrower, who in turn negotiated a five day extension with the developer? Or something else? Yes, I'm thinking that the pressure could come from the underwriter, but it's just a guess. We'll see what happens in 5 days. If that is the case, the underwriter should be grateful for a flexible and understanding developer. That would have been a hefty deposit (or part thereof) to sacrifice if the dev had been adamant about a completion date. My weekend conspiracy juices are flowing so, if it is nervous underwriter, I'm going for: Borrower already received full loan amount and passed necessary over to Developer, FS additionally increasing loan funding date by five days to help reduce U/W's commitment, and not upset them as may be need in future. Three off-the-top-of-the-head thoughts: 1. I think the U/W is RK, the new Dir/PSC. (Still might desire to commit less to this one loan, but only so it keeps the pot more full for other underwriting requirements if they arrive.) 2. I think it more likely the borrower (M.E., apparently) is having some kind of insurmountable logistical issue or similar and the dev is understanding on that front. 3. If it drags on any longer, I'd wonder if an 'understanding' developer is actually an indicator of how slow (or not) the market may be at the moment. (As just mentioned, a missed completion date is often a trigger for some kind of penalty clause(s) in the exchange contract and they can be quite costly to the buy; eg: interest at base +4%, loss of deposit (or part thereof) and so on. In a raging market, with any significant delay, the dev might be more inclined to take the penalty sum and simply re-sell to the next buyer in the queue.)
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bg
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Post by bg on Jan 26, 2019 15:55:56 GMT
Yes, I'm thinking that the pressure could come from the underwriter, but it's just a guess. We'll see what happens in 5 days. If that is the case, the underwriter should be grateful for a flexible and understanding developer. That would have been a hefty deposit (or part thereof) to sacrifice if the dev had been adamant about a completion date. My weekend conspiracy juices are flowing so, if it is nervous underwriter, I'm going for: Borrower already received full loan amount and passed necessary over to Developer, FS additionally increasing loan funding date by five days to help reduce U/W's commitment, and not upset them as may be need in future. Three off-the-top-of-the-head thoughts: 1. I think the U/W is RK, the new Dir/PSC. (Still might desire to commit less to this one loan, but only so it keeps the pot more full for other underwriting requirements if they arrive.) 2. I think it more likely the borrower (M.E., apparently) is having some kind of insurmountable logistical issue or similar and the dev is understanding on that front. 3. If it drags on any longer, I'd wonder if an 'understanding' developer is actually an indicator of how slow (or not) the market may be at the moment. (As just mentioned, a missed completion date is often a trigger for some kind of penalty clause(s) in the exchange contract and they can be quite costly to the buy; eg: interest at base +4%, loss of deposit (or part thereof) and so on. In a raging market, with any significant delay, the dev might be more inclined to take the penalty sum and simply re-sell to the next buyer in the queue.) You do love a good conspiracy theory! 1. Not possible. P2P platforms are no longer allowed to put their own funds into their loans. It's against FCA rules. 2. We know the borrower has a logistical problem in getting a quick mortgage. It is also likely that they will find it much easier to get a mortgage once they own the flat and have a tenant in place. It may well not be a case of having an understanding developer, it depends on the terms of the contract of sale. They can't just confiscate the property if the buyer doesn't complete by the agreed date. There will be a penalty charge but it really depends on the terms what action they can take and when. 3. I really think you are looking into this too much (see 2.). The penalty rate in the contract could well be much higher than you suggest...I have often had the penalty interest rate set at base + double figure interest....not that I have ever failed to complete. I really don't understand this theory about the underwriter being nervous. You can't agree to be paid for taking on whatever part of the loan does not sell, take the money (based on £475k) and then refuse to stump up at the last minute. Underwriting doesn't work like that. £475k of this has been underwritten and right now the u/w will be on the hook for around £250k. Quite a good result for them I would say - and they can still continue to sell the loan down once it has drawn. People seem to be judging this on the basis that £250k is an extraordinary sum of money to have in a single loan but it's not, it's all relative. Loans are regularly underwritten on many platforms by many times this amount. If you have £5m in P2P, a £250k loan holding is just part of a diversified portfolio. they won't be losing any sleep over it. People often underwrite loans by 6 figure sums and don't even bother selling down the holding for weeks/months, no big deal.
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dApps
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Post by dApps on Jan 26, 2019 17:11:59 GMT
If that is the case, the underwriter should be grateful for a flexible and understanding developer. That would have been a hefty deposit (or part thereof) to sacrifice if the dev had been adamant about a completion date. My weekend conspiracy juices are flowing so, if it is nervous underwriter, I'm going for: Borrower already received full loan amount and passed necessary over to Developer, FS additionally increasing loan funding date by five days to help reduce U/W's commitment, and not upset them as may be need in future. Three off-the-top-of-the-head thoughts: 1. I think the U/W is RK, the new Dir/PSC. (Still might desire to commit less to this one loan, but only so it keeps the pot more full for other underwriting requirements if they arrive.) 2. I think it more likely the borrower (M.E., apparently) is having some kind of insurmountable logistical issue or similar and the dev is understanding on that front. 3. If it drags on any longer, I'd wonder if an 'understanding' developer is actually an indicator of how slow (or not) the market may be at the moment. (As just mentioned, a missed completion date is often a trigger for some kind of penalty clause(s) in the exchange contract and they can be quite costly to the buy; eg: interest at base +4%, loss of deposit (or part thereof) and so on. In a raging market, with any significant delay, the dev might be more inclined to take the penalty sum and simply re-sell to the next buyer in the queue.) You do love a good conspiracy theory! 1. Not possible. P2P platforms are no longer allowed to put their own funds into their loans. It's against FCA rules. 2. We know the borrower has a logistical problem in getting a quick mortgage. It is also likely that they will find it much easier to get a mortgage once they own the flat and have a tenant in place. It may well not be a case of having an understanding developer, it depends on the terms of the contract of sale. They can't just confiscate the property if the buyer doesn't complete by the agreed date. There will be a penalty charge but it really depends on the terms what action they can take and when. 3. I really think you are looking into this too much (see 2.). The penalty rate in the contract could well be much higher than you suggest...I have often had the penalty interest rate set at base + double figure interest....not that I have ever failed to complete. I really don't understand this theory about the underwriter being nervous. You can't agree to be paid for taking on whatever part of the loan does not sell, take the money (based on £475k) and then refuse to stump up at the last minute. Underwriting doesn't work like that. £475k of this has been underwritten and right now the u/w will be on the hook for around £250k. Quite a good result for them I would say - and they can still continue to sell the loan down once it has drawn. People seem to be judging this on the basis that £250k is an extraordinary sum of money to have in a single loan but it's not, it's all relative. Loans are regularly underwritten on many platforms by many times this amount. If you have £5m in P2P, a £250k loan holding is just part of a diversified portfolio. they won't be losing any sleep over it. People often underwrite loans by 6 figure sums and don't even bother selling down the holding for weeks/months, no big deal. It's the weekend! Re: 1, I was thinking of RK in a personal capacity. He joined FS with a history of investing in loans, so I see no reason why he couldn't continue to do so, although happy to be convinced otherwise. Agree with the rest, particularly the bit in bold.
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Post by df on Jan 26, 2019 17:18:20 GMT
If that is the case, the underwriter should be grateful for a flexible and understanding developer. That would have been a hefty deposit (or part thereof) to sacrifice if the dev had been adamant about a completion date. My weekend conspiracy juices are flowing so, if it is nervous underwriter, I'm going for: Borrower already received full loan amount and passed necessary over to Developer, FS additionally increasing loan funding date by five days to help reduce U/W's commitment, and not upset them as may be need in future. Three off-the-top-of-the-head thoughts: 1. I think the U/W is RK, the new Dir/PSC. (Still might desire to commit less to this one loan, but only so it keeps the pot more full for other underwriting requirements if they arrive.) 2. I think it more likely the borrower (M.E., apparently) is having some kind of insurmountable logistical issue or similar and the dev is understanding on that front. 3. If it drags on any longer, I'd wonder if an 'understanding' developer is actually an indicator of how slow (or not) the market may be at the moment. (As just mentioned, a missed completion date is often a trigger for some kind of penalty clause(s) in the exchange contract and they can be quite costly to the buy; eg: interest at base +4%, loss of deposit (or part thereof) and so on. In a raging market, with any significant delay, the dev might be more inclined to take the penalty sum and simply re-sell to the next buyer in the queue.) You do love a good conspiracy theory! 1. Not possible. P2P platforms are no longer allowed to put their own funds into their loans. It's against FCA rules. 2. We know the borrower has a logistical problem in getting a quick mortgage. It is also likely that they will find it much easier to get a mortgage once they own the flat and have a tenant in place. It may well not be a case of having an understanding developer, it depends on the terms of the contract of sale. They can't just confiscate the property if the buyer doesn't complete by the agreed date. There will be a penalty charge but it really depends on the terms what action they can take and when. 3. I really think you are looking into this too much (see 2.). The penalty rate in the contract could well be much higher than you suggest...I have often had the penalty interest rate set at base + double figure interest....not that I have ever failed to complete. I really don't understand this theory about the underwriter being nervous. You can't agree to be paid for taking on whatever part of the loan does not sell, take the money (based on £475k) and then refuse to stump up at the last minute. Underwriting doesn't work like that. £475k of this has been underwritten and right now the u/w will be on the hook for around £250k. Quite a good result for them I would say - and they can still continue to sell the loan down once it has drawn. People seem to be judging this on the basis that £250k is an extraordinary sum of money to have in a single loan but it's not, it's all relative. Loans are regularly underwritten on many platforms by many times this amount. If you have £5m in P2P, a £250k loan holding is just part of a diversified portfolio. they won't be losing any sleep over it. People often underwrite loans by 6 figure sums and don't even bother selling down the holding for weeks/months, no big deal. I was thinking that the reason for 5 days extension could be to keep this loan in "available" section for longer so it is seen without searching for it on SM, thus the underwriter has better chance to reduce their contribution. Otherwise the loan could be already activated.
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adrian77
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Post by adrian77 on Jan 26, 2019 17:57:19 GMT
I only own 5 houses (bought 4 with cash) so thanks for the patronising lecture - like to think I have some idea what I am doing and I paid exactly zero deposit for my last 3 houses - have a very good solicitor.
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cwah
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Post by cwah on Jan 26, 2019 18:18:23 GMT
By the way, if you check the developper website, it mention that these flats already have the stamp duty paid. So the buyer shouldn't have to buy it
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adrian77
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Post by adrian77 on Jan 26, 2019 18:27:11 GMT
thanks - I missed that - guess that is a small plus- still an interesting one which I find difficult to call...
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cwah
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Post by cwah on Jan 26, 2019 18:29:30 GMT
thanks - I missed that - guess that is a small plus- still an interesting one which I find difficult to call... Yes I'm thinking to put some ££ on it from BG insights. Although this is not the type of flat I would buy myself and is targetting the upper market
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adrian77
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Post by adrian77 on Jan 26, 2019 20:41:24 GMT
not according to mrclondon link
Maybe FS could confirm - considering the bridging loan etc I think this is significant As a prior poster said a lot of foreign investors buy such flats as either a holding asset or plan to immediately flip. The latter is exactly what happened in Spain a few years ago....
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Currently they have 51% to offload.