Any thoughts on this loan? Tier 3 @ 12.63% is the highest rate i think Kuflink have ever offered, 2nd legal Charge though.
As a buy-and-hold investment...
With assured
12m fixed rate savings products offering a smidge over 5%, you're basically getting 7.5% for a twice-junior tranche on a 2nd Charge loan. In the event of default, that's three layers of capital and interest above you before you see any return of capital.
To borrow a (mis)quote: 'Are you feeling lucky, punk?'
Or, if you plan to trade out (assuming you can) and avoid 'term risk'...
... you need to take as view on how attractive a potential buyer may find... '
a twice-junior tranche on a 2nd Charge loan" where "in the event of default, that's three layers of capital and interest above you before you see any return of capital' with their limited upside being the residue of any retained interest in an environment that is (currently) offering over 5% for protected investments.
Again, 'Are you feeling lucky, punk?'
BTW, I'm not ignoring the LTV at 60% nor that this is a 'simple' bridging loan (were "
No development works will be undertaken during our loan term"). Instead, as I have seen, first-hand, a 1st Charge bridging loan against a decent property originally valued at £2.5m with an LTV of less than 50% that eventually (after several years) required the platform to cover the shortfall and provide 100% capital return, I'm not placing a huge amount of reliance on it.
And just one final thought on this specific loan.... the photo's.
I'm presuming that the borrower is in residence - based on the property not being rented, not currently up for sale and 'the family' being present during the valuation - but those photo's do not show a property that is given a great deal of time and consideration. If someone is lax in their attention to an asset being used as security, how considerate will they be for any loan secured against it?
It's picky, I know, but first impressions and all that... Don't forget, exit is supposedly via a refinance, so what kind of valuation will it get in 9-12m time? And what will the borrowers circumstances be that drive the LTV offered when it comes to refinance?? (fwiw, current 90d valuation is £1.25M giving an LTV of 72%. Let's assume it defaults, eventually goes to auction, fetches £1.1M - just how much is that "60% LTV" then worth on a 3rd ranking tier on a 2nd ranking charge?)
TL;DR - this 'game' is risky enough - I do not see the value in loading the dice even further against yourself by entertaining lower ranking tranches in 2nd charge loans for the sake of a few percent.
