webwiz
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Post by webwiz on Nov 16, 2015 21:54:37 GMT
"The other problem is that most loans aren't actually 70% LTV, they are loan to completed value, which is fine if they are completed. I don't look forward to selling a half completed project in a down-turn even if some of the money is still with the platform." I have seen deals where the security is 70% GDV, but the value today before any falls is over 100% LTV. Others say they are purchasing at say 350k, but its true value is 450k and base the LTV on the 450k, but its value must be 350k because that is today's market value. . AFAIK I have never seen either type of loan. Maybe they are not on the platforms I use: SS, MT and FS. Can you point me at an example on one of these?
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Liz
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Post by Liz on Nov 16, 2015 22:29:40 GMT
"The other problem is that most loans aren't actually 70% LTV, they are loan to completed value, which is fine if they are completed. I don't look forward to selling a half completed project in a down-turn even if some of the money is still with the platform." I have seen deals where the security is 70% GDV, but the value today before any falls is over 100% LTV. Others say they are purchasing at say 350k, but its true value is 450k and base the LTV on the 450k, but its value must be 350k because that is today's market value. . AFAIK I have never seen either type of loan. Maybe they are not on the platforms I use: SS, MT and FS. Can you point me at an example on one of these? I'm not naming names, but I only use SS of the 3, and it isn't them. The point was security varies vastly on loans and different security types are used(GDV/LTV), so you do have to be cautious and not just be dassled by the high interest rates on offer.
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Liz
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Post by Liz on Nov 16, 2015 23:10:57 GMT
OK found one if the loans I was on about, others will have seen it too.
Purchase price 340k
Fees plue redurb 50k
Loan amount 390kk
Security
Open market value 445k
Even if you use the 445k figure, you get a LTV of 88%, a figure in between the 2 has a LTV around 100%.
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webwiz
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Post by webwiz on Nov 17, 2015 9:50:31 GMT
Thanks for the warning. I am fairly confident that this does not happen on my 3 platforms but anyone who knows different please tell! That's not to say there is no risk eg the valuation might be wrong for a reason covered by one of the valuer's cop-out clauses or there might be a major price crash.
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Post by emoney on Nov 17, 2015 17:12:34 GMT
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Post by mrclondon on Nov 17, 2015 17:30:37 GMT
OK found one if the loans I was on about, others will have seen it too. Purchase price 340k Fees plue redurb 50k Loan amount 390kk Security Open market value 445k Even if you use the 445k figure, you get a LTV of 88%, a figure in between the 2 has a LTV around 100%. If this is the loan I think it, it is split into 2 tranches. The first tranche is for £240k (70% of the £340k current purchase price) for a sensible 10.25% yield, where as the second tranche which ranks behind the first tranche is for £150k for 14 to 15%. The particular loan introducer behind this loan frequently adopts this structure which enables those lenders that look for good security to participate as well as risk junkies. IMO looking at the properties being offered as security for this loan, the fact that only superficial rennovation work is needed (redecorate + kitchen + bathroom), the location, and local demand, I think the first tranche of this loan is as good as you're going to get. The ultimate test - would I be prepared to buy the security for £240k myself - answer , a resounding yes.
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Post by emoney on Nov 17, 2015 18:35:44 GMT
This is a great thread yet again, so the £295K 70% LTV (Today's valuation, not GDV) eMoneyUnion bridging loan listed, with no further borrowing/tranches required due the A1 profile borrowers ability to service the monthly interest payments and cover the refurb costs out of cash resources, looks like a strong deal paying 9% yield? This is why the challenger banks are courting savers cash to lend on these type of secured loans. Let's keep the crowd in and we can list more of these types of deals.  |
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Post by meledor on Nov 17, 2015 18:44:45 GMT
OK found one if the loans I was on about, others will have seen it too. Purchase price 340k Fees plue redurb 50k Loan amount 390kk Security Open market value 445k Even if you use the 445k figure, you get a LTV of 88%, a figure in between the 2 has a LTV around 100%. If this is the loan I think it, it is split into 2 tranches. The first tranche is for £240k (70% of the £340k current purchase price) for a sensible 10.25% yield, where as the second tranche which ranks behind the first tranche is for £150k for 14 to 15%. The particular loan introducer behind this loan frequently adopts this structure which enables those lenders that look for good security to participate as well as risk junkies. IMO looking at the properties being offered as security for this loan, the fact that only superficial rennovation work is needed (redecorate + kitchen + bathroom), the location, and local demand, I think the first tranche of this loan is as good as you're going to get. The ultimate test - would I be prepared to buy the security for £240k myself - answer , a resounding yes.
Like Liz I am extremely picky with property loans as there is so much to choose from at the moment. As it happens one of my criteria is to avoid properties that are presented as multi-tranche loans. The risks are usually too high for the higher rated tranches and the rewards for the tranches with better security can be bettered by looking elsewhere at non-tranche loans. Also the higher rated tranches are often more akin to equity in the deal which the borrower should be putting in.
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Post by mrclondon on Nov 17, 2015 23:47:07 GMT
meledor - it is just as well we are not all alike, otherwise a proportion of loans would go unfilled !! Just as a matter of interest, do you have an example of a p2p property type loan that you consider to be lower risk than the TC 1st tranche of multiples ? Personally I find the first of multiple tranche loans on TC to be amongst the best reward vs risk there is in p2p. The first tranche of the loan we have been discussing here is almost certainly overpriced at 10.25%, a truer reflection of the risk is probably 9% and is a good example of where loans on TC are having to be priced to liquidity not risk. I do however agree the later tranches are more akin to equity risk and are generally seriously under priced.
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bigfoot12
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Post by bigfoot12 on Nov 18, 2015 0:53:59 GMT
... a truer reflection of the risk is probably 9% and is a good example of where loans on TC are having to be priced to liquidity not risk. Do you not think that TC is attracting a higher platform risk at the moment because of the significant changes that are occurring?
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Post by meledor on Nov 18, 2015 9:39:48 GMT
meledor - it is just as well we are not all alike, otherwise a proportion of loans would go unfilled !! Just as a matter of interest, do you have an example of a p2p property type loan that you consider to be lower risk than the TC 1st tranche of multiples ? Personally I find the first of multiple tranche loans on TC to be amongst the best reward vs risk there is in p2p. The first tranche of the loan we have been discussing here is almost certainly overpriced at 10.25%, a truer reflection of the risk is probably 9% and is a good example of where loans on TC are having to be priced to liquidity not risk. I do however agree the later tranches are more akin to equity risk and are generally seriously under priced. I agree it's a question of preference. With so much to choose from I tend to avoid complexity. I can get the property loans I want by keeping it simple and avoiding mezzanine type structures.
I didn't say the loans would be lower risk than 1st tranche multiples (although there was a recent loan at 14.5% with very good security). As I've said the problem for me for multi-tranche loans is it usually ruins the risk/reward balance - rewards too low for 1st tranche, risks too high for the other tranches.
Likewise I avoid interest roll-ups unless the LTV is low.
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Liz
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Post by Liz on Nov 18, 2015 20:03:14 GMT
meledor - it is just as well we are not all alike, otherwise a proportion of loans would go unfilled !! Just as a matter of interest, do you have an example of a p2p property type loan that you consider to be lower risk than the TC 1st tranche of multiples ? Personally I find the first of multiple tranche loans on TC to be amongst the best reward vs risk there is in p2p. The first tranche of the loan we have been discussing here is almost certainly overpriced at 10.25%, a truer reflection of the risk is probably 9% and is a good example of where loans on TC are having to be priced to liquidity not risk. I do however agree the later tranches are more akin to equity risk and are generally seriously under priced I agree the first tranche is great quality, I'm in a couple of these type of loans, but always in the first tranche. My point earlier was that the risk on property deals varies massively and the extra few percentage points aren't worth the risk.I like the multi tranche deals as I get the lower risk I want, but think those in the higher rate tranche are unvaluing risk. PS, said loan doesn't look like filling.
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Post by mrclondon on Nov 24, 2015 13:01:54 GMT
I agree the first tranche is great quality, I'm in a couple of these type of loans, but always in the first tranche. My point earlier was that the risk on property deals varies massively and the extra few percentage points aren't worth the risk.I like the multi tranche deals as I get the lower risk I want, but think those in the higher rate tranche are unvaluing risk. PS, said loan doesn't look like filling. This TC loan we were discussing last week was indeed struggling to make headway at the time, but is now just £5,000 below the minimimum required to drawdown (£350k across both loans) and will close in c. 24 hours time. Such is the bizarre approach to risk by many p2p lenders, the underpriced high risk B loan romped home, and the overpriced low risk A loan has been the laggard. Worth repeating the mantra over and over "Return of capital is more important than return on capital" ....
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Post by yorkshireman on Nov 24, 2015 14:25:49 GMT
I agree the first tranche is great quality, I'm in a couple of these type of loans, but always in the first tranche. My point earlier was that the risk on property deals varies massively and the extra few percentage points aren't worth the risk.I like the multi tranche deals as I get the lower risk I want, but think those in the higher rate tranche are unvaluing risk. PS, said loan doesn't look like filling. This TC loan we were discussing last week was indeed struggling to make headway at the time, but is now just £5,000 below the minimimum required to drawdown (£350k across both loans) and will close in c. 24 hours time. Such is the bizarre approach to risk by many p2p lenders, the underpriced high risk B loan romped home, and the overpriced low risk A loan has been the laggard. Worth repeating the mantra over and over "Return of capital is more important than return on capital" .... Worth repeating the mantra over and over "Return of capital is more important than return on capital" .... Absolutely spot on!
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Liz
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Post by Liz on Nov 24, 2015 18:34:24 GMT
Agreed and with rolled up interest, you may not even get the internet! PS, I now have £5k in Loan A With the enhanced rate:)
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