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Post by andrewholgate on Feb 17, 2014 15:29:22 GMT
...what are the most important things you consider?
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bugs4me
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Post by bugs4me on Feb 17, 2014 16:25:11 GMT
...what are the most important things you consider? I'm sure if you asked 10 people this question Andrew then you'd get 11 different answers. Someone would have changed their mind by the time you've gone round the room. Apart from the obvious LTV and percentage return I always try to drill down with my own DD regarding the individual(s) that are borrowing. Recently a loan was available which I did not participate in. The main individual had a track record of starting a business every couple of years or so. The LTV was on the surface okay but for a 5 year term. So it simply wasn't for me although with a chunk of underwriting it did fly. But, and it is only a but, if things turn sour then you may be into a fire sale which may not realise the perfect LTV scenario. My advice to anyone (including myself) is if you're not comfortable then walk away as there will be other opportunities either with AC or elsewhere. Occasionally, names are kept anonymous but it's not too difficult to find these out. Now I know leopards can change their spots but if the track record of the individual(s) take me outside of my comfort zone then it's not for me.
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Post by oldnick on Feb 17, 2014 19:44:31 GMT
...what are the most important things you consider? I'm quite interested in bridging loans but not the kind that have no intention of proceeding, so perhaps some sort of up front reservation fee, stiff enough to deter tyre kickers, would help there?
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bugs4me
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Post by bugs4me on Feb 17, 2014 22:37:10 GMT
...what are the most important things you consider? I'm quite interested in bridging loans but not the kind that have no intention of proceeding, so perhaps some sort of up front reservation fee, stiff enough to deter tyre kickers, would help there? I agree with the up front (refundable) reservation fee but not sure how this would impact on AC securing these loan opportunities in the first place. What would also be handy to know is an estimate of drawdown timescales but from memory I think this is already being implemented.
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mikes1531
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Post by mikes1531 on Feb 17, 2014 23:01:30 GMT
...what are the most important things you consider? LTV and ease of liquidation, other security, percentage return, term, repayment plan, exit plan. Having a reasonable LTV is meaningful only if the asset can be liquidated reasonably quickly. The proportion of a valuation that can be realised in a 'fire' sale varies greatly. A bog-standard flat will be a lot easier to convert into cash than a unique multi-million pound house. A specialised asset needs a specialised buyer. Other security that I've seen on AC ranges from easily liquidated shares (very good) to personal guarantees (of dubious value, IMHO). Not knowing exactly what my future cash needs will be makes me want to have a variety of maturities in my portfolio. Longer-term loans shouldn't require as much attention as short bridging loans that will need to be replaced relatively quickly. (I do recognise that nearly all loans are subject to early repayment, so the likelihood of that is an additional factor to consider.) The exit plan often is a refinance to a 'mainstream' lender so a consideration is the likely timing of such a refinance. I prefer loans that aren't just 'interest-only'. Where the repayment exceeds the interest, the amount outstanding reduces over the life of the loan. This has two benefits: 1) It increases my cashflow (though it does require more reinvestment); and 2) LTV improves during the loan's term. A 20-year amortisation schedule isn't a lot different from interest-only, and 15-years is only a little bit better. (The bullet payment after five years on the upcoming BCT loan with 15-year amortisation is 88% of the original principal.) 10-year amortisation is OK, and 5-year (i.e. full repayment, no bullet payment) is great.
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Post by jevans4949 on Feb 18, 2014 10:20:34 GMT
The main things that put me off are a record of financial failure in the past (bankruptcy or IVA, previous investments gone bad, etc), and/or an over-optimistic business plan. Also, in some cases, where the loan is required due to lengthy inaction on the part of the borrower in addressing the situation.
In some cases, whether the security would be easily saleable (e.g. existing housing, housing development sites).
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JamesFrance
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Post by JamesFrance on Feb 18, 2014 21:04:28 GMT
When considering which platform to send funds to, the main things I think about are the expected return after defaults and charges, so an assessment of interest rate and risk, followed by how soon those funds can be expected to start earning interest.
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Post by andrewholgate on Feb 19, 2014 9:17:40 GMT
Thank you. Keep the comments coming.
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Post by mead187 on Feb 19, 2014 11:08:55 GMT
Things I look for are Percentage of return, length of loan, LTV, the Asset secured on the loan and previous bankruptcies/IVA's.
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duck
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Post by duck on Feb 19, 2014 20:16:01 GMT
I look for a feeling that the proposed loan is 'logical'. If I was in the borrowers position would I be doing the same? If I can see some logic I delve further. If I don't have a comfortable feeling I will delve further but with a 'convince me' attitude. Then it is hit the detail.
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oldgrumpy
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Post by oldgrumpy on Feb 19, 2014 21:31:54 GMT
Whatever the proposal is, I look very carefully at the probing questions being asked by lenders far more astute than I, and the answers being given. This forum and the Assetz Q&A are invaluable. Thanks be to everyone who adds to the DD on each offering.  |
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mikes1531
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Post by mikes1531 on Feb 19, 2014 23:11:37 GMT
Whatever the proposal is, I look very carefully at the probing questions being asked by lenders far more astute than I, and the answers being given. This forum and the Assetz Q&A are invaluable. Thanks be to everyone who adds to the DD on each offering. Me too. That Q&A page is very useful because others think of questions to ask that wouldn't occur to me.
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