mikes1531
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Post by mikes1531 on May 21, 2016 16:57:45 GMT
I'd rather have £1 each month for 6 months, than the promise of £9 in 6 months time. ... It was a really long post.. 99% thumbs up. But the last line.. 100% ... I've been banging on for ages about it. Different people want different things. If everything else is the same for both of those options -- probability of loss, etc., etc. -- I'd prefer £9 in six months. I'd invest in one of these every month until I had six of them. And at that point I'd start receiving £9 every month for as long as I could take the proceeds from any maturing investment and reinvest it in another similar deal.
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Post by earthbound on May 21, 2016 17:04:41 GMT
Jaydee ... It was a really long post.. 99% thumbs up. But the last line.. 100% ... I've been banging on for ages about it. Different people want different things. If everything else is the same for both of those options -- probability of loss, etc., etc. -- I'd prefer £9 in six months. I'd invest in one of these every month until I had six of them. And at that point I'd start receiving £9 every month for as long as I could take the proceeds from any maturing investment and reinvest it in another similar deal. Mike... if everything was the same we would all opt for £9 every month, but it isn't , your scenario is a prediction based on no losses and no defaults. If only p2p was that simple.
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Post by earthbound on May 21, 2016 17:14:20 GMT
If this thread related to MT or SS they would have defended themselves and put investors at ease- not with FS however which also adds more concern. Quite right.. FS are notoriously adept at not giving out any more info than is absolutely necessary. Been that way for as long as I can remember. 
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mikes1531
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Post by mikes1531 on May 22, 2016 1:46:05 GMT
I'd rather have £1 each month for 6 months, than the promise of £9 in 6 months time. ... It was a really long post.. 99% thumbs up. But the last line.. 100% ... I've been banging on for ages about it. Different people want different things. If everything else is the same for both of those options -- probability of loss, etc., etc. -- I'd prefer £9 in six months. I'd invest in one of these every month until I had six of them. And at that point I'd start receiving £9 every month for as long as I could take the proceeds from any maturing investment and reinvest it in another similar deal. Mike... if everything was the same we would all opt for £9 every month, but it isn't , your scenario is a prediction based on no losses and no defaults. If only p2p was that simple. : I didn't think I was suggesting no losses and no defaults, I was simply suggesting the same level of losses in both payment scenarios. I guess I'm missing the point here. Is someone suggesting that interest paid monthly would mean noticeably reduced losses? I can see that it would reduce losses by a tiny bit -- to the extent that there'd be a bit of interest earned in the monthly case that wouldn't be earned if no interest was paid until maturity. But I don't think that would make up for the difference between £6 of monthly interest and £9 of interest at maturity.
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max
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Post by max on May 22, 2016 10:19:47 GMT
That is a blooming good question, I have looked at the valuations on FS and in my non-expert view most of the FS loans look ok. They are not flying off the shelf for all the reason's mentioned many times before why the SS model is favoured more than FS.
It would be good to hear from FS how they are winning so much business. But I don't see the risk on these FS loans being much worse than the SS ones. There may not be much difference between the types of loan but certainly on the usual metric of cost there is a significant one, FS charges a minimum of 2.4% per month before fees, giving a APR of upwards of 33%, Savings Stream charges 1.5% per month including costs. (although it doesn't explicitly say that the lender does not pay fees, merely that " a fair margin as the administration costs that are associated with sourcing new projects for investment, and ensuring all property is secured with a legal charge, are substantial.") So taking that as face value would give an APR of 19.5%. Therefore although it is fair to assume that anyone taking a FS loan probably does not have access to normal sources of finance, whereas the difference for SS borrowers is not as significant, although still fairly substantial. Make of that whatever you will in the general context of the platforms before looking at any specific loan. Can you clarify where did you get your info on fundingsecure lending rates for property loans? I cannot see a competitive business @ 2.4% per month. In fact, I cannot see a business at all.
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max
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Post by max on May 22, 2016 10:31:23 GMT
After a quick look at FS website, I can answer to myself - the lending rate for property loans is 1.5% per month within the market standards. I guess the edge of FS is that they do not charge any fees or interests upfront to the borrower. This makes the deal attractive IMO. www.fundingsecure.com/what-we-lend-against/loans-against-property |
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 22, 2016 13:10:24 GMT
After a quick look at FS website, I can answer to myself - the lending rate for property loans is 1.5% per month within the market standards. I guess the edge of FS is that they do not charge any fees or interests upfront to the borrower. This makes the deal attractive IMO. www.fundingsecure.com/what-we-lend-against/loans-against-propertyCame to much the same conclusion in my earlier response to OP, FS arent out of line compared to what SS appear to charge based on info available. Probably at a premium to AC/FC rates but then lower returns to lenders, not necessarily with less risk.
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stevio
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Post by stevio on May 22, 2016 17:01:12 GMT
Charging rates of 1.5% to borrowers, who pays the 1% cash backs? If the borrower, seems to add a huge 60% premium?
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ben
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Post by ben on May 22, 2016 17:16:30 GMT
not sure about the cashback but on the bonus on a few of them they have said the thborrower has agreed to fund the increases but not on all of them so not it is unclear who pays the others and the cashback
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mikes1531
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Post by mikes1531 on May 22, 2016 18:37:58 GMT
Charging rates of 1.5% to borrowers, who pays the 1% cash backs? If the borrower, seems to add a huge 60% premium? : I think you've forgotten that the 1.5% is a monthly rate, and the 1% cashback is a one-off. (So over six months it would be 9% vs. 10%.)
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Jeepers
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Post by Jeepers on May 22, 2016 19:36:43 GMT
Charging rates of 1.5% to borrowers, who pays the 1% cash backs? If the borrower, seems to add a huge 60% premium? : I think you've forgotten that the 1.5% is a monthly rate, and the 1% cashback is a one-off. (So over six months it would be 9% vs. 10%.) From what I understand no fees other than the interest is charged to the borrower. By law the borrower must have the option to repay early so if there is no early exit fee and FS have paid cashback but the borrower then finds a lower rate from a bank and refinances, FS will be out of pocket. Is this sustainable?
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Post by Deleted on May 23, 2016 7:02:40 GMT
As a very cautious lender I've always avoided the roll overs on property. Not because I fear the FS business model is wrong. (I have a feeling that businesses make money on the deals they do or else they don't do the deals) but because I always look for a clear view of the cash generation of any deal and the competence of the borrower.
If we are lending on Rolex watches and the borrower rolls over, the guy is an idiot and the watch is now (basically going to be) ours, the cash generation issue is then all about can FS sell the thing quickly, and for some reason people like the silly things. If it isn't ours then we get paid off, a second roll-over makes no sense.
If we are lending on a prop development and the borrower rolls over then the I don't understand the developer and I don't want to know any more, the property is now of uncertain value and the borrower should have gone for a different deal. Now that may be too simple for the more sophisticated investor but I recognise my limits.
That is not to say that I invest in every prop on FS. I avoid between half and two thirds of all the deals just because the "position" of the property or the notes from the business case does not add up.
BTW I do appreciate those sophisticated investors who explain their thinking on this forum it certainly helps me develop my understanding.
The issue of the FS business model would be clarity on the cash burn. Does anyone actually claim they have these figures or are we just discussing "maybes"?
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SteveT
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Post by SteveT on May 23, 2016 8:24:21 GMT
Whilst the "standard" FS borrowing arrangements on property loans may not include upfront fees, I very much doubt that's the case on large loans and especially those where cashback is added. SS have said previously that they charge borrowers a 2% upfront fee, which more than covers costs of valuation, legals, etc. and leaves something over for occasional lender incentives when needs must. I'm sure other commercial bridging lenders will do much the same, so there will be plenty of scope for negotiation on fees with borrowers looking to raise large sums in short order.
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ben
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Post by ben on May 23, 2016 8:44:04 GMT
on the bridging loans they state they charge no up front fees although does not state what the exit fees are just no penalty for paying back early.
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SteveT
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Post by SteveT on May 23, 2016 8:52:48 GMT
on the bridging loans they state they charge no up front fees although does not state what the exit fees are just no penalty for paying back early. Yes, and my bank advertises "free" banking, and my broadband provider offers "free" broadband. My point is that there are usually exclusions, extras, small print that ensure money will be made somewhere in the process. For example, it's perfectly possible that "no up front fees" actually excludes "out-of-pocket expenses incurred for valuation, legals and any lender incentives agreed with the borrower" (or similar).
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