michaelc
Member of DD Central
Say No To T.D.S.
Posts: 5,706 
Likes: 2,981
Member is Online
|
Post by michaelc on Oct 8, 2016 19:36:48 GMT
HI
I've been reading this forum for a while and it is a great resource!
Probably a very basic question but one I have is why would a property developer not get a loan from a bank if he/she/it has good security?
A follow up, is am I right that most/all the loans are offered at 12% so presumably the borrower is paying 1% or 2% more than that. In these times, I don't understand why most people wouldn't be able to raise finance at a much lower rate secured on property especially where the LTV is 70% or a lot lower. Heck, Tesco's are offering completely unsecured loans for as little as 3% or 4% and regular domestic mortgages are often lower still.
Sorry for my naivety in this.
|
|
cooling_dude
Bye Bye's for the PPI
Posts: 2,853
Likes: 4,298
|
Post by cooling_dude on Oct 8, 2016 19:59:56 GMT
HI I've been reading this forum for a while and it is a great resource! Probably a very basic question but one I have is why would a property developer not get a loan from a bank if he/she/it has good security? A follow up, is am I right that most/all the loans are offered at 12% so presumably the borrower is paying 1% or 2% more than that. In these times, I don't understand why most people wouldn't be able to raise finance at a much lower rate secured on property especially where the LTV is 70% or a lot lower. Heck, Tesco's are offering completely unsecured loans for as little as 3% or 4% and regular domestic mortgages are often lower still. Sorry for my naivety in this. SS charge the borrower 18% + fees, so it's is an expensive route of finance for the borrower The short answer to your question : bridging loans can be provided quickly, while traditional loans take longer. Sometimes people need funds quickly!
The Long Answer...
The PBLs are "Bridging Loans"; they bridge a gap between the borrower requiring the funds and them actually finding the funds (either via a mainstream bank, or via them releasing their own funds). Traditional property loans (i.e. a mortgage) take time, and that's why sometimes the borrower needs to bridge the gap. Some borrowers are asset rich, but not cash rich, so need to bridge the gap so they can release funds from their assets. The same applies to DFLs (Development Loans), but the loan is required so that the borrower can start development quickly or meet a timescale. This is evident by the student blocks on SS; ideally, the borrower wants them completed for the new university year; he can't afford to wait for a traditional loan. The above is what bridging loans are traditionally used for, but they are sometimes used for other reasons, such as if a broker simply can't find traditional finance for the borrower (i.e. they are rejected finance), they will place it with a bridging loan provider.
|
|
|
|
Post by martin44 on Oct 8, 2016 20:14:52 GMT
|
|
michaelc
Member of DD Central
Say No To T.D.S.
Posts: 5,706
Likes: 2,981
Member is Online
|
Post by michaelc on Oct 8, 2016 20:28:36 GMT
Thanks cooling_dude - makes a lot of sense.
Martin: Unfortunately, I don't have so much time these days that I can afford to waste it by creating profiles on random sites to ask random questions. So yes, I am looking to move out of FC, Zopa and 0% bank accounts into something with a more efficient risk/reward profile.
|
|
|
|
Post by martin44 on Oct 8, 2016 20:38:37 GMT
Thanks cooling_dude - makes a lot of sense. Martin: Unfortunately, I don't have so much time these days that I can afford to waste it by creating profiles on random sites to ask random questions. So yes, I am looking to move out of FC, Zopa and 0% bank accounts into something with a more efficient risk/reward profile. Its not a random profile on a random site, its the help page on this site, which a certain poster has spent a lot of time preparing to help out newbies such as you.. you aught to go there and have a look . 
|
|
mikeh
Member of DD Central
Posts: 499
Likes: 370
|
Post by mikeh on Oct 8, 2016 20:39:49 GMT
SS charge the borrower 18% + fees, so it's is an expensive route of finance for the borrower The short answer to your question : bridging loans can be provided quickly, while traditional loans take longer. Sometimes people need funds quickly!
The Long Answer...
The PBLs are "Bridging Loans"; they bridge a gap between the borrower requiring the funds and them actually finding the funds (either via a mainstream bank, or via them releasing their own funds). Traditional property loans (i.e. a mortgage) take time, and that's why sometimes the borrower needs to bridge the gap. Some borrowers are asset rich, but not cash rich, so need to bridge the gap so they can release funds from their assets. The same applies to DFLs (Development Loans), but the loan is required so that the borrower can start development quickly or meet a timescale. This is evident by the student blocks on SS; ideally, the borrower wants them completed for the new university year; he can't afford to wait for a traditional loan. The above is what bridging loans are traditionally used for, but they are sometimes used for other reasons, such as if a broker simply can't find traditional finance for the borrower (i.e. they are rejected finance), they will place it with a bridging loan provider. and let's be honest - some of SS's borrowers are colourful characters who find it difficult getting finance from traditional sources.
|
|
ben
Posts: 2,020
Likes: 589
|
Post by ben on Oct 8, 2016 20:50:41 GMT
A lot of the borrorowers on SS have to use sites like this as there is too many if buts and maybes to begin with to pass bank checks. A lot of banks will not be happy to lend in the initial stage.
|
|
|
|
Post by martin44 on Oct 8, 2016 20:56:42 GMT
A lot of the borrorowers on SS have to use sites like this as there is too many if buts and maybes to begin with to pass bank checks. A lot of banks will not be happy to lend in the initial stage. But all will be ok... because the tory's, but yesterday, unveiled their new initiative , for the umpteenth time, 'we are going to make more money available to build more homes' ... but you cant have any of it. 
|
|
|
|
Post by geraldine1210 on Oct 9, 2016 7:05:11 GMT
SS charge the borrower 18% + fees, so it's is an expensive route of finance for the borrower The short answer to your question : bridging loans can be provided quickly, while traditional loans take longer. Sometimes people need funds quickly!
The Long Answer...
The PBLs are "Bridging Loans"; they bridge a gap between the borrower requiring the funds and them actually finding the funds (either via a mainstream bank, or via them releasing their own funds). Traditional property loans (i.e. a mortgage) take time, and that's why sometimes the borrower needs to bridge the gap. Some borrowers are asset rich, but not cash rich, so need to bridge the gap so they can release funds from their assets. The same applies to DFLs (Development Loans), but the loan is required so that the borrower can start development quickly or meet a timescale. This is evident by the student blocks on SS; ideally, the borrower wants them completed for the new university year; he can't afford to wait for a traditional loan. The above is what bridging loans are traditionally used for, but they are sometimes used for other reasons, such as if a broker simply can't find traditional finance for the borrower (i.e. they are rejected finance), they will place it with a bridging loan provider. and let's be honest - some of SS's borrowers are colourful characters who find it difficult getting finance from traditional sources. Colourful? I love that.
|
|
|
|
Post by brokenbiscuits on Oct 9, 2016 9:25:25 GMT
Thanks cooling_dude - makes a lot of sense. Martin: Unfortunately, I don't have so much time these days that I can afford to waste it by creating profiles on random sites to ask random questions. So yes, I am looking to move out of FC, Zopa and 0% bank accounts into something with a more efficient risk/reward profile. If you don't have much time on your hands you probably should think again about investing in Saving Stream. It would be wise to spend time reading the DD (due diligence) threads created on this board before investing in any loans. And would it really be a waste of your time to ask random questions if it's your money that's at risk.  Agree, if you don't have any time and want a fire and forget approach then zopa (and ratesetter/ bondmason) and the current accounts you are leaving are probably the most appropriate for you. Obviously there is no need to have 0 percent accounts when 3-5% accounts exist. You could use savingstream in a way where you just invest in every loan and do no research at all. Hold until when (if?) it pays back and spread the risk that way. But I would think most that employ a similar strategy still do some due diligence, reduce exposure to perceived weaker loans and sell down or out on some before it repays? Check updates and forums regularly to be at the front of the selling queue when any bad news is received? This is not really a platform for fire and forget investing. It wouldn't give you a chance of earning 12% if it was.
|
|
michaelc
Member of DD Central
Say No To T.D.S.
Posts: 5,706
Likes: 2,981
Member is Online
|
Post by michaelc on Oct 9, 2016 12:31:38 GMT
Hi
That isn't what I meant. Before martin44 edited his first post into a helpful one, it just said "Are you wanting to invest or are you just curious?" which was less helpful to me. Therefore, I replied by saying (apparently not clearly) that I was investing and wasn't asking just because I was curious.
|
|
|
|
Post by martin44 on Oct 9, 2016 12:41:56 GMT
Hi That isn't what I meant. Before martin44 edited his first post into a helpful one, it just said "Are you wanting to invest or are you just curious?" which was less helpful to me. Therefore, I replied by saying (apparently not clearly) that I was investing and wasn't asking just because I was curious. Might have been more helpful if you had replied thus. "Martin44, I am looking to invest" Thats why i added further. But ok, lets start afresh, if you are new here i would strongly recommend, if you haven't yet. go here forum.p2pmoney.co.uk/thread/4585/faq-read-post-answers-common You will find this an excellent source of information before you start RISKING your hard earned cash.
|
|
|
|
Post by martin44 on Oct 9, 2016 12:49:26 GMT
|
|
ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329
Likes: 11,549
|
Post by ilmoro on Oct 9, 2016 13:08:11 GMT
|
|
michaelc
Member of DD Central
Say No To T.D.S.
Posts: 5,706
Likes: 2,981
Member is Online
|
Post by michaelc on Oct 9, 2016 14:44:04 GMT
Thanks guys! Sorry also for the misunderstanding. That info is extremely useful. I read the faq last night and the status page is really, really good stuff!
Btw, my property experience is modest but I do have a tiny bit - I've currently gained fpp (without an architect) for 3 residential units on the site of my existing house and am getting offers of JVs and outright offers from developers. It is fascinating for me to see what it is like on the other side - i.e. how the developers raise their cash. That all said, 100% of the reason I'm here is to find something better than 0.1% or whatever the banks give me.
Maybe I should post on the thread concerning this but regarding the Edgbaston loan I thought the valuation very optimistic. I would have preferred a more honest valuation and higher LTV. I also noted that they have the build costs at about 1.1K per sqm. Even on a large build, I doubt you could get the level of finish needed for their GDV although presumably since it is a PBL, the valuation is based on current resale but still seems high. Was also interested to read that the borrower has another loan via a company he controls - I'm too knew to SS's platform to know yet but that sort of thing should surely be very clear on the platform and not require the diligence of people on this board to check company's house etc. That isn't to say we shouldn't conduct our own DD of course. Sorry for the ramble !
|
|
