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Post by Deleted on Nov 23, 2016 14:24:28 GMT
In the aftermath of the Big Cheshire House loan going live I've picked up a lot of loans on the SM this morning.
This has helped me diversify my holdings and move to longer term remaining loans over some which are due to end (go negative)
Now looking at my holdings I realise I am heavily weighted towards DFL over my PBL loans. Would this be considered generally more risky? Any thoughts or discussion welcome. . . .
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Nov 23, 2016 14:49:23 GMT
In the aftermath of the Big Cheshire House loan going live I've picked up a lot of loans on the SM this morning. This has helped me diversify my holdings and move to longer term remaining loans over some which are due to end (go negative) Now looking at my holdings I realise I am heavily weighted towards DFL over my PBL loans. Would this be considered generally more risky? Any thoughts or discussion welcome. . . . There is no yes or no answer; there is personal preference, so you are likely to get a variety of answers to your question. Each loan is as risky as your own DD (and preference) implies, depending on which loan you are comparing against. I.e. One PBL could be less risky than a DFL and vice versa. It seems to me that some of the DFLs on SS have current LTVs over 100%, so if the development stalls SS would be left with a site worth less than the total loan. Remember that DFLs are developments, and development can stall. A lot can happen between the loan going live and the expected completion date. With this in mind, I do consider Bricks & Morter PBLs less risky than DFLs Also remember that with DFLs, the headline LTGV is misleading, as it is only applicable when the development completes and if no more tranches are sent. As new tranches are sent this % will increases. As such it is much harder to assess the risks involved unless there is a recent VR at hand. In any case, being overexposed to any single loan is a bad idea; diversity & DD is my advice 
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Post by Deleted on Nov 23, 2016 15:10:55 GMT
In the aftermath of the Big Cheshire House loan going live I've picked up a lot of loans on the SM this morning. This has helped me diversify my holdings and move to longer term remaining loans over some which are due to end (go negative) Now looking at my holdings I realise I am heavily weighted towards DFL over my PBL loans. Would this be considered generally more risky? Any thoughts or discussion welcome. . . . There is no yes or no answer; there is personal preference, so you are likely to get a variety of answers to your question. Each loan is as risky as your own DD (and preference) implies, depending on which loan you are comparing against. I.e. One PBL could be less risky than a DFL and vice versa. It seems to me that some of the DFLs on SS have current LTVs over 100%, so if the development stalls SS would be left with a site worth less than the total loan. Remember that DFLs are developments, and development can stall. A lot can happen between the loan going live and the expected completion date. With this in mind, I do consider Bricks & Morter PBLs less risky than DFLs Also remember that with DFLs, the headline LTGV is misleading, as it is only applicable when the development completes and if no more tranches are sent. Ss new tranches are sent this % increases. As such it is much harder to access the risks involved unless there is a recent VR at hand. In any case, being overexposed to any single loan is a bad idea; diversity & DD is my advice Thanks for taking the time to write that, confirmed a few of my own thoughts and suspicions. This forum is invaluable for DD and I've bookmarked all your threads for loans I hold. I'm sure it's far from the complete picture but I'd be at a loss starting my own DD. Diversification is my motto, currently no loan worth more than 2% of my total P2P pot although exposure to single borrowers over many loans on sites such as Moneything do skew this. I will maybe target some PBL loans with future deposits to balance my portfolio out ...
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duck
Member of DD Central
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Post by duck on Nov 23, 2016 15:23:04 GMT
One additional factor I consider is 'what is the exit strategy'.
With PBLs these are generally easier to quantify (but are they realistic) with DFLs there may be more to consider, staged sales, one off sale etc etc
With either type of loan the exit strategy may dictate if you hold to term or sell early.
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Post by Deleted on Nov 23, 2016 16:48:54 GMT
My two concerns would be what happens during this winter
1) Brexit driven May is trying to find a path between a bunch of sharks, which include
foreign students (we want to train them but we don't want them to stay and contribute to the country I understand) ,
Buy to let (we want capital appreciation on our houses, cause there are no better deals out there, so lets keep house prices up),
ownership of housing by foreign companies (money in my home country is open to "revision" so lets keep it some wheresafer)
and what may or may not become "guest workers" (if I can't work here, I don't need the house, but if I have two houses I 'm part of buy to let).
This silent issue will get noisier as time goes by and the numpties (the three musketeers) Boris, Davis and Foxis try to work out why they are getting paid the big bucks.
2) The increasing levels of homelessness which will be highlighted further by a cold winter.
So getting through those two issues will be interesting and may have no affect (let's hope so)
Certainly half finished development projects normally sell for less than cost, the issue is how much less than cost?
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mikes1531
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Post by mikes1531 on Nov 23, 2016 17:48:52 GMT
Certainly half finished development projects normally sell for less than cost, the issue is how much less than cost? This suggests to me that a development project that is being built and sold in stages is better than a project working toward a single end point after which it becomes fully saleable. e.g. For a housing development of 100 homes, having 50 complete houses and 50 not started yet is better than having 100 half-built houses. Does that seem reasonable?
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Post by Deleted on Nov 23, 2016 17:51:28 GMT
Makes sense to me
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ablender
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Post by ablender on Nov 23, 2016 18:24:03 GMT
In the case of staged development, if houses start selling (but no payment is done towards reducing the loan), will not this result in a reduced security?
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gurberly
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Post by gurberly on Nov 23, 2016 18:59:24 GMT
The DFL I am most "intrigued" about is DFL005 p2pindependentforum.com/thread/6429/dfl005-land-planning-live-soonIf it's a DFL as in the funds are to fund a development, surely those funds should be funding the development of the development, so I am uneasy that the first tranche is being used to extend a PBL which seems to in my eyes seems to have stalled. To quote SS Tranche 1 facility of £617k is being used to fund the extension of PBL035 for 6 months. Property / site is currently unencumbered with a value of £1.5m so Day 1 LTV only 41%.A personal opinion, but this is one of my "barge pole" loans. My gut says no, it just does not sit right with me. If my thinking is not quite right, please feel free to correct me. I am here to be edukated  |
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Post by Deleted on Nov 23, 2016 19:00:06 GMT
does the borrower receive the cash (made up of cost and margin), if so then the vehicle for the loan continues with a reduced risk as more cash is about and more freedom to move to the cash so more more risk. So you wins some you loses some.
Then we get into the meaning of the word risk, which I note the recent survey from the ombudsman failed to define...
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mikes1531
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Post by mikes1531 on Nov 24, 2016 3:01:12 GMT
In the case of staged development, if houses start selling (but no payment is done towards reducing the loan), will not this result in a reduced security? If the sales money is put back into the project to build/complete more houses then the value of the security should increase. This presumes, of course, that the houses are sold for more than it costs to build them!
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elliotn
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Post by elliotn on Nov 24, 2016 8:05:42 GMT
The DFL I am most "intrigued" about is DFL005 p2pindependentforum.com/thread/6429/dfl005-land-planning-live-soonIf it's a DFL as in the funds are to fund a development, surely those funds should be funding the development of the development, so I am uneasy that the first tranche is being used to extend a PBL which seems to in my eyes seems to have stalled. To quote SS Tranche 1 facility of £617k is being used to fund the extension of PBL035 for 6 months. Property / site is currently unencumbered with a value of £1.5m so Day 1 LTV only 41%.A personal opinion, but this is one of my "barge pole" loans. My gut says no, it just does not sit right with me. If my thinking is not quite right, please feel free to correct me. I am here to be edukated There's a cross corporate guarantee on this so there's further exposure to the borrower's non-related projects. I recently completed a quick review of my holiday exposure including CD's old threads as the totals were flashing up on my materialitydar. DFL005 did take a sizeable haircut but there's an experienced team in place and SS have only just backed them so at c300 days default risk hopefully not 'imminent'. Having said that Pickering was culled and even my beloved Sidmouth had a trim. Time are tough and cuts should be made accordingly.
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ablender
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Post by ablender on Nov 24, 2016 13:45:49 GMT
In the case of staged development, if houses start selling (but no payment is done towards reducing the loan), will not this result in a reduced security? If the sales money is put back into the project to build/complete more houses then the value of the security should increase. This presumes, of course, that the houses are sold for more than it costs to build them! I am not sure if I understand it - what I am seeing is that part of the bricks and mortar are now not part of the security, and that additional loan is handed over to the borrower. There must be a line between making this a system which reduces LTV and increasing it but I fail to see it. Somehow it does work because projects do get finalised successfully.
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mikes1531
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Post by mikes1531 on Nov 24, 2016 14:25:29 GMT
If the sales money is put back into the project to build/complete more houses then the value of the security should increase. This presumes, of course, that the houses are sold for more than it costs to build them! I am not sure if I understand it - what I am seeing is that part of the bricks and mortar are now not part of the security, and that additional loan is handed over to the borrower. There must be a line between making this a system which reduces LTV and increasing it but I fail to see it. Somehow it does work because projects do get finalised successfully. : If the developer receives some funds by selling some houses, they then ought to be able to self-fund more work on the part-finished houses. So they shouldn't need to ask for another tranche of the DFL until they've spent all of that money. The value of the unsold, partially built, houses should have increased during that process, and that should keep the LTV at a reasonable level. Does that help?
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ablender
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Post by ablender on Nov 24, 2016 16:22:11 GMT
I am not sure if I understand it - what I am seeing is that part of the bricks and mortar are now not part of the security, and that additional loan is handed over to the borrower. There must be a line between making this a system which reduces LTV and increasing it but I fail to see it. Somehow it does work because projects do get finalised successfully. : If the developer receives some funds by selling some houses, they then ought to be able to self-fund more work on the part-finished houses. So they shouldn't need to ask for another tranche of the DFL until they've spent all of that money. The value of the unsold, partially built, houses should have increased during that process, and that should keep the LTV at a reasonable level. Does that help? Yes. Clearer now. Thanks.
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