stevio
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Post by stevio on Dec 27, 2016 17:35:16 GMT
We all have different factors and their level of importance. Wondering what others feel important and not so important?
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Liz
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Post by Liz on Dec 27, 2016 17:45:31 GMT
We all have different factors and their level of importance. Wondering what others feel important and not so important? PF, PF, PF. Security, security, security. Everything else is jam.
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Liz
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Post by Liz on Dec 27, 2016 18:10:17 GMT
PF, PF, PF. Security, security, security. Everything else is jam. Liz , yes security is number one on the list, but security is tied in to the LTV. If the value is inflated, then the level of risk rises. We have all seen how some platforms will deliberately use a high value to reach their optimum LTV, which I find very misleading. I completely agree. You have to think of the value of the securitity in a distress situation, then deduct fees and then look what's left to cover the loan, adding in a bit of margin. I also avoid 2nd charges, generally avoid commercial, land and hard to sell security, unless a low LTV. A juicy interest rate helps, or rather a low interest rate puts me off; I need rewarding for my risk, got to make plenty whilst the sun shines.
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Post by Butch Cassidy on Dec 27, 2016 18:44:46 GMT
We all have different factors and their level of importance. Wondering what others feel important and not so important? PF, PF, PF. Security, security, security. Everything else is jam. If you are relying on security then the loan is most likely already in deep trouble & would have been better avoided altogether.
My investment approach, across all platforms that I lend through, is to apply some common sense rules to every proposition; Does the SME borrower have a solid business plan, proven track record, offering that is easy to understand, likely to be successful, good reason to apply for funding etc - most get rejected at this first test & only then do I ask does the rate being proposed reflect the inherent risk of the project, more fail this test, so having rejected probably 90% of the opportunities offered I will look at bit harder at what is left; here security has it's first assessment but it still doesn't form a massive part of the final decision. Obviously pure property/land loans/SPV's need for the security to stand up to scrutiny but it is far more important that the project succeeds as planned/proposed.
I work on the basis that there will be far more lending opportunities than I have available funds so to be ruthless at this initial stage & throw out plenty of good along with the bad is not a problem & well worth the effort - any future default is best avoided at this stage, even if that means losing some solid security backed loans at the same time. In reality any security is often far less liquid, difficult to locate, surprising less than the valuation & very often eaten away by lawyers/receivers/other priority creditors than ever envisaged at the outset, so has to be seen as a very last recovery resort.
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Liz
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Post by Liz on Dec 27, 2016 19:01:17 GMT
PF, PF, PF. Security, security, security. Everything else is jam. If you are relying on security then the loan is most likely already in deep trouble & would have been better avoided altogether.
I only lend on property deals now, so the security is pretty much all you have to go on; and that security is the safety net. I've lend to "solid" businesses in the past where the security evaporates or is eaten up by numerous fees associated with an SME in distress. I've also lent to profitable businesses who had few real assets behind them, again when it goes wrong, it costs you in the pocket. I tend to now look at the worst case senario and that is a defaulted loan; and see if it is going to cost me.
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Post by Butch Cassidy on Dec 27, 2016 20:12:10 GMT
If you are relying on security then the loan is most likely already in deep trouble & would have been better avoided altogether.
I only lend on property deals now, so the security is pretty much all you have to go on; and that security is the safety net. Of course it's always each to their own but I would question whether to put all your eggs in one (property based) P2P basket was the best approach?; I prefer to diversify across platforms & assets, so even when one sector or platform offers poor value then I have better options elsewhere. Would you really not consider lending against say gold pawn via Col or MT? or aircraft on Abl?
With SME lending there will always be some defaults but as long as they are kept below an acceptable level, so as to maintain the overall return, they offer far more variety & diversification potential than just property IMHO.
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Post by loontik on Dec 28, 2016 18:15:37 GMT
I'm still learning the ropes of this, but so far my preference is for: 1. Loans with buyback guarantee 2. Loan originator's stats and default rates on the loans 3. Lender's and the loan details 4. Type of loan and the lender's details.
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upland
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Post by upland on Dec 29, 2016 9:34:22 GMT
I would not say that I am that experienced in this game. I mostly now do secured lending. My DD is fairly cursory , dont like 2nd charges or anything that puts me behind others or gut feeling that this is a bad scene. But mainly I go for diversity and accept any inconvenience of having to wait longer for my return. I know that you should not but I give the benefit of the doubt to the platform that put the loan up. If I do badly out of investments from a platform (and I have in p2p and other areas) then my future investment with them declines. Generally I take my hat off to the quality of some of the loan analysis that people do on these forums. I could not do it.
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Post by lynnanthony on Dec 30, 2016 19:13:29 GMT
One thing I look at which hasn't been mentioned is exit strategy. How is the loan to be paid off? A development loan will be paid off when the property sells. Fine. A bridging loan will be re-financed on hopefully better terms. Fine. But five year non-fully-amortised loans to provide working capital with a vague exit strategy of re-finance (or no exit strategy at all): barge pole.
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Post by solicitorious on Dec 31, 2016 1:08:35 GMT
The more time I spend in P2P, I think it's really down to 4 things, in roughly descending order of importance. a) Diversification, across loans (and platforms, to a lesser extent). Spread your investment thinly. Of course, sometimes I take a chance in getting a (somewhat) larger sum invested, rather than have dead funds sitting about, but always with a view to selling down as soon as practicable to a more trivial level for any particular loan. After being burnt a little in the early days, my own rule of thumb now is:- not much more than £100 in any unsecured loan, and not much more than £500 in any secured loan. For reference, these would equate to around a 20th of 1% and a 5th of 1% respectively of my total P2P investments. [SS is a special case, where I am happy to go many times this, at least during the initial life of (some of) the secured, interest paid up-front, provision-fund-backed loans] b) LTV. Understand it, particularly for 2nd charges and tranches. Figure out your comfort level and try to stick to it. If you must break your own rule, only do it with a trivial amount of investment. There will always be a more attractive loan along soon, and a couple of days lost interest is negligible compared to a loss in an over-invested loan that subsequently goes south... I'm happy to share my LTV calculator docs.google.com/spreadsheets/d/1poGF5j1MLNd-QV9zB4rhNuOuisZI5RVYjjqBFRjHkt0/edit?usp=sharing
c) If possible, try to sell-out completely, say 30 days, before the end of term. Some platforms actively encourage this with a tax break! d) I don't get too hung up on doing my own DD. Life's too short, time is money, and the initial proffered info is usually rosy/vague enough for most secured loans to pass muster in any case. But, keep an eagle-eye on the forum for subsequent nasties that others may discover down the line... If in doubt, sell out early. General advice. Stay disciplined, get organised with spreadsheets. Never get "emotionally attached" to a loan, and... Focus on minimising your losses, and the profits will look after themselves.
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james
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Post by james on Dec 31, 2016 10:22:43 GMT
I look secondly at the viability of the business plan, including exit strategy.
Thirdly at the types and levels of security, who is holding it and how.
But first I look at how trustworthy the platform is, since nothing can protect us directly from a platform that chooses to mislead by omission or false claims and which more generally fails to act in our interests.
So the platform that offered a corporate guarantee then renounced it, said it would pay interest after default and renounced it, didn't disclose its own ownership interest in a borrower, didn't disclose a purchase price well below valuation and presented a planning permission description that was misleading needn't bother trying to get my money or a positive recommendation: it already failed the ethics tests and will continue to fail until the individuals involved change. It demonstrated that I simply cannot trust that the information presented to me will be complete or accurate enough to judge a proposed investment.
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ozboy
Member of DD Central
Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Dec 31, 2016 14:35:01 GMT
Oh go on james, gis a clue? :-)
I have a fair idea who you mean.
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