SteveT
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Post by SteveT on Mar 7, 2017 14:16:12 GMT
Where have I "reported the great returns I've achieved"? I said that my IRR (based on completed loans) is running at a little short of 9% after 2 years. Doesn't sound all that great to me. Where does yours stand?
I went on to mention that, if active and defaulted loans are factored in, there is a range of uncertainty from as low as zero (potentially worse) to a theoretical maximum of around 15%, but that's simply the nature of FS. Any FS lender could theoretically achieve 13-14% IRR (more if they are big hitters targeting bonus rates), but they're most unlikely to manage it IMO.
Remember also that company lenders are liable for 20% corporation tax on ALL profits, unlike individual lenders who opt to take advantage of selling their FS parts on the SM to avoid income tax liability.
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Liz
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Post by Liz on Mar 7, 2017 16:53:36 GMT
SteveT : Is it fair to presume that you've been making investments that qualify for FS's bonuses for large investments? If not, how do you manage to achieve 14-15% returns when nearly all FS loans pay less than that? No, I think I've only ever reached a bonus threshold on one (very low LTV) loan. However, I predominantly buy my loan parts at a discount on the SM (via a company account) : That explains it! But it also means that the good return you've accomplished is unachievable by those of us who don't have a company account we can use that way, and that makes it rather irrelevant for us. I haven't a clue what fraction of FS investors do have company accounts -- that's probably a good subject for a poll! -- but perhaps it would be appropriate if you're going to report the great returns you've achieved that you make a point of mentioning the fact that it's a company account lest people with 'ordinary' accounts think it's something they could do as well. You don't need to be a company to buy loans at a discount and boost your returns. Overall after-tax(income tax) an individual who is a higher rate tax payer would do worse, a standard tax payer about the same, a non tax payer better. Although this a higher risk strategy as you take on default risk. So that 14-15%(pre-tax) return will never materialise. 9% longer term sounds about right.
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mikes1531
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Post by mikes1531 on Mar 7, 2017 17:32:58 GMT
You don't need to be a company to buy loans at a discount and boost your returns. Overall after-tax(income tax) an individual who is a higher rate tax payer would do worse, a standard tax payer about the same, a non tax payer better. You're right. I had forgotten about the advantages of the SM for a non-taxpayer. I do wonder whether someone whose income is so low that they don't pay tax should be putting their nest egg into FS, but I suppose a bit of a dabble wouldn't be unreasonable.
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Liz
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Post by Liz on Mar 7, 2017 18:07:54 GMT
You don't need to be a company to buy loans at a discount and boost your returns. Overall after-tax(income tax) an individual who is a higher rate tax payer would do worse, a standard tax payer about the same, a non tax payer better. You're right. I had forgotten about the advantages of the SM for a non-taxpayer. I do wonder whether someone whose income is so low that they don't pay tax should be putting their nest egg into FS, but I suppose a bit of a dabble wouldn't be unreasonable. There are plenty of families where only 1 parent works, it is often the more wealthy that can afford to live on one wage. Think upper-middle class.
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ben
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Post by ben on Mar 7, 2017 18:21:59 GMT
Where have I "reported the great returns I've achieved"? I said that my IRR (based on completed loans) is running at a little short of 9% after 2 years. Doesn't sound all that great to me. Where does yours stand? I went on to mention that, if active and defaulted loans are factored in, there is a range of uncertainty from as low as zero (potentially worse) to a theoretical maximum of around 15%, but that's simply the nature of FS. Any FS lender could theoretically achieve 13-14% IRR (more if they are big hitters targeting bonus rates), but they're most unlikely to manage it IMO. Remember also that company lenders are liable for 20% corporation tax on ALL profits, unlike individual lenders who opt to take advantage of selling their FS parts on the SM to avoid income tax liability. On FS I am averaging about 13.3% after about 2 years also but that includes 2 loans at bonus rates and my only defualt being fully repaid and interest. Alhough I only expect about 8% after defaults. So current average rate wise FS is my highest.
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mikes1531
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Post by mikes1531 on Mar 7, 2017 18:23:20 GMT
Where have I "reported the great returns I've achieved"? I said that my IRR (based on completed loans) is running at a little short of 9% after 2 years. Doesn't sound all that great to me. Where does yours stand? I went on to mention that, if active and defaulted loans are factored in, there is a range of uncertainty from as low as zero (potentially worse) to a theoretical maximum of around 15%, but that's simply the nature of FS. Any FS lender could theoretically achieve 13-14% IRR (more if they are big hitters targeting bonus rates), but they're most unlikely to manage it IMO. Remember also that company lenders are liable for 20% corporation tax on ALL profits, unlike individual lenders who opt to take advantage of selling their FS parts on the SM to avoid income tax liability. My apologies. I suppose I was focussed on the 14-15% mentioned and failed to give appropriate weight to the full range of possible returns mentioned. My return to date is 9-10%, assuming that my current holdings are worth par value (i.e future interest received will be enough to offset any capital lost to defaults). That return is a bit of an odd number because it includes parts sold on the SM, so it's not all taxable. If I include accrued interest, the return rises to 13-14%, but I don't expect I'll achieve that long-term because there are bound to be losses in the future. Both those returns have been boosted slightly because of the occasional bonus or cashback. The tax situation gives different investors different incentives, ranging from higher-rate taxpayers investing at launch and selling on the SM to non-taxpayers and companies buying mature parts at a discount on the SM.
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mikes1531
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Post by mikes1531 on Mar 7, 2017 18:34:43 GMT
You're right. I had forgotten about the advantages of the SM for a non-taxpayer. I do wonder whether someone whose income is so low that they don't pay tax should be putting their nest egg into FS, but I suppose a bit of a dabble wouldn't be unreasonable. There are plenty of families where only 1 parent works, it is often the more wealthy that can afford to live on one wage. Think upper-middle class. I obviously didn't think this through well enough.  I had jumped to the conclusion that an upper-middle class family with one wage would have all their investments in the name of the non-earner so as to reduce their overall tax bill. But I accept that with the reasonably generous ISA allowances it would take a rather large amount of investment to put the non-earning partner's income up to the point where they became a taxpayer. I'm probably out of touch with the real world! 
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Mar 7, 2017 20:09:28 GMT
SteveT The SM currently has several 1st charge loans with very low LTV's, available at affective rates of 20%+. These could easily boost your IRR return above 15%. Yup, those are the sort of loan parts I reinvest into whenever one of my existing holdings repays. However the "effective rate" quoted by FS is based on the loan repaying on the due date. As soon as they go weeks / months overdue, the effect of the discount declines. Don't forget the occasional loan that may repay early, where the effect of a discount increases. If you were the lucky punter who bought my £1k of 1946684085 yesterday at 1% discount, you've just bagged a 365% return.
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elliotn
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Post by elliotn on Mar 8, 2017 5:50:18 GMT
You don't need to be a company to buy loans at a discount and boost your returns. Overall after-tax(income tax) an individual who is a higher rate tax payer would do worse, a standard tax payer about the same, a non tax payer better. You're right. I had forgotten about the advantages of the SM for a non-taxpayer. I do wonder whether someone whose income is so low that they don't pay tax should be putting their nest egg into FS, but I suppose a bit of a dabble wouldn't be unreasonable. I'm a non tax payer that doesn't need much in the way of day to day cash and have 6 figures invested in p2p. However, as I can't really be a'sed with the morass of FS overdue loans I'm using a % of my RS repayment to try going in through the front door on 13%+ loans & selling on SM. I still have loans ouststanding from Dec and as Steve points out amortising the discount over several months whittles away the effective return; I may prefer SM sale to uncertain loan updates and delays.
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Mar 8, 2017 9:57:35 GMT
You're right. I had forgotten about the advantages of the SM for a non-taxpayer. I do wonder whether someone whose income is so low that they don't pay tax should be putting their nest egg into FS, but I suppose a bit of a dabble wouldn't be unreasonable. I'm a non tax payer that doesn't need much in the way of day to day cash and have 6 figures invested in p2p. However, as I can't really be a'sed with the morass of FS overdue loans I'm using a % of my RS repayment to try going in through the front door on 13%+ loans & selling on SM. I still have loans ouststanding from Dec and as Steve points out amortising the discount over several months whittles away the effective return; I may prefer SM sale to uncertain loan updates and delays. As a non-tax payer can you be a'sed to get money with no risk? There are currently loan parts for 2681169568 available at a discount. It's repaying in 1 hour.
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Post by dan1 on Mar 8, 2017 12:06:40 GMT
Live help tell me that it'll redeem once the new loan is activated. Discount has increased slightly.
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stevio
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Post by stevio on Mar 8, 2017 21:23:49 GMT
Not wishing to put anyone off unfairly, I've now run some basic figures to refine my previous "gut feel" estimates. Out of 76 loans I currently hold: 47 (62%) have been active less than 6 months 13 (17%) are between 6 and 9 months 9 (12%) are between 9 and 12 months 5 (6.5%) are between 12 and 18 months 2 (2.5%) are over 18 months So more like 21% of my portfolio is more than 3 months overdue and in the twilight world of seemingly perpetual "No change" Putting this in some perspective, my IRR after 2 years on FS is close to 9% (ignoring all unpaid accrued interest but assuming all lent capital is eventually repaid, effectively a trade-off) and I've not yet had a penny formally written off (although a couple of loans have seen FS cover small capital losses). That said, roughly 20% of my stake money is still locked up in the >9 month loans... How does this stack up in terms of % of amount invested? I have 63% of my investment in FS greater than 6m and 4% marked as unredeemed
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