stevio
Member of DD Central
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Post by stevio on Apr 8, 2017 20:07:21 GMT
Everyone does it differently - whats important to you?
LTV, Rate, Borrower, Asset, Term etc etc
Whats the top three factors?
Have you changed over time what you evaluate?
How much time do you spend evaluating a loan?
Do you feel confident in your analysis?
Anything else you think important to add?
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daveb4
Member of DD Central
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Post by daveb4 on Apr 9, 2017 9:43:47 GMT
Brief version
Diversify - lots of loans across sites which reduces all sorts of risks although may reduce overall interest rate but safer.
Spend time reviewing portfolio.
Then
Security - residential 70% commercial 60% both need to be saleable eg location
Care at small amounts as costs to go to recoveries starts about £20k espically commercial before you look at cheap sale price at auction.
If OK stage 2
Commercial - Look at accounts - should be stable and ideally improving
Development - ideally 5 house plus site eg hopefully paid off before sale of house 5
Start at low level and if possible increase (pre sales) or decrease investment as it proceeds, generally problems are in earlier stages of development.
Depending on p2p company sell out before end eg sales risk especially if only small development of high value.
What is reason for request? Desperate or for improvement
What is exit? Realistic? I prefer sale to bridge of an in case/ hope
Lastly have a quick check on this forum before hitting the buy button!
I do occasionally take a punt like all of us and break some of these rules.
Trouble is most people do similar to above so obtaining these loans can be difficult therefore you take some more risk but lend smaller amounts across more high risk lends and prey.
So far only 3 losses in last 2 years across thousands of loans (obviously other possibles in portfolio) but takes time, I spend about 1 hour a day buying, reviewing and selling, for me it's worth it, others would prefer to sit and leave and receive 7/8% after losses. My return over 11% APR (including some small sale profits) but I enjoy it.
My concern is rates getting lower and risk higher. Not good for my future and need to review the above shortly as not enough loans that fit my target of 10%
I am also ex commercial bank manager which gives me some advantages re gut feels etc but lending against security first is not what I was taught but this is my money!
Have fun
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ben
Posts: 2,020
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Post by ben on Apr 9, 2017 10:37:58 GMT
Similar to above it depends on the type of loan.
How long I spend looking at a loan depends on how much I plan to invest and what my stake would be in default. It also depends on the information avalaible sometimes you can find lots and other times you can not find anything.
If investing a large amount into a loan the three most important things to me are
1. Security - ie is the property going to sell and cover the orgianl loan back
2. Exit Plan - does it make sense, is there actually profit for the borrower, after legal fees and construction fees etc taken into account
3. Borrower - do they have a negative history, it is all well and good having a great asset but if the borrower is going to run rings round the platform when it comes to paying up time, by the time it has gone through the legal route a 70% LTV can quickly become 20% LTV.
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Post by lynnanthony on Apr 9, 2017 11:44:43 GMT
a 70% LTV can quickly become 20% LTV. Don't think you mean that. I'd love 20% LTV. 
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ben
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Post by ben on Apr 9, 2017 11:52:55 GMT
a 70% LTV can quickly become 20% LTV. Don't think you mean that. I'd love 20% LTV. I meant 120% opps
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elliotn
Member of DD Central
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Post by elliotn on Apr 9, 2017 12:03:54 GMT
Top 3 - rate, realisable security, platform (liquidity/reliability)
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gibmike
Member of DD Central
What is a cynic? A man who knows the price of everything and the value of nothing.
Posts: 256
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Post by gibmike on Apr 9, 2017 17:11:40 GMT
Not as experienced as many but my rule of thumb:
Diversification per platform so I have a minimum of 30 loans (3%) per platform.
FS is my favourite as my loans are only about 1.5% of total value per loan.
These are prerequisites before investing but give me what amount I am investing (e.g. £5k per loan limit).
Then I look at the trade between Type of Security vs LTV vs Return.
If I see two loans coming onboard and I only have a certain amount to invest I usually go 50/50 to spread risk.
So far I have been lucky as my duedil is very sketchy ;-)
Mike
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