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General Category => General P2P Lending Discussion => Topic started by: JustTryinToMakeABuck on August 14, 2016, 09:18:10 PM

Title: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 14, 2016, 09:18:10 PM
I currently have P2P lending investments in two sectors: consumer debt (e.g., LC) and small business lending. I'm now planning to add real estate exposure, split 50-50 between residential real estate and commercial real estate.  My ultimate goal is to have about 30% of my P2P investments in consumer debt, about 30% in small business debt, and about 20% in each of residential and commercial real estate debt.  For each sector, I work with (or plan to work with) a different platform (i.e., company), and that should reduce my platform risk, but I'm wondering if by diversifying across marketplace lending sectors (consumer debt, small business debt, residential real estate debt, commercial real estate debt) I'm decreasing my overall risk in the P2P asset class or if I'm just making myself feel better.

Comments? Insights?

Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 14, 2016, 09:25:19 PM
You're reducing one kind of risk, and taking on a different kind of risk.

Unfortunately, there are no P2P platforms in real estate or small business lending which I trust.  (I'm investing a bit thru some, but that's an experiment.)

None of them have been around long enough to establish a track record.  With no track record, you're flying blind.

LC has over 1 million loans in the publicly available database.  Sure there are some problems here and there, but you can see what happened in the past in considerable detail.  You can see the quality of their work.  For these startup real estate and small business lending guys you don't have anything like that.  You're flying completely blind.
Title: Re: Value of P2P Lending Sector Diversification
Post by: rawraw on August 15, 2016, 06:30:31 AM
If you decided to give $50 dollars to five homeless people at a 10% interest rate or $250 dollars to one homeless person at a 10% interest rate, which do you think is risky?  Well surely the bet on five reduces the risk somewhat, but it doesn't tell us how much.  Why would anyone invest in P2P real estate instead of buying a REIT?  I still don't understand why, other than the fact the P2P guys seem to do perhaps much riskier real estate.
Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 15, 2016, 11:19:49 AM
Why would anyone invest in P2P real estate instead of buying a REIT?  I still don't understand why, other than the fact the P2P guys seem to do perhaps much riskier real estate.

I'm attracted by what I believe are two advantages:
This is new territory for me, however, so I could be mistaken. If I am, I hope others will step in and correct me.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Half Right on August 15, 2016, 12:05:36 PM
I agree with your logic and am also concerned about the viability of these online real estate lenders.
On the other hand Lending Home has now issued over $750 million in loans and with a current balance outstanding of approximately
$500 million, they are taking in $5 million a year ( at 1% of the outstanding) which is helpful in covering overhead.

In addition they are using a Bankruptcy Remote Vehicle which makes me feel even better. And their rate of return is equal to or surpasses Lending Club.
So I wouldn't put my last dollar with them but all in all I feel relatively comfortable.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 15, 2016, 01:45:33 PM
...Lending Home... And their rate of return is equal to or surpasses Lending Club.

You have no idea what their rate of return is.  They haven't been around long enough to calculate a rate of return.
Title: Re: Value of P2P Lending Sector Diversification
Post by: rawraw on August 15, 2016, 03:27:33 PM
I agree with your logic and am also concerned about the viability of these online real estate lenders.
On the other hand Lending Home has now issued over $750 million in loans and with a current balance outstanding of approximately
$500 million, they are taking in $5 million a year ( at 1% of the outstanding) which is helpful in covering overhead.

In addition they are using a Bankruptcy Remote Vehicle which makes me feel even better. And their rate of return is equal to or surpasses Lending Club.
So I wouldn't put my last dollar with them but all in all I feel relatively comfortable.
Do you think credit risk of highly levered real estate deals (when the market is at all time low cap rates) is lower, equal, or higher than the company facilitating it? Surely the BRV only matters as much as you think the business is unsustainable. A BRV just leaves the average risk of a levered transaction, so don't focus on it too much.

In terms of returns, AAA Subprime paper was marketed as risk free but higher than treasuries. The sure fire way to mess up in investing is focusing on returns vs focusing on what creates those returns.

In terms of the underlying value can't decline, how do you arrive at that? Just because you're investment isn't marked to market daily doesn't mean the value isn't changing. Or are you suggesting it's risk free?  I've been looking at the fundrise ereit but still can't find any information on why it's different from a reit other than marketing sound bites.

Sent from my SAMSUNG-SM-G935A using Tapatalk
Title: Re: Value of P2P Lending Sector Diversification
Post by: reidy83 on August 15, 2016, 09:40:57 PM
I agree with RawRaw/Fred93 that the P2P RE sites all carry risk bur risk is a relative term. I am big proponent of P2P RE and have been investing in this alternative space for 42 months. I know what you are thinking........this is a very short window to determine if this is a good long term play. However, reading your thread I assume your an accredited investor and  I think it is a good idea to try it out and see what happens. Start small and add/subtract based on your results. I have done 110 deals on 8 different sites with 60 deals completely closed. I have lost principal in only two cases and yet my overall return is north of 10%.

I feel the best overall site right now is Realty Shares which gives you Debt/Equity & Commercial/residential opportunities and solid returns. Lending Home/Patch of Land are good for debt positions and short term turnarounds. Most of the deals on the debt sites are done within 12 months so it is pretty easy to get your rate of return.

I used to invest heavily in Fundrise and they were one of my favorite sites until they shut down their interest in specific properties and channeled all their efforts into the eREIT.  Their fees are higher than other REIT's that I invest in so I no longer have any interest in Fundrise.

Another way to participate and potentially spread your risk further is using AlphFlow. The guy who started this site left Realty Shares and created a fund that invests in multiple P2P RE platforms. In addition, this site is awesome if you want a single dashboard for all of your P2P websites. 

Good Luck
Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 16, 2016, 11:50:37 AM
Another way to participate and potentially spread your risk further is using AlphFlow. The guy who started this site left Realty Shares and created a fund that invests in multiple P2P RE platforms. In addition, this site is awesome if you want a single dashboard for all of your P2P websites. 

I've been looking carefully at the AlphaFlow offering. It has some very attractive features, foremost among them that they refund the full management fee if investors don't get 8% per annum on their investment. I also like that the management fee is assessed in arrears. Neither of these things pertains to the fund's ability to choose wise investments, but in a world where fund managers typically get paid in advance no matter how poorly they execute, it's refreshing to see a manager get paid AFTER doing some work and to keep their fee only if they deliver what they promise.

If anybody has comments on the AlphaFlow fund or the people behind it, please chime in!
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 16, 2016, 02:39:30 PM
If anybody has comments on the AlphaFlow fund or the people behind it, please chime in!

Two guys.  No track record.  Their fund charges 1% AUM fee!  They just buy some loans.  Get real.
Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 16, 2016, 02:58:27 PM
Two guys.  No track record.  Their fund charges 1% AUM fee!  They just buy some loans.  Get real.

I've spent a fair amount of time looking, and from what I can tell, if you're looking for a fund with a track record that invests in real-estate-backed marketplace lending debt, you're not going to find one.

For this fund, one of the two guys manages the loan acquisition, and this is the same guy who did the project underwriting for RealtyShares for two years. Not a long track record, but at the same time more than just some random guy.

The interesting part of the 1% fee is that it's fully refunded to investors if the fund doesn't produce a net 8%/year return. I've identified 19 funds that invest in marketplace loans (not all invest in real estate), and this is the only fund I've found that has a hurdle rate for its management fee. Most of the funds charge a management fee regardless of performance, and most have no hurdle for their performance fee. In what appears to be a world of 1% of AUM plus 10% or 15% of all profits, 1% of AUM with an 8% hurdle and no performance fee stands out.

At the end of the day, any fund that invests in marketplace loans "just buys some loans." That's what they're supposed to do. Ideally, they choose good loans, but the AlphaFlow fund is the only one I've found that gives up its management fee if it doesn't achieve a certain level of performance. Saying "Their fund charges 1% AUM fee!" leaves out important information.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 16, 2016, 03:35:45 PM
I've spent a fair amount of time looking, and from what I can tell, if you're looking for a fund with a track record that invests in real-estate-backed marketplace lending debt, you're not going to find one.

Bingo.  You and I do a different thing with that information.  To you it means go ahead.  To me it means stop.  There is a good reason why there are no funds in this area with a track record.  There are no originators in this area with a track record!

Quote
For this fund, one of the two guys manages the loan acquisition, and this is the same guy who did the project underwriting for RealtyShares for two years. Not a long track record, but at the same time more than just some random guy.

That's not "a track record".  That's an employment record.  RealtyShares hasn't been around long enough to have a track record.

Quote
The interesting part of the 1% fee is that it's fully refunded to investors if the fund doesn't produce a net 8%/year return. I've identified 19 funds that invest in marketplace loans (not all invest in real estate), and this is the only fund I've found that has a hurdle rate for its management fee.

Having a hurdle rate is certainly better than not having one, but that's not a reason to invest, and it doesn't overcome the no-track-record issue for me.

Given that there is no fund guy with a track record of any kind, why don't you just invest directly with an originator, and then you won't have to pay a 1% fee in any case?

Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 16, 2016, 05:25:50 PM
Given that there is no fund guy with a track record of any kind, why don't you just invest directly with an originator, and then you won't have to pay a 1% fee in any case?

Two reasons:
Fundamentally,  I believe somebody who does loan selection for a living will do a better job at it than I could myself.

That doesn't mean that I will definitely invest with a fund. I'd like to, but only if I have confidence that the fund is likely to pay off for me. I'm not terribly put off by the lack of a track record, but I don't ignore it, either. For you, it'd be a deal-killer. That's fine. We each weigh our investment options in different ways.
Title: Re: Value of P2P Lending Sector Diversification
Post by: reidy83 on August 16, 2016, 05:28:59 PM
Fred93...........I know you have been critical of P2P lending, specifically Prosper since 2006 and in many cases I agree with your synopsis. No disrespect to you but  there is money to be made in P2P RE sites. Obviously, the market could change and the P2P RE vendors could implode but I don't think that is anytime soon.

I'm sure one could wait another two or three years to invest in P2P RE once these companies become "established" or have a "track record".  By that time, one could miss out on a lot of gains. Again, it comes down to the individuals risk tolerance.

My recommendation for "JustTryingToMakeAbuck" is to try it out and see what happens. I have three years of positive gains and my returns are better then my LC/Prosper returns.

Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 16, 2016, 05:55:26 PM
Fred93...........I know you have been critical of P2P lending, specifically Prosper since 2006 and in many cases I agree with your synopsis. No disrespect to you but  there is money to be made in P2P RE sites.

Actually, I'm a strong PROponent of P2P lending.  I'm heavily invested in Lending Club & Prosper loans.

I argue that one should be very careful of the startups, ie two-guys-who-put-up-a-web-site. 

What money is to be made or lost on the present round of P2P RE web sites is completely unknown.  I understand the allure of high interest rates, but frankly, that's all you have at present.  I am investing a bit at Groundfloor. 
Title: Re: Value of P2P Lending Sector Diversification
Post by: AnilG on August 17, 2016, 07:39:39 PM
Interesting conversation. In the absence of track record, I expect more transparency and disclosures from platforms. I have stayed away from most P2P lending platform, except Lending Club and Prosper, because none of them want to be transparent in disclosing information about their past and current deals. No opening the loan/deal book, no interest from me.

You never know when someone is running a "ponzi" scheme. Trust but verify.
Title: Re: Value of P2P Lending Sector Diversification
Post by: SLCPaladin on August 17, 2016, 08:21:52 PM
Quote
You never know when someone is running a "ponzi" scheme. Trust but verify.

The Ezubao peer-to-peer scheme in China and the staggering amount that was lost is enough to make anyone skittish about investing in P2P funds of any sort, especially when attractive returns are floated around as if they were a given. The amount of credibility that Ezubao had and the implicit backing that state-owned media seemed to give it led many Chinese investors to believe if was much safer than it actually was. Then the whole house of cards came tumbling down. Over $7 billion lost.
Title: Value of P2P Lending Sector Diversification
Post by: Ran on August 18, 2016, 08:41:14 AM
Quote
You never know when someone is running a "ponzi" scheme. Trust but verify.

The Ezubao peer-to-peer scheme in China and the staggering amount that was lost is enough to make anyone skittish about investing in P2P funds of any sort, especially when attractive returns are floated around as if they were a given. The amount of credibility that Ezubao had and the implicit backing that state-owned media seemed to give it led many Chinese investors to believe if was much safer than it actually was. Then the whole house of cards came tumbling down. Over $7 billion lost.
P2P corps in China can operate without proper auditing, which cannot happen for US public companies. Remember that (1) LC's auditing firm is Deloitte and (2) LC went through a wave of scrutiny by IPO underwriters. Now to speak of trustworthiness of auditing firms, Andersen went bankrupt because of Enron scandal, Madoff used a one man auditing firm no one heard of before. To push LC fraud case, one has to really push Deloitte's bankruptcy case
Title: Re: Value of P2P Lending Sector Diversification
Post by: Half Right on August 18, 2016, 11:12:00 AM
Interesting conversation. In the absence of track record, I expect more transparency and disclosures from platforms. I have stayed away from most P2P lending platform, except Lending Club and Prosper, because none of them want to be transparent in disclosing information about their past and current deals. No opening the loan/deal book, no interest from me.

You never know when someone is running a "ponzi" scheme. Trust but verify.

What transparency are you looking for? Lending Home or Peerstreet list almost all the details on every loan they made and are in the process of making. With lending Home surpassing $750 million in loans I think a track record has been started for sure and possibly established. I look at these loans the same way I look at Lending Club. Diversify with 800 loans and your return will hit the projected return on the bell curve. only difference is their is an asset backing up your loan. If you don't go above 70% LTV someone else will lose ALL their money before you lose the first nickel
Title: Re: Value of P2P Lending Sector Diversification
Post by: AnilG on August 18, 2016, 01:15:11 PM
Lending Club and Prosper has set the benchmark for P2P lending disclosures and transparency. At minimum, I expect historical loan information with detailed attributes considered during due diligence at the time of loan issuance, information on loans in progress, payment file for each loan, and details on the due diligence methodology, collection and payment distribution process.


What transparency are you looking for? Lending Home or Peerstreet list almost all the details on every loan they made and are in the process of making. With lending Home surpassing $750 million in loans I think a track record has been started for sure and possibly established. I look at these loans the same way I look at Lending Club. Diversify with 800 loans and your return will hit the projected return on the bell curve. only difference is their is an asset backing up your loan. If you don't go above 70% LTV someone else will lose ALL their money before you lose the first nickel
Title: Re: Value of P2P Lending Sector Diversification
Post by: Half Right on August 18, 2016, 05:14:11 PM
Since they are available only to Accredited investors all the transparency you are looking for is right there in the PPM. Just sign up and prove Accreditation and the info is there in black and white.

For example hypothetically it might read like this:

Our portfolio currently includes over 3,700 loans of which 3.2% have ever hit the 120+ day delinquency stage. Once a borrower is 30 days late on their monthly payment or their maturity date, we consider that loan to be default, and our servicing team works closely with borrowers to bring them back to current. Delinquent loans may, but do not necessarily, produce a loss. Of four foreclosures and two short sales to date, only one resulted in a loss of principal.

What I am wondering is are you looking for all the attributes available to LC, such as FICO scores, inquiries, etc? 
If so you are in the wrong business. I have been lending hard money on real estate for 30 years. as long as the LTV is appropriate and the rate meeting my parameters I will usually make the loan as long as the borrower hasn't filed cha 7 or 11 , and has some other minimal attributes. But my primary security is the property. I am more concerned if its a judicial or non judicial foreclosure state.

What i have learned over the years is that when a borrower has 25% or more of the properties value on the line, he would much rather default on his Lending Club loan than on his property.
Title: Re: Value of P2P Lending Sector Diversification
Post by: rawraw on August 18, 2016, 05:34:46 PM
Since they are available only to Accredited investors all the transparency you are looking for is right there in the PPM. Just sign up and prove Accreditation and the info is there in black and white.

For example hypothetically it might read like this:

Our portfolio currently includes over 3,700 loans of which 3.2% have ever hit the 120+ day delinquency stage. Once a borrower is 30 days late on their monthly payment or their maturity date, we consider that loan to be default, and our servicing team works closely with borrowers to bring them back to current. Delinquent loans may, but do not necessarily, produce a loss. Of four foreclosures and two short sales to date, only one resulted in a loss of principal.

What I am wondering is are you looking for all the attributes available to LC, such as FICO scores, inquiries, etc? 
If so you are in the wrong business. I have been lending hard money on real estate for 30 years. as long as the LTV is appropriate and the rate meeting my parameters I will usually make the loan as long as the borrower hasn't filed cha 7 or 11 , and has some other minimal attributes. But my primary security is the property. I am more concerned if its a judicial or non judicial foreclosure state.

What i have learned over the years is that when a borrower has 25% or more of the properties value on the line, he would much rather default on his Lending Club loan than on his property.
Attributes that I would expect

1) Date of last appraisal.
2) Appraisal assumptions for each of the three methods along with the values
3) global DSCR
4) Project DSCR given certain metrics changing (occupancy, rent/sqft, this depends on type of property)
5) Guarantor information, such as liquidity and income
6) Yield on debt (this is not the cost of the debt paid)

I'm sure there are other metrics, but those are top of mind.  To me, that example paragraph is meaningless.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 18, 2016, 05:46:38 PM
...I have been lending hard money on real estate for 30 years. as long as the LTV is appropriate and the rate meeting my parameters I will usually make the loan as long as the borrower hasn't filed cha 7 or 11 , and ... What i have learned over the years is that when a borrower has 25% or more of the properties value on the line, he would much rather default on his Lending Club loan than on his property.

With the web sites lending to flippers, LTV doesn't mean the same thing as it does for an ordinary owner-occupied mortgage.  The "V" in the LTV is often the supposed future value of the property AFTER intended upgrades are made.  If the flipper fails in mid-project, then the upgrades are not made, and the value of the property isn't the "V" in the formula.

I'm still waiting for good historical data. 
Title: Value of P2P Lending Sector Diversification
Post by: Ran on August 18, 2016, 05:55:53 PM
http://www.bloomberg.com/news/features/2016-08-18/how-lending-club-s-biggest-fanboy-uncovered-shady-loans
Let me throw today's Bloomeberg news article into the discussion. To be clear, Bloomberg journalists are extremely good at generating clicks by exploring public's emotion, be it greed or fear. And this article is negative as usual on LC, but it does open a window into how LC has transformed in the past a few years
Title: Re: Value of P2P Lending Sector Diversification
Post by: Rob L on August 18, 2016, 06:08:27 PM
If you don't go above 70% LTV someone else will lose ALL their money before you lose the first nickel

Just beginning to take a look at this. Maybe a new "home" for some of the funds I recently withdrew from LC. Sorry for the bad pun.
Concern one is loaning money to "I flip homes.llc" and would want to see their track record. Concern two is "LTV"; who supplies the "V"?
Haven't made any direct inquiries but probably will.
Since I'd like to invest IRA funds and LendingHome is set up with SDIRA (same as LC) this it simplifies things for me.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Half Right on August 18, 2016, 06:54:54 PM
http://www.bloomberg.com/news/features/2016-08-18/how-lending-club-s-biggest-fanboy-uncovered-shady-loans
Let me throw today's Bloomeberg news article into the discussion. To be clear, Bloomberg journalists are extremely good at generating clicks by exploring public's emotion, be it greed or fear. And this article is negative as usual on LC, but it does open a window into how LC has transformed in the past a few years
I guess you can never have "enough transparency". I agree with the article writer in that I am letting my account wind down over time by not reinvesting and withdrawing my collections daily. It will take a while to see if LC can turn this around.
Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 18, 2016, 07:07:34 PM
Since they are available only to Accredited investors all the transparency you are looking for is right there in the PPM. Just sign up and prove Accreditation and the info is there in black and white.

For example hypothetically it might read like this:

Our portfolio currently includes over 3,700 loans of which 3.2% have ever hit the 120+ day delinquency stage. Once a borrower is 30 days late on their monthly payment or their maturity date, we consider that loan to be default, and our servicing team works closely with borrowers to bring them back to current. Delinquent loans may, but do not necessarily, produce a loss. Of four foreclosures and two short sales to date, only one resulted in a loss of principal.

I started this thread, and I have PPMs for six funds in front of me, though only two deal with real estate.  (The two are from http://www.alphaflow.com/ (http://www.alphaflow.com/) and http://www.pmifunds.com/funds-2/real-estate-lending-fund/ (http://www.pmifunds.com/funds-2/real-estate-lending-fund/), and if you are aware of other funds that invest only in marketplace real estate debt, I'd appreciate it if you'd point me to them.) None of the PPMs (and neither of the PPMs for the real estate funds) include anywhere near this kind of detail. 

As a general rule, all the PPMs I've read run more or less like this:
PPMs do have useful information, but they don't contain anywhere near as much as their length and serious-looking print would lead you to expect. Furthermore, virtually all contain wording like this (from one of the PPMs I have):
Quote
THIS MEMORANDUM IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE LIMITED PARTNERSHIP AGREEMENT OF THE FUND AND THE SUBSCRIPTION AGREEMENT RELATING THERETO, COPIES OF WHICH WILL BE MADE AVAILABLE UPON REQUEST AND SHOULD BE REVIEWED PRIOR TO PURCHASING AN INTEREST. IN THE EVENT THAT THE DESCRIPTION IN OR TERMS OF THIS MEMORANDUM ARE INCONSISTENT WITH OR CONTRARY TO THE LIMITED PARTNERSHIP AGREEMENT OR THE SUBSCRIPTION AGREEMENT, THE LIMITED PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION AGREEMENT SHALL CONTROL.
In other words, the fact that the PPM says something about the fund doesn't mean it's true. You have to check the partnership and subscription agreements, which are different long, serious-looking documents, the primary distinguishing feature being that they actually mean something.

The kind of information you seem to expect a PPM to contain is more likely to show up in a monthly investor newsletter that describes the current state of the fund's investments. In my experience, the most recent such newsletter is generally delivered prior to or at the same time as the PPM when you contact the fund and ask for information.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on August 18, 2016, 07:32:34 PM
None of the PPMs (and neither of the PPMs for the real estate funds) include anywhere near this kind of detail. 

That is typical.  Funds put as little detail as possible in the PPM.  Anything they put in writing either could restrict them later, or someone could argue wasn't quite correct.

This is another reason for not investing thru the funds.

Why aren't you investing directly?
Title: Re: Value of P2P Lending Sector Diversification
Post by: JustTryinToMakeABuck on August 18, 2016, 07:47:26 PM
Why aren't you investing directly?
To quote myself from a couple of days ago:
Two reasons:
  • I don't want to choose the investments myself. I have no experience in loan evaluation, and I don't want to acquire the necessary expertise. Just as I pay somebody to prepare my income tax returns, I'm happy to pay somebody to evaluate and select loans and lending platforms for me.
  • I don't want to be limited to the loans available on a single platform. Places like LendingHome and PeerStreet offer auto-investing options (which I use with LC), but they can choose only from the loans available on their platform. 
Fundamentally,  I believe somebody who does loan selection for a living will do a better job at it than I could myself.
Title: Re: Value of P2P Lending Sector Diversification
Post by: scotty0318 on November 12, 2016, 11:05:39 PM
Fred93...... What is your experience so far with Groundfloor? I'm interested but am clearly a little hesitant with this being such a young company. Are you seeing decent return? They advertise 12% average.
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on November 13, 2016, 12:44:34 AM
Fred93...... What is your experience so far with Groundfloor? I'm interested but am clearly a little hesitant with this being such a young company. Are you seeing decent return? They advertise 12% average.

So far ok.  The guys running it seem to be fine people.  They communicate well when I have questions or issues.  The fact that they made the effort to go thru the SEC means that legal things are much better documented than most of the real estate funding startups. 

They are intentionally growing slowly, which is good from one point of view and bad from another.  It makes them less likely to make big mistakes as they grow, but it also means product availability is limited.  A few loans per week.

Still hard to say what the returns will be as I haven't had any loans charge off yet.  Average interest rate in my account is a bit above 12%, but of course I'm not gonna get to keep all of that.   

I have 36 loans that have been repaid and 56 loans that are active, of which 3 loans are in forbearance, ie they're working with the borrower to give him a little more time to sell the remodeled house, and 4 for which a demand letter has been sent, which is the stage before repossession.

On one of those demand letter loans ... groundfloor noticed a tax lien filed against the property, which puts the loan in default, so they demanded their money and are starting foreclosure.   The borrower had only drawn down about 3/4 of the loan, which makes one wonder why he didn't draw down some more and pay the damn taxes.  I guess if the borrower is not managing his affairs at this level, we're better off in foreclosure.

That property is in NJ which is a "judicial foreclosure" state, so you go thru the courts, which they say takes 12 months minimum.  Nothing fast about real estate investing.  So it could be a year before I see an example of the recovery process play thru.

These are secured loans, so I think there's a pretty good chance that most of the loan value will be recovered if and when they go thru with those repossessions, unless there's some kind of fraud we don't know about, or it all gets eaten by the lawyers. 
Title: Re: Value of P2P Lending Sector Diversification
Post by: rawraw on November 13, 2016, 04:52:48 AM
Doesn't the government lien prime your position?  Hope it isn't too large.
Title: Re: Value of P2P Lending Sector Diversification
Post by: dmcnic on November 13, 2016, 10:54:21 AM
Groundfloor is new to me. What made you open an account there when LC already offers home improvement loans?
Title: Re: Value of P2P Lending Sector Diversification
Post by: Fred93 on November 13, 2016, 04:43:56 PM
Groundfloor is new to me. What made you open an account there when LC already offers home improvement loans?

LC's home improvement loans are very different than Groundfloor's loans.   I could list differences, but you can also go to groundfloor's website and read.