### Author Topic: LC income  (Read 4545 times)

• Newbie
• Posts: 15
##### LC income
« on: December 27, 2012, 06:42:45 AM »
Has anyone run a model showing that given enough investment in LC that it could become a substantial income? I was looking at 60k plus notes and the amount that would bring monthly. Not bad. Of course most of the expected monthly payment is principle. Anyone done the math to see at what point you could withdraw, how much you could withdraw and still be able to perpetuate the account through reinvestment while withdrawing money?

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LCI

#### Zach

• Hero Member
• Posts: 622
##### Re: LC income
« Reply #1 on: December 27, 2012, 08:13:55 AM »
It is certainly possible, and I'm sure there are people already doing it.

The amount you're looking for would be entirely dependent on the amount of money you're looking for in income from the investment.

Do you have a number in mind?

• Newbie
• Posts: 15
##### Re: LC income
« Reply #2 on: December 27, 2012, 08:35:18 AM »
My thought recently has been to have about 10k per month coming in from payments (of course most of that is principle) then drawing off 5K of that as income and continuing to reinvest the other 5k. What I have been trying to model is at what point can you draw money from the account but still grow it so that you maintaining the number of notes or increase them while also drawing an income?

The use of exponential growth comes in here but I lack the exact formula to see the result.

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LCI

#### Zach

• Hero Member
• Posts: 622
##### Re: LC income
« Reply #3 on: December 27, 2012, 09:03:33 AM »
To receive payments equal to about \$10k a month (assuming an average IRR of 10%, and 5 year term), you would have to invest about \$500k.

As all LC loans are fully amortized, the interest amount is going to vary with each payment cycle. If you continued to reinvest, you should have no problem pulling out about \$5k a month in interest alone with a \$675k investment.

My 10% annual figure is a conservative estimate at this point....but I think its very realistic (dependent on your investment strategy)

• Newbie
• Posts: 15
##### Re: LC income
« Reply #4 on: December 27, 2012, 09:23:46 AM »
Thanks Z,

The dream of most investors is to some day live off of their holdings. With P2P this may be a theoretical idea because: P2P is still a young industry and it is hard to tell if it will be around or in what form it will be in the years or decades ahead. And because it is never a good idea to put so much in any one investment or use it as a sole income provider.

But it is an interesting idea isn't it, to have an income from P2P? LC may be going public in a few years according its CEO. This could mean a quick "legitimising" of the industry and many others could join or there may be other similar services opening. If the returns continue to be steady and relatively stable this could be the wave of the future.

So, is anybody out there doing this yet and what sort of knowledge would you like to share?

As for me I have been in LC for about 3 years and am at the 500+ mark for total notes. I have been fascinated to watch the principle grow as I compound the interest through reinvestment. This got me thinking about what I mentioned above.

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STC

#### J2E

• Jr. Member
• Posts: 79
##### Re: LC income
« Reply #5 on: December 27, 2012, 09:36:24 AM »
Long term goal for me is to have interest coming in at about 2k per month.  I'm currently at arond a 100, so I've got a ways to go, but only 10k invested.

• Newbie
• Posts: 15
##### Re: LC income
« Reply #6 on: December 27, 2012, 09:40:43 AM »
How have you been able to accurately see what your total interest is per month?

I have been able to get some rough estimates but I would like to see it in more detail.

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SLC

#### Zach

• Hero Member
• Posts: 622
##### Re: LC income
« Reply #7 on: December 27, 2012, 09:47:47 AM »
How have you been able to accurately see what your total interest is per month?

I have been able to get some rough estimates but I would like to see it in more detail.

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SLC

I would recommend trying out interestradar.com

Its an invaluable tool for tracking your actual returns and breaking down the statistics of your investment.

It will show you month-by-month what your payments/interest are.

• Newbie
• Posts: 15
##### Re: LC income
« Reply #8 on: December 27, 2012, 11:55:21 AM »
Great site! Thanks.

Anybody doing what I described above? Or thinking about it?

I have wondered about this from beginning considering how steady the returns are and that it is subject to the underlying value fluctuating as stock do. Of course if we could also have FDIC insurance on accounts this would be ideal.

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SLC

#### SBryantMS

• Jr. Member
• Posts: 95
##### Re: LC income
« Reply #9 on: December 27, 2012, 08:14:34 PM »
I am working to make LC an annuity for my retirement.  If I have \$115K invested in loans returning 10% net -- then -- I will have a \$1,000 monthly withdrawal for 30 years assuming that I can rollover all payments (less my monthly draw) at a net 10% for the 30 years.

You can play with annuity numbers here:

http://www.bankrate.com/calculators/investing/annuity-calculator.aspx

#### Grant

• Newbie
• Posts: 42
##### Re: LC income
« Reply #10 on: December 28, 2012, 04:53:25 AM »
I think you need to be careful in your planning and diversify your portfolio... Even lending club says you shouldn't have more than 10% of your net worth tied up in P2P lending. While I think that number may be a little conservative depending on one's particular situation, I don't think I'd put more than 20% in as I don't believe the party can go on forever.

• Newbie
• Posts: 15
##### Re: LC income
« Reply #11 on: December 28, 2012, 06:12:58 AM »
Agreed. I am putting about 20% into my LC acct. at the moment and don't plan to go much beyond that. It is risky but that risk gives us all rewards. The rest goes to a ROTH and bonds. The 401K is for stocks.

The annuity calculator was very useful, thanks. One thing to keep in mind of course is what the payment will be worth after inflation in 25 years. If you are paying yourself it seems best to make those payments small at first and then increase them over time to a level you may be comfortable with.

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SLC

#### OrthoInvest

• Newbie
• Posts: 36
##### Re: LC income
« Reply #12 on: December 28, 2012, 10:58:07 AM »
The standard thought is that as wealth increases, so does our spending habit. Obviously if you have half a million dollars, you will be spending more than 5k a month. People with that amount of money would likely balk at the idea of only having 5k/month. That being said, I'm sure a tiny amount would consider it.

If you have 500k to invest in P2P, and that's only 10-20% of your net worth, then you are looking at a multimillionaire. And they are probably investing in stocks that return above P2P rates, with more liquidity, and different risk classes.

That being said, P2P can represent a passive income supplement - which I think all of us would love to have.