Huge discrepancy in valuation.

bowlhead99

MONEYTREE wrote: »

Thanks Adrian. I must make 100% certain I cannot lose the money though. I just lost £2,600 in shares and I am absolutely gutted.

Hi from your other investing thread. AdrianC is well-meaning and it is true that the p2p forum he's referring to has a lot of knowledgeable people on it, and I don't doubt his returns.

However, p2p is loaning money to individuals or businesses through a middleman, and whether or not there is some collateral in the background, the high potential returns there are to compensate you for the risk that the borrower doesn't pay back or the middleman collapses and a variety of other risks that could see you lose money or have huge delays getting your money back. Unlike with a bank account, there's no FSCS compensation in the case of investment losses on the loans you make to try to get the returns.

As you mentioned earlier in this thread, you are not looking for the absolute best possible deals at all costs, as staying in good mental health and avoiding hassle is also a factor. So, getting into a pickle with some peer-to-peer lending investments that went wrong - just to eke out a higher return for a couple of months between houses - is not something you should get into. AdrianC's good long term return is not from just doing a cursory bit of research and then deploying the money for two months on virtually instant access.

For the first few (or few tens of) thousands you can get good rates from current accounts and instant access regular savers, some of which you might already be using. You are right that for the vast majority of the £300k+, something like 1% at NS&I would fit the bill given you can't tie it up for long terms or notice periods if you want to be able to pounce on a dream home.

As a substitute for equity and bond investment though, aside from your house money, p2p can be more useful - as long as it's very well researched - because the (potential) returns are more structured than equities for example. Just definitely don't confuse for being a cash deposit substitute.

glasgowdan

In your shoes I'd be seriously reviewing if I needed 10 rooms worth of house and stuff, with a disability that surely must make maintaining a house that size hard work. And I assume you're single as there's no chat of a partner?

I know this isn't relevant to the main topic, sorry, but it's all I can think about when I look at your situation.

MONEYTREE_2

glasgowdan ~ I am truly grateful for your concern. I manage my current ten-roomed house just fine, thanks. I let three rooms to lodgers, and we split the cleaning between us. Only the GF is my responsibility, and I can manage to drag the hoover and mop around, and every few weeks I pay someone for a couple of hours' cleaning to do the bits I have trouble with.

I do have a boyfriend, who doesn't live with me, but it's my male lodger who does ad-hoc maintenance and repairs (at an hourly rate) and my town is full of builders and cleaners.

I'm not moving to get a smaller place. I am moving because I want to live in another town.

MONEYTREE_2

Hi bowlhead ~ I appreciate your concern, too.

When my ex first told me about P2P I too thought it sounded terribly risky but since Adrian's comment I have been reading up about it online. Not from the companies running it, but from investment guides.

See for example the Daily Telegraph:

http://www.telegraph.co.uk/personal-banking/savings/peer-to-peer-lending-everything-you-need-to-know-about-the-leadi/


Turns out that the default rate is minuscule! About 1%. What is more, because you only invest a small amount with any one borrower, if you are hit by that 1% it barely affects your overall profit. There are articles online written by investors and they are making 4 to 7 pc including defaults.

http://www.financialthing.com/bondmason/

I am not thinking about putting my house sale money in P2P but coming out of my S&S ISA and using (some of) that for P2P. I have lost £2,600 in the past 2 weeks in my S&S ISA and no P2P could possibly lose me that much, not in a year, let alone in such a small space of time.

There is also now such a thing as a P2P ISA!

I am aware that I am now seriously off topic!

[Deleted User]

Depending on what sale price is achievable for your property, you may have to consider which is more important, location or size of property but it would be worth looking at smaller properties to see if there is anything out there you can live with, that costs less. If you are older and disabled, really, it might be time to plan for the future. My father is stuck in a totally unsuitable property (he's 82) that was fine up until his 60's, and then he became unwell. He's really struggling now and can't move to another property at all. One of the reasons is the stress of another move.

It is probably also worth making the house as presentable as possible so it does get the highest price. Update the decor where possible etc (not saying the house looks dated but just in case, it might be worth getting someone who doesn't know you well to look at the house and give their opinion if anything would make the house more attractive to buyers).

MONEYTREE_2

Hi Deanna

I can't go too small as I need to retain the ability to have lodgers. I might get away with two (currently have three) because I can charge more per person, as rents are higher in the town I am moving to. Also, from next year I get my employee pension. It's only £55pw but helps compensate for the lack of the third lodger. Lastly, if the new house has a garage and off road parking I could always try to let out the garage.

I've been looking at "chalet bungalows". They have one or two bedrooms plus a full bathroom (often with a walk-in shower) on the ground floor, which will be my quarters, and two beds and a bathroom upstairs, for lodgers. As they would clean their own rooms and facilities, I would hardly ever have to go up there except for the occasional check and to show new lodgers the room. And of course my boyfriend could always show them around, anyway, as he is 100% fit.

Thanks for the tips on selling. I have already asked a couple of building firms for a quote for tarting up the facade. I had the whole rear repaired and repainted last year, so maybe time to do the frontage.

Hoploz

A lick of paint and a declutter does wonders when going on the market so get the place spruced up a bit ASAP. It would certainly help, when there's a chance your property is over priced.

People might be prepared to stretch a little further if the place is modern and fresh looking and can be moved straight into, but if the place looks shabby with ancient paper hanging off the walls and mould all round the bathroom then they certainly won't.

Also, if you're likely to have to buy something smaller then a declutter will be necessary anyway.

I'm a little confused by your lodger requirements. It seems as if you're buying a big place purely for the income .... But surely if you had money left over having bought a property that's ideal for you yourself living alone (or even leaving room for your BF) you could do without the rental income.

somethingcorporate

We had 3 valuations on our last house. £320k, £325k and £365k.

The £365k agent used a professional photographer. Sold within a week for £360k.

6am

MONEYTREE wrote:

I want to buy at £20k more or less what I get for my house, so it makes a huge difference whether my place is valued at £400k or £300k.

Yes. I am prepared to put up to £20k of my savings into the new purchase.

Did you consider costs? The estate agent fee is £5K, stamp duty is £10K, solicitors £2K.

bowlhead99

MONEYTREE wrote: »

See for example the Daily Telegraph:

http://www.telegraph.co.uk/personal-banking/savings/peer-to-peer-lending-everything-you-need-to-know-about-the-leadi/

Turns out that the default rate is minuscule! About 1%. What is more, because you only invest a small amount with any one borrower, if you are hit by that 1% it barely affects your overall profit. There are articles online written by investors and they are making 4 to 7 pc including defaults.

It has been quite easy to make money as an early participant in a new market. In the time P2P has been going, investment markets are all up, and interest rates have been falling and employment has been increasing and wages have been rising. So whether you are lending to individual businesses or individual consumers, it has been profitable and you have easily been able to get your money back. When someone borrows from you at 6%, but then they see Tescobank will lend to them at 3.1%, they can go get that new loan and use it to pay you back. Easy peasy.

However if you try that in a market where the interest rates are going up and investment markets are going down and unemployment has been rising and people are having trouble making ends meet and businesses are not so bouyant, then whether you are lending to individual businesses or individual customers, you will find it harder. And you don't know whether we are going to see a good period or a bad period for the economy next. Most forecasters project 2017 to be lower-growth than they had previously assumed pre-referendum, and 2018 to be lower still.

Some of the individual borrowers, perhaps a large percentage in inclement times, will refuse to pay you because they would rather choose not to pay you than get their house repossessed through not repaying their mortgage or get their phone cut off through not paying their phone bill. The businesses who pledged some of their business assets as collateral for your loan to them, just in case they couldn't pay you back, may find that not only are they unable to pay you back, but their assets are not worth what they thought they would be, and either way it's a massive pain in the !!! to chase them through the courts. Also, the middleman who arranged for your money to be deployed across all these little deals might go bust. So even though you technically still own 100 £20 loan parcels, it's very impractical to get your hands on them.

Anyway if you think you can't lose more than 1%, think again. Martin Lewis in your quoted article said the key to it was to accept that once you lend money out you may not get it back. Lord Turner in your quoted article (former financial services regulator) highlighted that consumers were taking on huge risks and serious losses would emerge at some point.

Featured lender Lending Works says defaults are hardly anything and that their average borrower has 39 months term. As they were only formed in early 2014, not a single borrower has lasted a full 39 month term so the data about who will default is not complete.

I am not thinking about putting my house sale money in P2P but coming out of my S&S ISA and using (some of) that for P2P. I have lost £2,600 in the past 2 weeks in my S&S ISA and no P2P could possibly lose me that much, not in a year, let alone in such a small space of time.

Nonsense. Based on rough figures being bandied about in your investment thread, that's only 5% or so. You could very easily lose a similar amount on P2P and quite possibly more. Yes the downside risks are generally lower with P2P vs equities of course as one is targeting a fixed contractual return and other isn't. But there is no FSCS protection, because people can quite easily break contracts or simply fail to meet their terms despite their best intentions.

Did you read the part of the Telegraph article that said that Trustbuddy expects its investors to lose at least a quarter of their cash? I haven't bothered to follow up on the story since I first heard about it, but you don't need to hear exactly how it ended to realise that such losses are possible. Perhaps even likely, in time.

This is not to suggest that anyone who claims they have gotten a good return since P2P began is a liar. Many will have done very well. Though they will likely now be getting worse returns for the same risk than they did at the start when there was more limited competition in the market for lending out your money.

For example, Telegraph article mentions that at Zopa, average return 5% after bad debts / default losses. But the default losses are almost a percent, implying pre-default gross return was almost 6. That can't be realistic now as they only offer headline rates of 3.9% on Zopa Classic lending or 3.1% on the shorter term stuff, with the higher 6.3% reserved for if you're happy with higher risks.

There is also now such a thing as a P2P ISA!

With virtually no providers authorised to offer it yet.