Loanpad P2P - Reviews, experiences, info or updates, post them here. I'm having a dabble.

Albermarle

I gave up on P2P altogether over two years ago and stopped looking at the P2P forum. 
Luckily although all three platforms I used closed, they did not actually go bust, so my money was returned although that is still only happening slowly with the last one. 
So I can not help/comment on the HMO question.

Sea_Shell

Albermarle said:

I gave up on P2P altogether over two years ago and stopped looking at the P2P forum. 
Luckily although all three platforms I used closed, they did not actually go bust, so my money was returned although that is still only happening slowly with the last one. 
So I can not help/comment on the HMO question.

I suppose it also begs the wider question about investing (generally) in the growing HMO sector, even if indirectly.

Is this something that people would be comfortable with?

Aceace

The country is desperately in need of more housing stock. That need is not going to be satisfied any time soon. If the government and planning authorities decide that converting some buildings to HMOs is part of alleviating the crisis then, like it or not, that is what will happen regardless of whether Loanpad is part of that solution. 

If I was without accommodation and was offered an HMO then I would be happy to get a roof over my head. Obviously, I'd prefer it to be a decent quality HMO. I've seen many that I would be perfectly happy to live in if necessary, and some that I'd rather not. Borrowers on Loanpad appear to be spending hundreds of thousands on these projects, so, hopefully, they will be of decent quality.

As a Loanpad lender for the past 7 years, I was interested to see if your hypothesis that there was a recent trend towards HMOs was true. Examining all 971 loans was way to onerous, as was examining all 271 live loans. Instead, I looked at the 20 newest loans and the 20 oldest live loans. It did seem to bear out the hypothesis. 

Of the 20 newest loans: 

10 were some kind on conversion to HMO,
5 were flat refurbs,
2 were house refurbs, 
1 was already an HMO,
1 was a new house build, 
1 was a retail unit. 

Of the 20 oldest live loans (2020 - 2021 vintage):

6 were conversions to flats/apartments, 
6 were new builds (of which 4 involved flats/apartments),
2 were conversions of buildings to houses, 
2 were house refurbs, 
1 was a conversion to HMO, 
1 was already an HMO,
1 was a hotel refurb,
1 was a mixed use extension. 

On the face of it it does seem that there is a recent trend towards HMO conversions. I do wonder if some of those older loans listed as flats/apartments might also have been HMOs.

I'm not sure why Loanpad are attracting a high proportion of borrowers who are performing HMO conversions. Perhaps it's because a number of their lending partners specialise in this area. And perhaps it's the newer partners who are in that category, hence the more recent trend. Regardless, I'm perfectly happy to continue to lend with them due to their excellent record of repaying 700 projects so far with zero loss of capital or interest on all of them. They are proof that P2P can and does work. 

Sea_Shell

Thanks @Aceace, that's amazing work.  Going above and beyond there!

Firstly I would say that I echo your last couple of sentences, in that I am very happy with the way Loanpad conduct their business and that my money is "safe" in their hands.   I've been with them since Nov 2021, and when I looked into what their loanbook looked like, it was more along the lines of what your research has found.  A good mix.

I also realise that we need places for people* to live, and I'm all for turning buildings into flats, bedsits or HMOs.

However, what doesn't sit very well with me, is the growing trend of converting family homes into HMOs.

I wouldn't want one to spring up next door to me, so I feel a bit hypocritical basically lending my money to these developers, taking my 6%, and thereby helping facilitate this apparently growing trend.    

I've google streetviewed a couple of the addresses of these newest loans, and TBH I feel sorry for the other residents.  They appear to be ordinary residential streets, and what may have been occupied by a family of 3-5, will likely end up being occupied by 6-10 people, with all that beings (cars, noise etc), and at the same time only paying Council Tax for the property as a whole, whilst putting additional strain on services.

My sister rents her family home, and heaven help her if she has to move, as the availability is already very limited, it doesn't need making worse by them being converted.

But as a LL, why settle for £1500 per month when you can potentially get upwards of £3000 pm !!!

I realise that Loanpad (and other P2P lenders) are just providing finance to legitimate projects and that the blame lies with local authority planning, but still...

Also I realise that almost any saving/investment is going to have some elements within it that don't sit right, but obviously it's not as readily available and transparent as Loanpad, which is a good thing.

I shall keep an eye on this trend, and see what the next 20 loans are for, and discuss it with my husband before make any decisions.



* IMO Population problem, rather than a housing problem, but that's for another time/place

Aceace

I take your point on the extra strain on resources due to the likely increase in resident numbers. This will be somewhat ameliorated by the extra tax on the rental income, albeit the cash would end up in a different government pot. 

In your example of the rent increasing by £1,500 per month plus, that would lead to an extra £3,600+ pa in income tax for a basic rate owner, or, more likely,  £7,200+ pa for a higher rate owner. Then there's the extra tax due to the increase in property value when the property is eventually moved on (death or sale), which is likely to be substantial. 

JamesRobinson48

AIUI, Loanpad currently offers ~1% p.a. higher than a Chase EA. It doesn't seem much of a yield pickup if there's risk involved.  So Loanpad is getting more into HMOs, a type of lending that seemingly no building society or mainstream bank will touch, whether due to financial or reputational risks (or both).

Evidently, to date Loanpad has a flawless reputation for execution. Although possibly they didn't go out of their way to draw retail investors' attention to their evolving lending strategy. Of course, one might keep an eye open for the original promoters ultimately losing their touch and/or selling out. Also, if the portfolio becomes concentrated in HMO properties, that might tend to magnify any future default losses.

Despite financial reservations, I could see the ethical purpose of having a dabble if my money was being lent directly to households that aspire to own a dwelling but somehow can't quite satisfy mainstream lenders. Lending to HMO landlords seems slightly different, given their (very natural) profit motive, although obviously everyone needs housing and HMO may be the best or only option for many.

Dunno what the right answer is, but thanks OP for spotting and highlighting this.

I think I'll stick with REITs for the modest real estate exposure in my own investment portfolio.

cfw1994

Sea_Shell said:

Any thoughts on the above from those of you who have posted on this thread previously and are either in Loanpad or other P2P platforms (what are other platforms doing with regards HMOs?)

@Aceace
@Albermarle
@cfw1994
@redpete
@where_are_we
@arsenepenguin
@older_and_no_wiser
@longleggedhair

Well, we have a tiny amount in Kufflink, & they continue to do what they say on the tin.
Not sure about the HMO point - we really only have a teeny tiny sum invested.  Every now & then feel I should pop some more in, but something, for some reason, stops me 🤷‍♂️

Sea_Shell

cfw1994 said:

Sea_Shell said:

Any thoughts on the above from those of you who have posted on this thread previously and are either in Loanpad or other P2P platforms (what are other platforms doing with regards HMOs?)

@Aceace
@Albermarle
@cfw1994
@redpete
@where_are_we
@arsenepenguin
@older_and_no_wiser
@longleggedhair

Well, we have a tiny amount in Kufflink, & they continue to do what they say on the tin.
Not sure about the HMO point - we really only have a teeny tiny sum invested.  Every now & then feel I should pop some more in, but something, for some reason, stops me 🤷‍♂️

How transparent are Kufflink about how your money is invested (lent)?   Are they moving towards HMOs?   What does it say on their "tin"?

I have a modest (but less than average) amount with Loanpad, and my individual investment on one of the loans mentioned above is about £25, so not much...but if their loan book is moving towards 50% HMO, obviously it's cumulative.

They are generally smaller loans though, individually, so will likely make up less in £££ than in numbers. 

Aceace

Kuflink don't often mention the purpose of the loan in the loan particulars, but they do give full access to the valuation reports. So, one would generally have to dig down into the valuation report to discover if a loan was HMO related. An unscientific quick squiz through 6 recent loans showed that only one had a mention of HMOs. 

The last time I looked through the loans in their auto accounts I seem to recall that they contained about 75 projects. The 'tin' says that they currently offer 8% for a 1 year term, 8.75% pa for a 2 year term, and 7% pa for a 3 year term. There's no early access. 

Around a third of the current auto loanbook by value is in default. Though I think that's using Kuflink's 1 month overdue as a default definition, as opposed to the FCA's 6 months overdue. So not paticularly high for this type of lending. Despite the defaults, my auto loans have repaid on time in full, though I usually roll my investments over into new loans so haven't tested this extensively. 

"Are they transparent?" - yes, if you look deep enough (and ignore their uniquely defined "Gross annual interest equivalent rate" nonsense).

Sea_Shell

Today's new tranches are also in respect of existing HMO loans too...😲

Both started life as 3 bedroom houses.