Feb 04, 2017
I have been on LendingHome since about the time they started taking accredited investors (early 2015). I have had nothing but a stellar experience. I have about $55k in the platform and about 11 current loans. I have auto invest and was mostly focused on whole platform (some early loans I hand picked). I have been averaging 10.47%. I only had one loan go late and that loan got back on track within about 40 days or so.
I decided to invest on their platform (it was my first CFRE) based on a recommendation from someone who works for me. We had acquired his startup a couple years back and one of his VCs is also a VC for LH. I did a bit of checking on that and after understanding their approach around using data science to provide a risk profile, I was actually good with it. Why? Because I am a VP at one of the largest payment companies in the world and I am intimitately familar with what is possible from good Risk Science. I saw also they brought in some top talent in this regard and that led me to have more confidence. I also sent them a bunch of user experience feedback (part of my background is leading experience engineering at Netflix) and that led to me spending time discussing the platform with their head of product.
All that to say it does exactly what it advertised. My returns are what I thought they would be. And I don't expect there to be zero late or zero defaults. The key is there is a recourse for them to recover. I am comfortable with that risk to get higher returns.
I like having a dozen or so of these loans and my risk spread about.
Cash drag. Increments of $5k means if you aren't careful you can have money sitting in their balance doing nothing. $50k spinning off $400 or $500/mo will take 10-12 months or more to get reinvested. I can't find a way to auto deposit (like you can with PatchOfLand).
I would probably change my rating on Quality of Deals. In one sense I don't even care that much as I don't find myself looking at the deals. They are "commodity" for me as I trust the platform and approach and the individual deals are not what I look at, but instead auto-invest is basically a dynamic fund of bridge loans
Only residential could be a negative. But I use PatchOfLand for other diversification (as well as YieldStreet -- another review later) for my Debt investments.
Tax implication. But this is the same for all Debt CFRE opportunities. I balance this with equity investments.
From my research here is a recap:
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- Requires minimum of $50K on the platform
- Provide bridge loans (hard money) for rehabbers/flippers
- Individual loan investments can be as low as $5K each
- They originate their own loans and do all the risk underwriting (contrast with PeerStreet that brokers with hard money lenders nation wide which has both positives and negatives)
- Interest seems aligned with investors.
- They assign a grade for lenders and allow you to select individual loans to invest in or you can choose a target return and turn on autoinvest
- LH makes the money on the spread of what they charge the borrower and what they pay the investor (usually 1-2%)
- Does not automatically move your money to your bank account (and investment happens in $5k increments which means you can have cash drag)
- Bigger goal of the platform is to disrupt the mtg industry. They also partner with real estate brokers and mortgage brokers
- Deal flow is really not prominent. Even the way they display the opportunities you just don’t find the information that helpful (these are fixer uppers) although you can look for ARV (after repair value) and the LTV (loan to value) to determine suitability.
- Have originated over $1B in loans
- You aren’t directly secured, but LH holds first lien and ensures they are careful with LTV and ARV.
- Only one default and it was recovered. Loss rates are extremely low. This follows my experience (about 9 months)..