Paradise Valley Weekly 303rd Edition - Mar 12, 2016
I present a bit of a bombshell to you this week, that represents a tremendous opportunity. It starts with "peer to peer" lending...
If you're not involved in peer to peer lending -- and relatively few people are at this point -- then you are missing out on one of the most important trends in modern finance. The impact it currently has on real estate is relatively small, but the rate at which is growing is extraordinary. Some of the better known companies in the space are Lending Club and SoFi, and they've been attracting attention from the C suite of JP Morgan on down.
For real estate investors, it's like when the first internet stock brokerage opened -- i.e. a whole new ballgame. Peer to peer lenders are providing us with an extraordinary data that was never available to individuals before.
So, here's where it gets juicy: you can slice and dice all the statistics about loans made by all sorts of data. One of them is turning out to be quite a doozy...
The state in which a borrower lives has a HUGE impact on their likelihood of defaulting on a loan. Therefore, the returns to investors can vary massively state by state.
For example, in 2014 the ROI on Lending Club outstanding loans in Indiana was 12.44%...
...in Florida it was just 7.17%!
As any rational investor would do, lenders are taking note and effectively redlining certain states (click here for details). The ethical implications are massive, and the federal government is certain to get involved at some point.
For now, we can learn quite a lot about where to invest our money. It stands to reason that if the loan default rate is very high in Florida, it's probably not the place one wants to be purchasing investment property.
You may be curious about Arizona's performance, and it was in the middle of the pack. Not nearly as high as the outlier Indiana, nor as bad as laggard Florida, in line with many other states at 8.6%.
Last year I went to the Midwest to check out investment properties, and I'll be doing the same again this year. This Lending Club data has encouraged me to redouble my efforts.
Bank foreclosures are still obtainable there, one just has to know how to source them. I've been laying that foundation for quite some time, to diversify my portfolio. If you may be interested in learning about such opportunities, please click here.
In closing, peer to peer lending data is incredibly valuable, and it may not be freely available to us all for long. Use this data while you can, and evaluate what's happening in the states where you own properties.
If 2014 default rates were high where you own property, it stands to reason they'll get a lot higher when the real estate market cycle changes -- 2014 was a strong year.
If you'd like some help accessing and analyzing the peer to peer data, I would be happy to walk you through it -- please reply to this email, or call me at (480) 442-7325.
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