£400,000 to Invest
Discussion
traxx said:
Property developers have typically been paying 15-18% for Mez financing over the last few years - so the funds that have been supplying this money must be paying 10+% to their investors
Spot onJoe public reads the Daily Mail and watches the News on Sky TV where all we hear is that interest rates are 0.5%
Reality is that the banks on want to lend to SAFE businesses and by safe I mean that they have the businesses by the short and curlys and that the loan will be repaid with a typical safety factor built in of between 20% and 40% in either income or so,e other form of liquid capital
Mezzanine funding operates at higher rates which to the general public look to be unworkable.
In reality they work but take a large chunk of the profit out of the borrowers deal, the key however is that they still allow the deal to go through and therefore allow the business to hopefully grow and go forward to do the next deal and so on.
z4RRSchris99 said:
traxx said:
Property developers have typically been paying 15-18% for Mez financing over the last few years - so the funds that have been supplying this money must be paying 10+% to their investors
true, but I wouldn't say mezz is anywhere close to low risk. zuby84 said:
z4RRSchris99 said:
traxx said:
Property developers have typically been paying 15-18% for Mez financing over the last few years - so the funds that have been supplying this money must be paying 10+% to their investors
true, but I wouldn't say mezz is anywhere close to low risk. I spoke to Shore capital about some money last year. As I recall, I needed to have pre-sold the development to a public body and the cost of money for a year was about 25% of the sum borrowed.
mezz sits behind senior a & b in the tranche, so lets say.. we have a site worth 10m that built out is £50m and you need 20m to build it out.
senior A might lend you £15m, as long as you have already achieved £15m of pre sales, and have finance for the other £5m. If we go bust they get the site, but its only worth £10+m dependant on where you are in the build.
mezz will lend you the £5m, but will want you to hit presales of X. if we go bust they get their cash after senior, when there might not be any.
also mezz gets drawn down first, so their money is at risk longer, and gets paid back last.
senior A might lend you £15m, as long as you have already achieved £15m of pre sales, and have finance for the other £5m. If we go bust they get the site, but its only worth £10+m dependant on where you are in the build.
mezz will lend you the £5m, but will want you to hit presales of X. if we go bust they get their cash after senior, when there might not be any.
also mezz gets drawn down first, so their money is at risk longer, and gets paid back last.
z4RRSchris99 said:
traxx said:
Property developers have typically been paying 15-18% for Mez financing over the last few years - so the funds that have been supplying this money must be paying 10+% to their investors
true, but I wouldn't say mezz is anywhere close to low risk. Guess the risk on the whole depends on the level of equity in the deal, each deal will be different
Have you looked at p2p? The one I've used is www.rebuildingsociety.com I'm getting c15% return, I've had 2 loans go bad so far of about 45. Some of that they are hopeful of recovering from the loan security, but that of course takes time. But in pure figures I've dipped my toe in the water with about £4500 lent across 45 loans (so average £100 per company). I've earnt about £700 in interest so far over about 12 months and bad debt stands at £120.
[NB: all figures are approximate so don't try and calculate any returns based on these figures because I've drip fed money in and I've also reinvested all capital repayments and interest into further micro loans]
[NB: all figures are approximate so don't try and calculate any returns based on these figures because I've drip fed money in and I've also reinvested all capital repayments and interest into further micro loans]
pods said:
Then try and ridicule it!!!!!
Thanks for your valuable insight,most enlightening!
How else would you expect most people to respond to a promise of 2.5% per month that is guaranteed. I'd love to know more should such a risk-free vehicle exist, as I could retire tomorrow.Thanks for your valuable insight,most enlightening!
Edited to add: I guess the catch here is that the capital is not protected, so you could quite easily be receiving 2.5% of a vastly reduced capital?
UpTheIron said:
ow else would you expect most people to respond to a promise of 2.5% per month that is guaranteed. I'd love to know more should such a risk-free vehicle exist, as I could retire tomorrow.
Edited to add: I guess the catch here is that the capital is not protected, so you could quite easily be receiving 2.5% of a vastly reduced capital?
Not a promise, a guarantee from a FCA regulated company(for what that's worth)Edited to add: I guess the catch here is that the capital is not protected, so you could quite easily be receiving 2.5% of a vastly reduced capital?
Ok, enjoy your retirement....
Yes it exists.
The capital is protected.
R11ysf said:
It's amazing how these threads bring out posters who've been on here ages with virtually no post count. Almost like their accounts were set up purely to tout 'investments' on a website they aren't actually a user of.......
Life would be boring without the misinformation they post though!Shame the mods had a clear out as I was looking forward to seeing how one of those posters would manage to bend time and space.
Extra 300 Driver said:
So, say a company has £400k to invest and try and get a better return than HSBC are giving at the moment, what would it be?
Get the basics right first (I don't know what your company or tax status is) but how much do you WANT to make and how long can you tie it up for? Have you set yourself parameters? Why engage in for instance, 40% more risk, to simply make a further 20% if you haven't identified what the objectives are.Set aside some for emergency and contingency and resign yourself to making not a lot (if at all) on that by keeping it liquid. Then ladder the rest - set some aside for intermediate and longer term and the balance for shorter term. Those windows should give you a steer towards risk and return.
Get the tax wrappers sorted. It is becoming increasingly likely that 40%+ tax relief on pensions is going after the next election, whoever gets in, so can some of it be used to help the directors and can you max out previous unused allowances? Have you looked at investing in the business and getting any relief; bio mass power generation for instance? I'd identify the business objectives and then look at the return requirements, risk/liquidity etc.
Shortlisting and selecting the underlying investments is a doddle after that and if you still want investment sex and violence at that point, then choose something credible. The chances are you won't want to shoot the lights out after all the boring stuff has been done because you *might* not have so much left - so go for proven quality first.
Edit: i-Pad spelling crouton.
Edited by Ginge R on Tuesday 19th August 20:52
R11ysf said:
It's amazing how these threads bring out posters who've been on here ages with virtually no post count. Almost like their accounts were set up purely to tout 'investments' on a website they aren't actually a user of.......
Oh so now I need to be a post whoooore to be worthwhile, do one please.....My prime business life is modular building.Look up BRE @ Ravenscraig to get an idea.
I am not connected with any investment company in any way shape or form.
To the OP - if you have a business that has generated £400k in excess cash then 1. well done and 2. stick to your knitting.
In other words don't start doing time-intensive risky things such as investing in wine/cars.
Spend your time working on what you are clearly good at - running the business.
In particular look to grow the business with that capital first and foremost.
Now if it is truly not needed then get a professional to advise you.
Lastly, for those morons offering 8%+ "risk free" or the even more laughable 2.5% PER MONTH I personally think you should be banned.
As DoubleSix rightly pointed out those returns aren't possible without significant risk.
Illiquid investements are by definition risky.
Property doesn't "guarantee" your capital.
Lending to businesses that banks won't fund IS f
kING RISKY!!!!!!!
Source: 15 long hard years in finance.
Second Source: I am not a total and utter moron.
In other words don't start doing time-intensive risky things such as investing in wine/cars.
Spend your time working on what you are clearly good at - running the business.
In particular look to grow the business with that capital first and foremost.
Now if it is truly not needed then get a professional to advise you.
Lastly, for those morons offering 8%+ "risk free" or the even more laughable 2.5% PER MONTH I personally think you should be banned.
As DoubleSix rightly pointed out those returns aren't possible without significant risk.
Illiquid investements are by definition risky.
Property doesn't "guarantee" your capital.
Lending to businesses that banks won't fund IS f
kING RISKY!!!!!!!Source: 15 long hard years in finance.
Second Source: I am not a total and utter moron.
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