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Thread: Micro loans investing

  1. #1
    Featured Member Tourdefranzia's Avatar
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    Default Micro loans investing

    I'm thinking of putting my mid-term investments into some micro loans and was wondering if anyone has done this and what their results have been? I've looked at Kiva and Prosper. I know that it is important to put small amounts into a variety of borrowers accounts. Any advice on investing this way, would be helpful.

    I'm terrible with saving my money. If I can get at it, I usually will withdraw any savings within a year of having deposited into a traditional account. I have taken to buying art lately, but know that is as much of a personal indulgence as it is an investment (and a risky one, at that).

    I'd love to hear about how others have done when investing in micro loans. It couldn't be riskier than art investing, I'm sure.

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    Default Re: Micro loans investing

    ^^^ General impression has been that an investor with enough capital to back a few dozen different loans ( to spread loss risk ) can do fairly well in this 'subprime' lending sector. However, investors who can only afford to back a handful of different loans face MAJOR loss risk ... since a 100% loss on one loan can completely wipe out 10% interest earnings on 9 other performing loans.

    Ultimately, micro-loans are one more form of 'subprime' loan based investment. For investors with limited capital, it's possible to reduce potential loss risk by buying into 'subprime' investments that are already 'diversified' ... like 'subprime' auto loan based bonds, 'subprime' real estate based Master Limited Partnerships, or even shares of BIZD or RCII .
    Last edited by Melonie; 09-26-2014 at 02:17 PM.

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    Default Re: Micro loans investing

    Quote Originally Posted by Tourdefranzia View Post
    I'm thinking of putting my mid-term investments into some micro loans and was wondering if anyone has done this and what their results have been? I've looked at Kiva and Prosper. I know that it is important to put small amounts into a variety of borrowers accounts. Any advice on investing this way, would be helpful.

    I'm terrible with saving my money. If I can get at it, I usually will withdraw any savings within a year of having deposited into a traditional account. I have taken to buying art lately, but know that is as much of a personal indulgence as it is an investment (and a risky one, at that).

    I'd love to hear about how others have done when investing in micro loans. It couldn't be riskier than art investing, I'm sure.
    Tourdefrazia, off subject but when you have a moment can you tell us more about your art investments? It is fascinating to me. <3

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    Default Re: Micro loans investing

    I've always known kiva.org as more of a charity than actual investing. You loan money to someone in a third world country for a business venture or school and you'll (eventually & hopefully) get your money back. Repayment is good (95%+) but not guaranteed and it could take a while.
    "There are different kinds of darkness. There is darkness that frightens, the darkness that soothes, the darkness that is restful. There is the darkness of lovers, and the darkness of assassins. It becomes what the bearer wishes it to be, needs it to be. It is not wholly bad or good."
    - The Court of Mist and Fury

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    Default Re: Micro loans investing

    Quote Originally Posted by LAChloe View Post
    Tourdefrazia, off subject but when you have a moment can you tell us more about your art investments? It is fascinating to me. <3
    Investment in art and collectables is not recommended as a way to increase wealth, but art and collectables make a good source of money should you find yourself in a tight spot. I display the art I buy from galleries or online throughout my home, I have the artwork insured against loss. It is really hit or miss when buying art, so be sure to buy something you really, truly enjoy. Find the niche you enjoy, and put your money there. I like to invest in glass sculptures and pieces made if glass and use LED lighting. I also have some signed prints from local art shows that I've framed and hang in my home. I don't usually spend more than $1000 on a single piece as I buy from young artists in the hope that one will hit it big. I once sold a car to a young artist who paid for it with a piece of art. He has since gained a lot of notoriety since then and the painting has increased in value quite a bit. I have another piece that the artist quit painting and has since going into tattooing. She may return to painting one day, but for now I have a lovely painting from a artist who has taken another path. I only paid $110 for her piece including the frame.

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    Default Re: Micro loans investing

    I do rent -to-own trailers (mobiles in parks) and small rehabbabble houses as my mid term 5-30k investments. 10-15% returns, backed by real estate, no maintenance or whiny tenants.

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    Default Re: Micro loans investing

    ^^^ Indeed, recent research shows that mobile home parks themselves, and mobile homes set up in parks, are one of the lowest risk highest return investment opportunities available these days. In fact, some hedge funds are rotating into mobile home park ownership and mobile home 'mortgages' as they rotate out of single family rental housing. See

    Their reasoning goes as follows ...

    - 'working class' people find living in a mobile home to be a desirable upward step compared to living in multi-unit rental housing ( thus strong demand )

    - 'working class' people find that the ( financed ) purchase of a mobile home ... as compared to renting a single family housing unit ... provides at least some 'perceived' opportunity to build equity ( thus stronger demand )

    - 'working class' people wishing to purchase a mobile home are almost guaranteed to be classified as 'subprime' borrowers ... thus high interest rate loans and/or 'rent to own' financing are readily accepted ( thus high profit margin for lender )

    - certain people with major 'issues' i.e criminal records, atrocious financial histories, etc. may find mobile homes as their only viable option to find 'private' housing ( thus creating 'usury' level profit margin opportunities for lender )

    - 'working class' people who have taken on the ( financed ) purchase of a mobile home are highly likely to remain in that mobile home ( and the mobile home park it is set up in ) for years and years ( thus lower indirect 'loan service costs' for lender )

    - 'working class' people living in ( financed ) mobile homes are less likely to declare bankruptcy in general, and significantly less likely to file Chapter 7 100% write-off bankruptcy in particular, due to the relatively low cost of mobile home housing as well as their perceived home ownership ( thus reduced loss risk for lender )

    - regulated lenders i.e. banks and credit unions now face major constraints regarding new mobile home loans, due to factors such as rapid depreciation creating negative equity during early years of the loan 'cycle', limited resale value / illiquidity of 'older' mobile homes, location of mobile homes on 'leased' property ( mobile home parks ), as well as the 'subprime' nature of most mobile home loan applicants. This creates a 'credit vacuum' ( which can only be filled by non-regulated / private lenders )


    Of course, there is a flip side ( from the above link )

    (snip)“Trailer parks have unusual economics,” says Anthony Effinger, the author of an article on the topic for Bloomberg Markets. “It’s a supply and demand curve that’s super attractive to investors.”

    There certainly is demand for trailer homes—they’re often the cheapest form of housing which means a lot in an economy with ever-growing wage disparity. The supply of designated trailer parks is also quite low because, “nobody wants a trailer park in their town or county,” says Effinger.

    Dan Weissman, who previously worked at Goldman Sachs and a private hedge fund, now owns five mobile home parks. “The greatest part of the business is that we go to sleep at night not ever worrying about demand for our product. It’s the best decision I’ve ever made,” he tells Bloomberg Markets.

    “What’s at work here,” says Effinger, “is the shrinking middle class.” People with bad credit and criminal histories are often unable to rent or buy homes, and are forced into trailer parks—where owners are usually willing to overlook credit and criminal activity.

    It’s not all a walk in the park. Investors go into these parks and often have to fix decrepit homes, deal with criminals, and in some cases even meth labs.(snip)
    Last edited by Melonie; 09-28-2014 at 05:13 PM.

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    Default Re: Micro loans investing

    I have been investing in Lending Club since January 2014 as kind of a hobby.. I only have invested $25 on each loan,.. I have a total of 12 loan notes now earning an average 9.41% Interest.. so far so good!.. Almost all my loan notes are from people who have very High scores in the 700's some in the 600's.. So I am just trying it out on a small scale.. Mr Money Moustache also has invested in this as well.

    http://www.mrmoneymustache.com/2012/...ub-experiment/

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    Default Re: Micro loans investing

    Quote Originally Posted by anonymous camgirl View Post
    I have been investing in Lending Club since January 2014 as kind of a hobby.. I only have invested $25 on each loan,.. I have a total of 12 loan notes now earning an average 9.41% Interest.. so far so good!.. Almost all my loan notes are from people who have very High scores in the 700's some in the 600's.. So I am just trying it out on a small scale.. Mr Money Moustache also has invested in this as well.

    http://www.mrmoneymustache.com/2012/...ub-experiment/
    Thank you for posting about this. I spent the last 2 hours reading about it and I went to sign up but people from my state are not allowed! Do you know why this is?

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    Default Re: Micro loans investing

    ^^^ as a guess, I would look toward California's 'business nexus' laws ... which attempt to tax non-California based businesses if they have a 'business nexus' in California. Lots of large internet based businesses ( Amazon, Overstock, etc. ) dropped all California based 'affiliates' as a consequence. See

    It's possible to still get involved in California based microloans ... but the process appears to be more 'regulated'. See . Upon first read, I took notice of such phrases as 'in compliance with all applicable laws', would-be lenders making 'contributions' as opposed to actual loans, would-be lenders receiving a 'reasonable' rate of return, loans being 'bundled' with individual would-be borrowers being required to 'cross-guarantee' the loans of other would-be borrowers in the same 'bundle', loan terms being 'negotiated' by the primary 'lender' with small amount lenders then given a 'take it or leave it' option to participate under those terms, etc.
    Last edited by Melonie; 09-29-2014 at 03:42 AM.

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    Default Re: Micro loans investing

    Kiva return your money at par, don't they? http://www.kiva.org/about/how/even-more (ie. lend $100, best case scenario receive $100 back, so no chance of making profit)
    Last edited by person; 09-29-2014 at 04:43 AM. Reason: jargon
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    Default Re: Micro loans investing

    ^^^ California based Kiva essentially operates as a de-facto 'charity', rather than a 'for-profit' institution. The CalX micro-loan program allows for a 'reasonable' rate of return versus the degree of lender loss risk. With CalX publicizing ~95-98% repayment rates on 'bundled' loans, this would likely impute to something on the order of ~6-10% 'reasonable' rate of return on loan money 'contributions'.

    As I mentioned earlier, California micro-loans appear to be subject to a significantly higher degree of 'regulation'. Thus California would appear to not allow ultra high risk micro-loans to individual borrowers carrying the 15%+ interest rates which are available in some states.

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