Octopus Choice Review
Here's the Octopus Choice review from one of 4thWay's experts:
4thWay's Quick Expert Octopus Choice Review
Offers something different that could add to your current P2P lending.
Established in 2016, lenders using Octopus Choice have lent £340 million to property borrowers.
It's part of the Octopus Investments group, which manages £6 billions pounds-worth of investments and has been profitable for at least ten years. This parent company owns the property lender formerly known as Dragonfly, a big industry brand.
Octopus takes the first loss on all P2P loans of 5%. It uses its own money to buy your loans if you want to sell early, where possible, and I estimate the pot for that was about £2 million in cash in 2018.
Borrowers are mostly buy-to-let landlords and owners of rented commercial properties. The typical rent covers the monthly P2P mortgage payments plus a bit more, although the property might briefly be untenanted at the start.
Octopus also does a good chunk of short-term (bridging) property loans and bridge-to-let loans, which are shorter loans during a refurbishment before a borrower switches to a traditional buy-to-let mortgage. The average loan is for 61.20% of the property valuation, which is very good.
I firmly believe that Octopus Choice has the people and skills to approve loans appropriately. Its people have a huge amount of experience. The group segregates safer, simpler loans for its peer-to-peer lending offshoot. In particular, it's interested in the quality of the borrower, not just the property, and it dodges property development lending and riskier types of bridging loans.
Four people in succession need to approve a loan before it's accepted. Key people have discussed with us their loan-approval and other processes in detail. These go beyond what we usually expect to see, and show creative thinking and experience in how they cope with quirks of a particular borrower or security. Octopus has quite a few specialists, from refurbishment experts to their own property surveyors. It always appoints an independent surveyor.
The 4.0% expected interest rate for lenders seems low at first sight, especially for bridging loans, but for the specific subset of bridge and other loans that Octopus Choice approves, I believe rates earned by lenders offer a good margin of safety compared to the risks. Bad debts have so far been very low and there are no losses to date.
Octopus has been unusually transparent and accessible to 4thWay. It just needs to start providing 4thWay its data on a regular basis and then we can assess it for a 4thWay PLUS Rating.
The minimum lending amount is just £10. Octopus spreads your money across at least 10 borrowers, adjusting portfolios every day. After two years, the average lender is lending across 130 loans. You can probably spread your money more rapidly by lending over several months. At least in recent months, there have been lots of loans to lend in.
The Octopus group holds over £100 million more than it's required to by the regulator.
Octopus Choice's lending accounts are available as IFISAs.
Visit Octopus Choice.
Independent opinion: the opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the ESMA or the FCA, and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.
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