Prosper.Com Class Action Lawsuit

I received notification today of a class action lawsuit against Prosper.com. It's been several years since I loaned money through them and, in the end, I decided it wasn't for me. I know a couple of my readers also loaned money through them. I just wanted to make people aware that, if you loaned money through Prosper between January 1,2006 and October 14, 2008, you may be a member of the class action suit. Full details can be found at http://www.prosperclassaction.com.

Loan #24 Started

Last week, I took my money from the close of HML #21 and put it to work in a new loan. The new property is a single family home in San Pablo, California. the property was purchased at a foreclosure auction by one of our best clients, who is also personally guaranteeing the loan. The purchase price was $111,600. My partner estimates the current as-is value to be $120,000 and the after repairs value to be $140,000. Our loan is for $74,000, giving us an LTV of 61% of the current value or 53% of the repaired value.

There are a fair number of comps for this property, ranging from $120,000 to $165,000, so our after repair value is smack in the middle of that range.

The property is a 3 bedroom, 1 bath home of 958 square feet. It was built in 1950. It's got a one car garage and sits on a 5,000 square foot lot. My partner's assistant rates the neighborhood as a C-, which is typical for most of the loans we make. He rates the loan safety as a B, given the low LTV ratio.

The exterior appears to be in average condition. There are no readily visible problems with the roof or foundation. The condition of the interior is unknown. There was at least one other bidder at the auction for this property.

Houston Apartment Turnaround?

I finally got the March numbers for the Houston apartment complex. Numbers were generally comparable to February - rent income in both months were up $10,000 over January numbers. Admin expenses were up $2,000 over February due to some legal bills incurred in working out late payments with vendors. Net income continues to improve, going from -$30,000 in January to -$10,500 in February to -$8,000 in March.

But a closer look reveals things may not be as rosy as they seem. One line item expense went from $2,000 in January to $3,000 in February to zero in March. This item? Security Services. No explanation was given and I've emailed management to ask what happened. If they got rid of security services, that might help the monthly bottom line (if you put it back in, we'd have basically the same net income as February), but we could get hit with vandalism repair bills in the future. I'm interested in hearing management's explanation for this.

But the better news is, because this report was so late, they were able to look at preliminary numbers for April and things look much better. April's total income looks to be $10,000 higher than March's and the highest revenue number since November 2010! Additionally, for May, the apartments are 95% occupied and 99% leased. This is due to increased marketing efforts and, according to management, an improving economy in the property's market area. Marketing costs in March rose $1,000 from February and rent concessions rose about $3,000. We'll see how those numbers compare to April. I should also note that, while rent concessions rose, the total amount is still $1,000 under the budgeted amount. This was pretty much offset, however, by the marketing costs being $1,000 over budget.

We've seen strong months come and go with this property. Things seem to improve for a couple months, only to fall back down again later. Hopefully the improvement will be sustained this time. That 99% leased number is quite encouraging.