Revisiting the U-Haul Investors Club

Truck and trailer from U-Haula Investors Club

It was almost a year ago when I first wrote about the U-Haul Investors Club. This is the peer to business investing option at U-Haul where anyone can invest in their trucks and equipment. It is secured lending where an asset backs your investment.

I thought it was time to revisit them and see how they were getting along. When I last spoke with Jim Shoen, Vice President at Amerco (the parent company of U-Haul) back in October last year they had done around $7 million in loans in their first nine months.

Today, they are at $18 million in total loans issued and their monthly volume is just under $1 million. There are also more loan offerings now than there was a year ago. Currently, there are seven different options for investors with terms ranging from a 2-year loan at 3% for a utility dolly up to a 30-year term at 8% for some real estate.

New Account Options: IRA and Coverdell Accounts

This year they have made several different account options available for investors. Recently they added both Traditional and Roth IRA options that is run through the custodian Oxford Life Insurance Company. They also offer UGMA/UTMA custodial accounts as well as Coverdell Education Savings Accounts. Business accounts and Trust accounts are accepted as well.

When you invest at U-Haul Investors Club your investment is tied to a specific piece of equipment. If Amerco were to go bankrupt US Bank would act as a trustee (officially called the indenture trustee) and sell the assets. So there is a level of protection here for the investor that is not available at Lending Club or Prosper. Hence, the interest rates are also lower.

Investment Available in All 50 U.S. States

U-Haul Investors Club is fully registered with the SEC (filed under Amerco) so they are available for investors in all 50 states. Investors receive quarterly interest payments that can be reinvested or withdrawn. Every Tuesday new offerings are released on their site and the existing offers are closed.

Let’s take an example to illustrate how it works. Offering # UIC-09B-33 is for U-Haul trailers. U-Haul is looking to finance 473 5′ x 8′ trailers at $1,000 a pop, so a total of $473,000. Each week they tally up the total investments in that offering and close on the loans for the number of trailers that have met the demand. Say demand is $5,000 then they will close on five trailers. Then they will immediately reissue the offering with 468 trailers now available.

Slowly Gaining Momentum

Jim Shoen is very committed to this new kind of funding for U-Haul. Now that everything is in place it is relatively simple and efficient to run. There is just one manager, George Huang, who oversees the program and manages the loan offerings.

When they opened the IRA program some months ago they started seeing many more external investors but the bulk of the investors have some connection to U-Haul either as an employee, customer or vendor. As word spreads of the opportunity here Shoen expects many more outside investors will come looking for the yields. With interest rates predicted to stay very low for a number of years I can see investments like this becoming more popular. Particularly when there is an asset backing the loan.

I am a small investor in U-Haul Investors Club and I have been very happy with it so far. The returns are lower than my other p2p lending investments but the risks are much lower as well. I look at it as a kind of corporate bond but without the underlying fluctuation in the value of that bond. And in reality it carries less risk than a bond because your investment is backed by a physical asset and not subject to interest rate changes.

Comments

  1. Frankie says

    The problem is U-Haul is one of the worst customer service companies in America with an aging fleet of broken down trucks. I wouldn’t feel good about doing business with them.

    • says

      I understand your perspective but if what you say was truly the case everywhere they would have been out of business a long time ago. My experience with U-Haul goes back a few years but at the time it was positive.

      • Dan B says

        I’m sorry, but I’m with Frankie on this. 3 years ago I had the unfortunate opportunity to do business with them. Their “soft ride” trucks stretch the meaning of the word “soft” & this is coming from someone who is used to driving a sports car. Their reservation system & the implementation of that system appears to redefine the concept of the term “reservation”. I could go on & on, but I don’t see the point.

        Who knows, perhaps U-Haul is a tremendous company to invest with. So I’ll be polite & just say that their frugality is plainly evident.

  2. Danny S says

    Peter, very interesting, and I am definitely looking into this investment concept.

    Any others similar to this that maybe I should also look at? As much as I love LC and Prosper, the idea of unbacked loans is worrisome to me and as a result I’d never put more than around 10% of my portfolio into it. So I am definitely looking into other options.

    • says

      Danny, U-Haul is the only company right now offering this kind of asset backed lending. There are other peer to business type investments in the planning stages but nothing else available to investors at this time.

      • Danny S says

        Cool, well as always, I’ll be checking this site for news on other options. For now, U-Haul looks like a good option for a small investment and may setup an account there soon. I dont mind 3-5% returns if its truly backed by an asset and that asset could cover all or at least most of the loss in case of default.

        Do you have any information regarding potential defaults and what happens (or have there been any defaults that you know of?)

        • says

          Here’s the thing. Either there will be no defaults, which is the case thus far, or there will be 100% defaults because it is all just one borrower: U-Haul. In the event of a default all assets will be sold and that should provide a decent amount back for each investor.

          • Danny S says

            Ah I see. I thought these were in favor of the U-Haul franchisees (arent they franchised?)

            In any case, if its backed by the security of U-Haul then the % returns look even more attractive as I’m willing to risk Uhaul wont be filing for BK any time soon.

          • Frank says

            still a little confusing. if the borrower is really u-haul then why does u-haul need money to buy EXISTING equipment? There must be franchises involved in here somehow and w/o sigining up for an account the materials available seem pretty skimpy to me

          • says

            This is not for existing equipment, it is for new equipment. I really don’t know the relationship to the franchisees, I will see if I can have someone from U-Haul respond.

          • Frank says

            I’m looking at the site right now and I see There are 2 listings for NEW dollies which seem to be like you describe. I also see 5 listings for EXISTING JH and AV trailers. The listings for EXISTING say things like 1990 5′ x 8′ Van Trailer.

            Then I see a listing for an entire manufacturing company and an existing u-haul location.

            Is it just a straight up loan to u-haul (or amerco parent) where they offer these existing items as collateral?

            It doesn’t make me happy to have no way to understand if the rates offered are market or not (outside of the club).

          • Len says

            What happens if the trailer or other asset that you invest in is lost or damaged and can’t be used? I’m guessing Uhaul has insurance and covers that loss. In that case, does that mean Uhaul returns the investment and the investor has to reinvest?

          • says

            I heard back from U-Haul and I was mistaken. There are some new and some existing equipment offered for investors. Here is a direct quote about this: “The original financing on commercial equipment like U-Haul, is not 100% amortizing. At the end of the original borrowing term, there are substantial balances which AMERCO pays in order to keep the equipment. A portion of those balances are what’s been financed when it says existing equipment.”

            Also, U-Haul has no franchisees, it has 1,450 Company owned/operated locations along with over 16,000 independent dealers.

            And here is what happens in the event that a piece of equipment is lost or damaged: “While any form of loss or damage to the asset will reduce the value of your collateral, AMERCO’s obligation to repay the U-Note® in full will continue to exist. In the event of a loss, you will remain secured in the remaining collateral securing your U-Note®. AMERCO has no obligation to replace or repair collateral. In the event of such a loss, AMERCO will have the choice to redeem the remaining balance of the U-Note® or to continue making the scheduled payments.”

          • Frank says

            Thanks for following up. No franchisees is a very interesting point. Actually makes me worry more about the time I was rented a truck w/o a working fuel gauge. :(

            Regardless, this is a very interesting move by u-haul. Basically individuals can avoid a middle man here and possibly get good returns. While I can relate to a person wanting to consolidate their credit cards on prosper or lc, I just don’t know how to evaluate financing up to 1040 dollies for 3-4 years. It actually makes me more likely to consider investing in the stock than their financing. Having no neutral 3rd party providing a market or even a credit rating on each loan makes me nervous.

  3. Dan B says

    So are you saying that an investor is first in line with this particular investment because the note is backed up by a specific piece of equipment, for lack of a better term?

    • says

      My understanding is that as a secured creditor an investor in U-Haul Investors Club will be first in line in the event of a bankruptcy and certainly ahead of bond and stock holders. In fact, it is even a little better than that, U-Haul has a “full recourse obligation” to investors:
      “Full-Recourse Obligation” means that AMERCO® (the issuer) is required to repay you the full amount of principal and interest owed. Your recovery is not limited to the value of the collateral securing your U-Note®, as would be the case in a limited-recourse or non-recourse scenario. The collateral provides you with a security interest and lien on the specified asset(s) you select with your investment, and the full recourse nature of the U-Note® means that AMERCO® is required to repay you in full.

      • Frank says

        well i also understand that a bunch of lawyers go to court to sort these things out. morningstar says as of march 2012 they have 3.6 billion total liabilities. just like prosper/lending club you probably want to see some actual defaults to see how the process really works before we get confident that the network of small time investors 18 million will get paid first.

        still i’m intrigued. i just want to stay as far as possible from the franchisees.

        • Frank says

          maybe the lien is what is going to make me whole in event of default. But i definitely have no use for a fractional lien on “up-to 1040″ utility dollies. i’m not even sure where in the world these assets would be – what if the asset tag gets worn off? do i have to retrieve the assets myself in a cross-country drive?

          In the case of a uhaul/amerco bankruptcy – thats where i assume we lose vs lawyers.

          not to mention one of my original transparency complaints. if i am just loaning money to uhaul/amerco, how do i evaulate the different collateral’s offered against the interest rate/term.

          • says

            Frank here are some more answers I have obtained from U-Haul:
            “Regarding the market rate, to me that is a somewhat subjective judgement left up to each investor to make based upon their own assessment of risk.”

            “Regarding the fractional lien, the collateral provides them additional security in addition to the obligation being owed by AMERCO. We leave it up to each individual investor to compare their investment options regarding rate, term and underlying security.”

  4. CA-Lender says

    @Peter,

    Do they have a secondary market (like Folio on Prosper) to sell your notes or do you have to hold the note to maturity?

    • says

      CA-Lender, No, there is no secondary market for notes, you have to hold them to maturity. While they haven’t ruled it out of adding one at some point their isn’t the volume of investors to justify it yet.

  5. says

    Dan B/Frankie/Frank and others,

    This investment isn’t for everyone. It is true there is risk having just one borrower for all the loans but I should point out that you have excellent information on this one borrower in the form of their regulatory filings. I can tell you that in the year ending March 31, 2012 U-Haul’s parent company made $197 million in profits on sales of $2.5 billion. They have an excess of over $1 billion of assets over debt.

  6. DT says

    Thanks for your valuable information as usual Peter. I plan to open a U Haul IRA account in the near future. This investment will diversify my portfolio more and help offset the risk involved in investing in stocks and high interest rate P2P loans.

  7. Eric Nims says

    I used to work for Uhaul for a number of years. I can assure you, they know business and they know how to make money. They have no franchises, this would require franchise fees, I used to market and open, “Uhaul Dealerships”. The cost of this is nothing to the independent business, just training and space for Uhaul equipment. Uhaul is probably the most financially sound company of it’s kind. Many people only think of Uhaul as truck and trailer rentals. Food for thought, they are the largest self insured company in the world and own more real estate than many companies combined. The parent company is an insurance company and real estate company. Several years back, (2000-2003 forget what year), we got dinged by the SEC, for late filing at which time a bond payment had also become due. In an unknown precidence, Uhaul filed a debt restructuring bankruptcy. During this time, we were all on payroll direct deposit, not one dealer in the US, Canada, vendor, nor employee was ever paid late. Shares of stock (Uhal) plummeted to about $1.50 per share. Within 6 months, we emerged from bankruptcy filing, a point even the “Motley Fool” admitted was the fastest turn-around in history. At that time, we also purchased thousands of trucks manufactured for Buget/Hertz Penske, because they came up short on payments. If you don’t believe me, look at the price of Uhaul stock today, and look at their 10 year growth. Uhaul is a very solid investment, has an awesome business model, and reinvents itself continuously. To think this all started in 1941 with 1 trailer . . . . .

  8. Ray says

    Hi Peter,

    This post is older now and I am wondering how this investment is going for you?

    I am thinking of opening an account and investing a little bit with them.

    Any feedback you can share?

    Thanks – Ray

    • says

      HI Ray, I will be doing an update for U-Haul some time this year but I can tell you that I am still happy with this investment. It is lower yield than my other p2p lending investments but it continues to perform well.

      • DT says

        Peter, I look forward to your update. I invested in U-Haul in October 2012 after reading comments on your site. I have been pleased with the investment, which I consider much less risky than many of my other investments. The investment adds good diversification. I have been reinvesting all the interest payments. Several years from now, I plan to treat the account like a self made annuity (with no overhead costs). DT

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