I know I am very late with this regular feature but better late than never as they say. I have been sharing my detailed quarterly returns with readers since 2011 and I will continue to do so for the foreseeable future. What started out as one LendingClub account in 2009 has now grown into 16 accounts across several different kinds of investments.
The good news is the slight uptick in returns that I experienced in Q3 continued into Q4 with my best quarterly return number in over a year. While I am still not happy with where these returns are today I am pleased with the upward trend of the last two quarters.
Overall Marketplace Lending Return at 5.35%
My overall returns for the calendar year in 2018 of my marketplace lending investments stood at 5.35%. This is up from 4.77% that I reported in Q3 and 4.46% in Q2. Interestingly, my original six LendingClub and Prosper accounts jumped considerably from 3.19% in Q3 to 4.16% in Q4. We are finally seeing the benefit of some changes that the companies made to their underwriting in 2017.
My lone holding in double figures is Streetshares as once again it is my top performing investment by far. But several of my newer investments have been performing well as I consider high single digit returns to be an excellent result these days.
Now on to the numbers. Click the table below to see it at full size.
As you look at the above table you should take note of the following points:
- All the account totals and interest numbers are taken from my monthly statements that I download each month.
- The Net Interest column is the total interest earned plus late fees and recoveries less charge-offs.
- The Average Rate column shows the weighted average interest rate taken directly from Lending Club or Prosper.
- The XIRR ROI column shows my real world return for the trailing 12 months (TTM). I believe the XIRR method is the best way for individual investors to determine their actual return.
- The six older accounts have been separated out to provide a level of continuity with my earlier updates.
- I do not take into account the impact of taxes.
Now, I will break down each of my investments from the above table grouped by company.
LendingClub
The above screenshot is from my original LendingClub account that was opened in 2009. This is a taxable account and for those people following along closely you will notice that the value of this account is much lower than last quarter. I have decided to liquidate my taxable account and move to other kinds of investments that receive better tax treatment. So, I stopped reinvesting my earnings in September last year and made my first withdrawal of $5,000 from this account in December. I will continue to draw down this account but will maintain my reinvestment program in all my other LendingClub accounts as they are all IRA accounts.
Prosper
I opened my main Prosper account in 2010 and I have built it up to be my largest position among my taxable accounts. Needless to say, come tax time I always more than max out my $3,000 in deductible losses with this account. So, I have also made the decision to liquidate my Prosper taxable account. This is on a similar timetable to my LendingClub account. And like LendingClub I am continuing to reinvest my IRA account. Speaking of which, my Roth IRA at Prosper was my best performing account in my personal loan investments returning 7% in 2018. From day one I always maintained a less aggressive approach with this account and it has been my best performing investment for some time as far as LendingClub and Prosper goes.
Lend Academy P2P Fund
I am not going to sugar coat it. I have been disappointed in the returns recently from the Lend Academy P2P Fund, managed by our sister company NSR Invest. While we maintained a positive return we are lagging most of the LendingClub and Prosper investments that I manage myself. I am hoping for better things from this holding in 2019.
P2Binvestor
Asset-backed small business lender, P2Binvestor, continues to be a very consistent performer. They invest in primarily short term loans backed by accounts receivables, although they have recently expanded into longer term loans. They also have a unique “unitranche” bank partnership product and I am invested in a few of these loans now (full disclosure: I am on the advisory board of this Denver-based company).
PeerStreet
I have been invested with real estate platform Peerstreet now for almost three years. While many platforms have struggled in the real estate niche Peerstreet has been a consistent performer. Their CEO recently penned a blog post sharing the fact that they recently crossed $2 billion transacted on their platform. They also went into some depth on their performance giving a breakdown of all the defaults they have received since day one. If only all platforms were this transparent.
Streetshares
Once again my top performing investment by a long way is Streetshares. I invest primarily in one and two year small business term loans with an average interest rate of around 20%. Losses continue to perform better than expected which is why I continue to add to my position here. I set my auto invest on and invest across the risk spectrum.
AlphaFlow
Real estate platform AlphaFlow invests across a variety of platforms offering short term fix and flip loans. Unlike investing on the platforms themselves you can build a diversified portfolio with a relatively small amount of capital. My account with just over $20,000 has 112 notes invested across 17 states. I am comfortable paying them a fee to screen the very best real estate deals across the industry.
Money360
The Money360 fund is my lone investment focused on commercial property. The fund invests primarily in bridge loans in the $3 million to $25 million range for commercial buildings across a variety of property types: office, retail, self storage, hospitality, industrial, multi family, manufactured housing and special purpose.
YieldStreet
YieldStreet is an interesting platform. They try to find unique investment opportunities that are not readily available elsewhere. I have invested in a portfolio of litigation pre-settlements and in the first week of January I invested in a loan for a shipping tanker. These are not investments I can find at other platforms. New this past quarter at Yieldstreet was the addition of the Yieldstreet wallet. They pay interest (2.2% as of this writing) while your cash is parked so I didn’t mind keeping over $10,000 there as I waited to deploy my capital into the next deal.
Fundrise
Fundrise is a real estate platform focused on the individual non-accredited investor. I opened up my account there three years ago and I continue to be impressed with their consistent returns. I am invested in their Income eREIT fund which is currently invested in 57 projects, primarily multi-family home construction. New investors can get started with just $500 and choose between Supplemental Income, Balanced and Growth.
Final Thoughts
The rebound in my Prosper and LendingClub accounts has been a long time coming. But as I said in my update a year ago I expected the new underwriting models rolled out in the second half of 2017 would make improvements. They need to continue to make improvements here so all my accounts can return above 5%. Right now, only one of my eight accounts held at these two companies is returning higher than that.
Regardless of how they perform I will be moving my taxable money out of personal loans and into other asset classes. As you can there are plenty of other good options today and I like having a more diversified portfolio across a number of uncorrelated asset classes.
Finally, I will highlight my Net Interest number. This is the money that my portfolio actually earned in the past year. I am happy to say this number has ticked up significantly since it bottomed out in Q2 2018. The net interest earned in 2018 was $40,790.
As always feel free to share your thoughts in the comments below.
Thank you for continuing to share this – with all these accounts you must hate tax season.
Yes, I hate tax season. My return last year was 317 pages…
Why don’t you reallocate towards the higher yields? You could still diversify. For example multiple yieldstreet positions that are not correlated (real estate, litigation, marine)…
That is exactly what I am doing. I will be liquidating around $130,000 of LC and Prosper investments and moving the money into higher yielding positions.
Peter, how are you liquidating Prosper if there’s no longer a secondary market like Foliofn at Lending Club?
I am just withdrawing the cash as it builds up in the account. It will take years for the account to be fully liquidated I know.
Are you actually able to invest the new money you put into StreetShares? I find that as my loans get repaid and my balance at StreetShares grows, it takes months for it to be redeployed via their automatic investment option (if at all). They seem to be stressing their 5% ‘Bond’ option over direct investments.
Hi Rob,
Streetshares gives early investors preference in their auto invest option. I started investing in 2014 so I am able to deploy new capital and reinvest existing capital with not too much of a time lag. And yes, I know they are directing investors to their 5% bond but for those of us investing directly it is not very enticing.
Peter, as usual, thanks for your quarterly report. I’d like to share an experience of mine.
To hear about StreetShares is nice but it no longer relates to me and I don’t know who in the future it could (not that you shouldn’t report anyway). Here’s why I say that. Based on your quarterly reports, I took the plunge and invested on StreetShares. I too enjoyed great returns––until last May when I noticed that the auto-invest was not investing. While I may not word this well, what I understand is that they are shifting resources to lower interest rates for the businesses, reducing the availability of loans through the “Streetshares Pro” which offers a higher return. The earliest investors in StreetShares get preference, so now they get first dibs on the fewer new loans. So those loans get funded them before I get a chance. If I wanted to stay invested on the platform, I had to move into the bonds option. I’m not happy about it, but it is their right to make business decisions, so no argument. I like the StreetShares people, idea, and platform. They’ve promised me 8% for one year before it drops back to the standard 5% for bonds.
If I am misunderstanding I’m happy to be corrected. It doesn’t change the fact that auto-invest has never invested for me since May 2018. I doubt I’m the only one.
Linda, you are understanding the situation correctly. It seems that only early investors are able to deploy capital directly on their platform today. They are pushing everyone into the 5% bonds.
Peter there is a typo on this page: https://www.lendacademy.com/my-returns-at-lending-club-and-prosper/. You have two Q3 2018 links (when the top one is Q4). Believe that some may not realize you have posted Q4 returns.
This has been fixed. Thanks for letting me know.
Can you explain more about this comment you made? “Needless to say, come tax time I always more than max out my $3,000 in deductible losses with this account.” Thanks.
There is a maximum of $3,000 that is deductible for capital losses (this is an IRS rule that includes all investments not just marketplace lending). You can learn more by reading our tax guide:
https://www.lendacademy.com/lendingclub-and-prosper-tax-information-for-2019/
There is also more general information on the Turbo Tax site:
https://turbotax.intuit.com/tax-tips/investments-and-taxes/capital-gains-and-losses/L7GF1ouP8
So, are you saying that the charge-offs from borrowers who fail to pay back the notes can count toward the $3000 capital loss deduction?
I’m a Prosper user. I receive a 1099-OID and a 1099-B at tax time. Does the 1099-OID already take into account the charge-off deduction, or is that something that I have to deduct separately?
I realize tax season is over, but this would be good to understand for next year. Good articles, BTW. Thanks.
The charge off information is on the 1099-B. You can see a more detailed description of how to account for this in our 2018 report: https://www.lendacademy.com/lendingclub-prosper-tax-information-2018/
This coverage is great especially for someone like me who has lots of investment experience in traditional vehicles but none in alternative new platforms. I was looking at Lending club but I am not sure 5% returns are worth the risk vs a 2.25% Marcus account for safe money. Most of my assets are in 3 physical residential rental properties, high quality dividend stocks that return 8% over long periods of time, growth stocks that have done much better with increased volatility of course, and some publicly traded reits.
1) Why fundrise instead of publicly traded reits like SRC paying 6% and I have had about 5% appreciation ytd, AMT, CCI and IIPR my favorite reit but only pays 2% but 1 year returns over 60%, or for those not comfortable picking reits an ETF like vnq?These all have low to no fees and full liquidity so why fundrise?
2) as an alternative to bonds, with the goal of generating income, which platform based on income and risk adjusted returns do you suggest to look at first assuming streetshares ,your best performer is no longer an option.
3) you have a lot of experience with lending club, I was looking at it as a replacement for corporate bonds and munis, given the risk and returns, it does not appear it is worth opening a separate account and having another tax reporting form in addition to my brokerage. Thoughts? 8-10% it is worth it, 4-5% not really…
4) on Lending club, and probably all these platforms with the exception of the real estate related ones, the advantage appears a non correlated asset class that is less correlated to interested rates. Consumer debt rates and notes at lending club do not appear nearly as sensitive to rate changes as say a bond fund or reit, is this what you have noticed as well in your experience?
5) what platforms are your top 3 platforms in order, that you would suggest looking at if you one is looking for something with higher returns then a marcus guaranteed 2.25 fdic , and something a little better then current investment grade munis and corporates?
great work on your coverage
Are you in SRC ?
Larry, Sorry for the slow response. Here are my answers:
1. I like Fundrise over traditional REITs for two reasons. One, your principal does not fluctuate (SRC that you mention is down significantly from where it was three years ago) and two, the fees are lower.
2. For income I think Fundrise and Yieldstreet are compelling opportunities.
3. I agree 4-5% is not worth it for a taxable account. This is why I am moving my LC and Prosper investments to 100% retirement accounts. And I think 6-7% should be the expectation.
4. This is one of the things I like about consumer credit. They are not that sensitive to interest rates although the platforms did make a show of increasing rates a couple of years ago in lock step with the Fed. But then you reinvest in new notes at a higher rate so there is not much negative impact.
5. My top three platforms today are: Yieldstreet, Fundrise and P2Binvestor. I would include Streetshares but they are not really open to new investors.
You mention Lending club as best for a retirement account and don’t seem happy with tax treatment. I am confused as to me the tax treatment seems better. So if you put your money at Marcus you get 2.25 % and you receive a 1099-int and it is taxed as ordinary income. Lending club seems exactly the same except you get a return of roughly double plus you get capital losses. These losses can be used to offset capital gains in stocks. I am not sure you invest in the stock market, but if you did, these losses are valuable as it allows you to take profits in the stock market without paying taxes so the lending club losses even if above $3,000 have value. Am I not looking at this the right way?
Now in stocks qualified dividends are taxed at much lower capital gains rates, but the principal or stock price moves with the market. I of course believe a basket of high quality dividend stocks as represented by the VIG or VYM etf’s is the best way to constantly get 8-10% returns over long periods of time but corrections have to be dealt with.
Larry,
With larger investments (say at least $40K) you will likely receive losses far beyond the $3K deduction max. Not only that, but I have other investments with capital losses so in effect I could not deduct any of my marketplace lending losses. May as well put in a retirement account so I am not taxed on the interest at all. For small accounts, there is not much of a tax disadvantage if any.
Hi Peter,
As always, thank you for the updates. Looking forward to Q1 ’19.
I was wondering what is your Investment Plan on Fundrise.
Thank you,
Eli
Eli, I invested in the Income eREIT a couple of years back. It is no longer available but think the equivalent today is the Supplemental Income plan.
And Q1 2019 update is here:
https://www.lendacademy.com/my-quarterly-marketplace-lending-results-q1-2019/
Have Peter’s returns gotten so bad that he won’t even post an update? 4 months after 3/31/2019!!
I know I was very late with this update but it was published today:
https://www.lendacademy.com/my-quarterly-marketplace-lending-results-q1-2019/