U-Haul Investors Club

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CowPoke
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U-Haul Investors Club

Post by CowPoke » Sun Feb 11, 2018 3:34 pm

Any Bogleheads have any experience investing with U-Haul Investors Club? Seems like a legitimate way to invest in asset-backed security. My former boss (who turned me on to this forum years ago) invests some money there and has had a positive experience. Wondering if there are any other folks who could share theirs.

miamivice
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Re: U-Haul Investors Club

Post by miamivice » Sun Feb 11, 2018 3:48 pm

Something like the U-Haul Investors Club is exactly what Bogleheads are against.

While I don't have time to analyze the details, I remember a few years back before the housing bust when I saw an advertisement for a loan to a real estate company to purchase some land, subdivide lots, and build houses. They were offering 8 or 12 percent or something. My first impression was - why can't they borrow from a bank? About a year later the housing market bust and I'm sure those who invested didn't get much of a return.

My impression is the same with U-Haul. Why can't they borrow from a bank?

quantAndHold
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Re: U-Haul Investors Club

Post by quantAndHold » Sun Feb 11, 2018 4:17 pm

They seem to be offering unrated bonds direct to the public at yields that are similar to investment grade bonds. There's no secondary market, so you need to expect to hold them to maturity, unless interest rates drop, in which case they can prepay with no penalty. The company is already highly leveraged, and although the loans are collateralized with furniture dollies and such, it seems very likely that if they default, you're going to take a big haircut.

In other words, it doesn't appear that you're getting compensated for the substantial risk you'd be taking.

quantAndHold
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Re: U-Haul Investors Club

Post by quantAndHold » Sun Feb 11, 2018 4:34 pm

miamivice wrote:
Sun Feb 11, 2018 3:48 pm
My impression is the same with U-Haul. Why can't they borrow from a bank?
A quick eyeball of their 10k shows that they're already eating through nearly all of their cash flow with lease and loan payments.

Also, most of their loans are variable rate. Interest rates ticking upward might become a problem for them.

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daytona084
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Re: U-Haul Investors Club

Post by daytona084 » Sun Feb 11, 2018 7:22 pm

(knock at the door)... "I'm sorry, there's bad news. U-Haul defaulted on your investment. But not to worry, your loan is 'asset-backed'. Where would you like us to put these 12,000 furniture dollies?" :happy

Finridge
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Re: U-Haul Investors Club

Post by Finridge » Sun Feb 11, 2018 8:50 pm

daytona084 wrote:
Sun Feb 11, 2018 7:22 pm
(knock at the door)... "I'm sorry, there's bad news. U-Haul defaulted on your investment. But not to worry, your loan is 'asset-backed'. Where would you like us to put these 12,000 furniture dollies?" :happy
LOL, except you don't get to just take the collateral. Normally it has to be sold at auction. And I expect that you don't have physical dollies that tied to the particular notes you bought. Rather, everyone holding the "dollie" notes probably have an undivided interest in all the dollie collateral.

"Next on the auction block: Another lot of 100 used dollies. Anyone, anyone?"

miamivice
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Re: U-Haul Investors Club

Post by miamivice » Sun Feb 11, 2018 8:50 pm

daytona084 wrote:
Sun Feb 11, 2018 7:22 pm
(knock at the door)... "I'm sorry, there's bad news. U-Haul defaulted on your investment. But not to worry, your loan is 'asset-backed'. Where would you like us to put these 12,000 furniture dollies?" :happy
Agreed. The condition of most U-Haul trailers or other equipment that I have seen would not indicate significant resale value should the company go through difficult times. And yes, if something happens to U-Haul, there will be a tremendous amount of inventory reaching the market at one time.

I would consider it unsecured debt, and the rates that they are offering aren't high enough to justify providing an unsecured business loan.

The lack of secondary market is also problematic, as it makes your loan to them a fixed term that you can't get out of if you need the money in the future.

overthought
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Re: U-Haul Investors Club

Post by overthought » Mon Feb 12, 2018 2:54 pm

quantAndHold wrote:
Sun Feb 11, 2018 4:34 pm
miamivice wrote:
Sun Feb 11, 2018 3:48 pm
My impression is the same with U-Haul. Why can't they borrow from a bank?
A quick eyeball of their 10k shows that they're already eating through nearly all of their cash flow with lease and loan payments.

Also, most of their loans are variable rate. Interest rates ticking upward might become a problem for them.
Maybe somebody should point them at Dave Ramsey. Meanwhile, I don't think anybody thought to short UHAL for this year's hedge fund contest... but sounds like they'd be a good candidate for 2019 if that year saw a recession following the ostensibly rising interest rates of 2018 :twisted:

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4nursebee
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Re: U-Haul Investors Club

Post by 4nursebee » Mon Feb 12, 2018 4:35 pm

I continue to be surprised by the number of ideas brought forth to BH, especially from early post count posters.

Too iffy for me, they own the company and should be able to get funds in other manners.
4nursebee

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willthrill81
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Re: U-Haul Investors Club

Post by willthrill81 » Mon Feb 12, 2018 7:06 pm

Frankly, I would rather invest in peer-to-peer lending than in U-Haul. I have been investing with Lending Club for nearly five years and have two accounts, one that's taxable (winding down due to tax complications) and another that's a Roth IRA. Defaults are always present, but my total returns after fees have averaged 8-9%, which blows U-Haul out of the water. Unless you're only investing in small business or vacation loans and the like, it's actually hard to not earn at least 4-5% if you have at least a few hundred notes. And since you can invest in hundreds or thousands of notes, I'd say your risk is probably significantly less than U-Haul to boot. If it weren't for the platform risk associated with P2P lending, I'd invest significantly more in my Roth account if for no other reason than the returns are uncorrelated to that of stocks, and I might do so anyway in the future since I don't think that the notes would vanish even if LC experienced problems. But generally speaking, I'm a stock guy.

From what I've heard, real estate crowd funding sounds more appealing than U-Haul as well, though the minimum investment is usually much higher.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

n00b590
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Re: U-Haul Investors Club

Post by n00b590 » Mon Feb 12, 2018 9:47 pm

willthrill81 wrote:
Mon Feb 12, 2018 7:06 pm
I'd invest significantly more in my Roth account if for no other reason than the returns are uncorrelated to that of stocks
Correlations always increase in bear markets. If the stock market crashes, you can count on seeing a big spike in P2P lending defaults.

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willthrill81
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Re: U-Haul Investors Club

Post by willthrill81 » Mon Feb 12, 2018 10:49 pm

n00b590 wrote:
Mon Feb 12, 2018 9:47 pm
willthrill81 wrote:
Mon Feb 12, 2018 7:06 pm
I'd invest significantly more in my Roth account if for no other reason than the returns are uncorrelated to that of stocks
Correlations always increase in bear markets. If the stock market crashes, you can count on seeing a big spike in P2P lending defaults.
True enough, but even during 2008-2009, credit card defaults, which largely mirror those in P2P lending, were not enough to put those offering them into the red. Even P2P loans aren't nearly as volatile as stocks.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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whodidntante
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Re: U-Haul Investors Club

Post by whodidntante » Mon Feb 12, 2018 11:26 pm

Do I get the use of a U-Haul so I can haul my U-Haul Investor's Club returns around?

Slacker
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Re: U-Haul Investors Club

Post by Slacker » Tue Feb 13, 2018 12:21 am

So, this is how a franchisee can get a loan for new u-haul equipment?

Do you get to look at the financials for the individual franchise you are providing a loan to?

quantAndHold
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Re: U-Haul Investors Club

Post by quantAndHold » Tue Feb 13, 2018 12:52 am

Slacker wrote:
Tue Feb 13, 2018 12:21 am
So, this is how a franchisee can get a loan for new u-haul equipment?

Do you get to look at the financials for the individual franchise you are providing a loan to?
My understanding from a quick read of the docs on the website is that you’re buying notes for specific furniture dollies, but you’re actually loaning the money to Amerco, U-Haul’s parent company. It wasn’t clear without reading a bunch of small print whether you’re loaning to the franchisee, and Amerco is just guaranteeing the loan, or if you’re loaning directly to Amerco.

Edit to add...it wouldn’t surprise me at all if Amerco is taking the loan money and lending it out to the franchisees at higher rates. It would be interesting to get a U-Haul franchisee to explain how it works....and indeed, reading further, one of the risks listed in Amerco’s 10k is that they’re holding a $48M note for a “highly leveraged” self storage companny.

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