Alphaflow: looking for feedback

13 Replies

Hi folks,

As part of figuring out the path forward for me in the real estate investment world I am exploring different options. One of them is crowdfunding and as I have been investing @ LendingClub for a few years, AlphaFlow interests me. I like the fact that I have more diversification which should help isolate from volatility in specific markets. Lending makes sense to me too as it is higher return than traditional investments while I am learning about the REI, how to be a land-lord, etc.

Long preamble, so I am looking for feedback on AlphaFlow. One thing I couldn't figure out is how do they source their loans. I saw that they aggregate from other crowdfunding sites, which ones?  I will be contacting AlphaFlow to setup an initial call to understand their system more. Any feedback from BP members will make it more productive.

Thanks, Vidur

I like AlphaFlow for a lot of reasons, including the instant diversity of being in hundreds of loans at once. I also like the way they give you geographic diversification as well. I don't like the fact that a large number of their loans (more than 50%) are above 70% LTV. In my opinion, anything above that is hard money loan speculation, rather than hard money loan investing, because there isn't enough equity cushion if something goes seriously wrong.

It's not necessarily their fault because they are forced to use whatever is on  the crowdfunding platforms,  and this is a problem across all of them in 2017. For that reason, I personally have moved my hard money loans into funds that originate  loans themselves, so I get into the safer LTV's (the other advantage is that these funds usually allow you to withdraw quarterly, after an initial one year lockup, which gives you added flexibility).

@Ian Ippolito , thanks for your inputs. Yes, the ability to quickly diversify both in terms of sponsors and geographical diversification is attractive; geographical diversification more so. Can you please provide reference to funds or CF sites you prefer? thanks!

@Vidur G. ,  I did a three-part article on this topic including several funds. Unfortunately BP policy does not allow me to even post instructions on how to do a Google search to find it. However, if you private message me, I can respond and give you the link. 

If your choice is between LendingClub and AlphaFlow, the clear advantage goes to AlphaFlow. Collateral with AF and none with LC.  I would much rather go with AF than spend the time on due diligence with picking individual notes from Lendinghome, Peerstreet, FundthatFlip,  and Patch of Land.  AF has the data on all the sponsors and platforms and the assumption is they can pick better deals and they also get access to notes that we as individuals do not get access to.  Institutional investors often get first look and the scapes are left for the individual investor. 

@Mark Robertson I will not be chosing between LC & AF. AlphaFlow will be an add-on. Thanks for your inputs specially the last line as I didn't think about that. It makes more sense to do this. One thing though, I assume AF buys a larger debt and then slices between it's members. So, I get a slice of a larger debt which AF holds. thanks!

Just an update, I spoke to a rep from AlphaFlow. They are working on getting things automated but at this point most of underwriting is done manually. I really like their model. I am still thinking if to go ahead with it or wait a little bit more. Any feedback from actual users will be great. thanks

@Vidur G. I participated in AlphaFlow's Diversification Fund II, and have been very satisfied with the results and with AlphaFlow's responsiveness and communications. Certainly there have been some growing pains on the tech side, but that's to be expected with a young tech-centric company evolving quickly. It seems that Ray's been bringing on new talent to help scale up, including improved client relations. While there are quite valid concerns about their LTVs on some loans, where I think they stand out is in leveraging the data they've got on loan performance. 

I have been in for over a year. I am pulling my money out as the loans mature. Site shows rate of return assuming all loans are performing. I have 8-9 loans in my portfolio that are not performing. If they all default, it will wipe out all of my earnings. Not a fan.

Alphaflow is no longer accepting new investments.....

"After nearly three years of constructing and managing Optimized Portfolios, AlphaFlow will no longer be accepting capital contributions on our retail platform. We recognize that these portfolios have been incredibly popular in today’s investment environment, particularly with the dearth of yield opportunities available. However, we ultimately needed to make a strategic shift to focusing exclusively on large institutional investors.

From our earliest days, transparency has been at the core of how AlphaFlow operates. With that in mind, we want to be open about what drove this decision. In summary, we found it impossible to build a sustainable and profitable retail investment business in this space that did not perpetually rely on venture capital to subsidize costs. Institutional capital provides a level of scale that allows us to be profitable.

What this means for Optimized Portfolios is there will no longer be loans purchased to add to nor to rebalance current portfolios. Regardless of when a portfolio was opened, allocated or most recently rebalanced, all portfolios will begin to return capital as loans repay. If you have a portfolio that is currently winding down, you’re familiar with this process. 

Your current portfolio allocations will remain invested, and corresponding net earnings payouts will continue on a monthly basis. From an operational and risk standpoint, your portfolio has more people and resources than ever before to protect your investment and monitor your loans.

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