My Prosper Internal Rate of Return Update (End of Jan 07) — 1.67%

I am tracking my Prosper internal rate of return (IRR). As a reminder my prosper IRR is defined as actual cash flows up to the current month. The current month is positive account balance minus monies added minus loan values in default.

I currently have 0 loans in default and an account balance of $3,614.65. That makes my Prosper cash flows as follows:

Month	Interest Paid	Monies Added	Cash flow
7/06	$0.00	($200.00)	($200.00)
8/06	$1.92	$0.00	$1.92
9/06	$2.33	($200.00)	($197.67)
10/06	$2.73	($1,231.17)	($1,228.44)
11/06	$13.65	($1,430.43)	($1,416.78)
12/06	$25.40	($300.00)	($274.60)
1/07	$3,614.65	($150.00)	$3,464.65

Using Excel I determine that my Prosper IRR is currently 1.67%. This is up from 1.41% on my first tracking date of 1/14/07 when I added my interest from my December monthly statement.

So what does this tell me? So far it tells me I would have done better in the short run to leave my money in a high yield savings account (5%). However, Prosper is not a short term play. It is at least a 3 year commitment. As such, I expect this number to rise steadily over time (for at least one year and at most 3 years) and then plateau. It is my prosper IRR value once a plateau is reached that I am interested in. And it is this value that I will be comparing against a high yield savings account to determine the long term benefit of Prosper.

After considering the comments from TB and some offline discussion I have restated my Prosper Jan 07 IRR: 18.41%

8 Comments | January 31, 2007 | Filed Under Prosper.com, Statistics | 8 Comments

Buying Expiring Domains and Parking/Selling

This is a off the topic of Prosper, but since I am going to send the proceeds to my Prosper account I think it works.

I read an article in a leading national magazine on buying domains for use as AdSense sites (arbitrage between the cheap misspelled AdWords and the expensive correctly spelled AdSense ads.) As I dug deeper I discovered domain parking and resale. I briefly looked into this business, but decided it was way too much ongoing work and that all the best domains are snapped up by expert resellers with automatic scripts. Still this experiment lasted about 2 weeks and I ended up with some domains (like 10 when you combine with my other inactive domains.)

None of the domains generate a huge amount of traffic or revenue but one or two were better than the rest. Cut to yesterday. My 3rd best domain (by traffic) was purchased for the asking price of $250. Sweet!!! I paid $25 in commission to Sedo where I have my domains parked and suddenly this 2 week experiment was profitable. I just transferred $225 from paypal to my bank and initiated a $225 transfer to prosper. Next week the money will be in play.

I don’t know if I will sell any more domains or make any money from the parking, but it was an interesting experiment.

Here are my parked domains that are for sale. There are a lot of cd ladder domains because of a business idea I had to automate cd laddering at the best rates in the country. The idea fizzled but some of the domains are pretty good. Make me an offer

acdladder.com
autocdladder.com
bankladder.com
dedweb.com
~~dijitalendustri.com~~
ecdladder.com
icdladder.com
movinmarin.com
mycdladder.com
thecdladder.com
zwallett.com

No Comments | January 31, 2007 | Filed Under SEO | Leave a Comment

New Loan Funded — paying bills — $5,000 at 26.00% — D Credit — DTI 12%

A new loan funded (paying bills — $5,000 at 26.00%). I participated via my new standing order: Low Amt, Low DTI — AF. Which is this loan was funded as a low amount requested, low debt to income ratio and was an auto-funding loan. The borrow had D credit and 12% DTI. As a reminder my standing orders only find loans with 0 current delinquencies, 10 or less delinquencies in the last 7 years, and 2 or less public records in the last 10.

With this loan I have $3,450 across 56 loans ($61.61 per loan) with an weighted average interest rate of 16.30% and an account value of $3,612.25. Each loan on average is 1.7% of my portfolio.

Here is the listing:

For the readers that believe in reading the actual description without modification:

I am a 44 year old divorced man with a twelve year old son. Currently I am living with my widowed mother. I would like this loan so that I can pay off some bills and also have enough money so that we can move into a bigger place. We are living in a small two bedroom house and it is a little crowded.

Here is a graph of all loans on Prosper with D credit and a DTI of 12% +/-5% and Loan Amount $6,000 +/-$5,000 funded in the last 100 days:

Number of Loans	Average Amount Borrowed	Weighted Average	Standard Deviation
137	$4,522.77	19.08%	3.86%

22.94% equals weighted average plus 1 standard deviation compared to the loan rate of 26%. This is a great loan rate. I love standing orders.

What do you think?

6 Comments | January 30, 2007 | Filed Under Loan Review, Prosper.com | 6 Comments

Why Would a Lender Want to Join a Group? — Prosper Group Analysis Part 2

Previously I posed several questions on prosper groups. Here is the second installment of answers. Why would a lender join a group? I think that the answer must be you are getting a higher ROI and/or that you are supporting some ethical, political, collegiate, or ??? value. Given that I can’t measure ones values that leaves maximizing ROI.

How can I measure ROI? The data is too young to measure default rates and any estimate is only a guess at this point. I propose measuring loans currently in default. No group currently default: (339/4,467 ~ 7.6%). With a group currently default (142/1,983 ~ 7.2%). That shows a slight improvement but not a statistical lock.

To be fair prosper alleges that a group’s reputation matters so I could only count loans with 4 or 5 star groups. This is a bit of a self fulfilling prophecy since groups with better ratings have less defaults by definition.

Only time will tell if groups make a difference from a lender’s perspective. How many loans must a group fund before it’s reputation is to be believed?

4 Comments | January 30, 2007 | Filed Under Prosper.com | 4 Comments