Revisiting the U-Haul Investors Club

Originally posted 09/24/2012 on http://www.sociallending.net/ by Peter Renton.  Read the original article at http://www.sociallending.net/investing-lending/revisiting-the-u-haul-investors-club/#more-5110.

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 Investors receive quarterly interest payments that can be reinvested or withdrawn.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.