Niall’s virtual diary archives – Saturday 28 May 2022

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Saturday 28 May 2022: 02:01. Last post I mentioned that final grant of planning should have been issued by early May, however delays in the planning office meant that didn’t happen for a few more weeks than expected. However, it did eventually happen, and I am glad to report that as of this week, I am now the owner of the land upon which I got planning permission! I signed the final transfer deed this week, it’ll take a few months before the Land Registry is updated, and that is indeed a huge weight off the shoulders given how much price inflation building sites have seen recently, never mind their scarcity.

The land transfer starts a countdown: In Ireland when you purchase land, you pay a stamp duty of 7.5%. If you commence the building of a dwelling house within thirty months from that date, you get a rebate because your stamp duty drops to 1% of the cost of the land and the building of the house less VAT. In my specific case, that’s worth about €1,500, so it’s worth aiming for.

The other big deadline is the end of this year: if I commence build before then, I get a €30,000 subsidy from the government. I very much doubt if we can get construction detail done before then, so we may have to think of some way of commencing a build before we know the precise detail of what we’re building. We’ll see how it goes.

A full nine months has elapsed since my last update on my P2P earnings #mintos! We’re running towards the end of this now I intend to start spending it – indeed, end of this month I’m going to disable the auto-invest and start letting the loans pay back into cash. It’ll take a few years for them to full pay back out, but from past experience a large majority will get bought out well before loan maturity.

MonthMintos annualised return for each monthMintos non-earning capitalMoncera annualised return for each monthAfranga annualised return for each month
August 2021 10.91%27.4%11.42%
September 2021 6.78%27.2%7.28%
October 2021 11.96%18.9%10.17%
November 2021 9.22%46.1%11.88%
December 2021 6.02%58.5%9.66%
January 2022 5.31%58.3%11.19%7.11%
February 2022 6.12%20.6%10.03%11.10%
March 2022 5.85%20.5%9.58%15.25%
April 2022 9.62%20.3%8.15%9.33%

A reminder that some money is tied up in non-earning Polish lender Capital Service, who will repay it eventually, but for now it drags down the annualised return rather significantly. If you exclude that non-earning capital, Mintos still does pretty well – I reckon about 11.5% in April, and I’m only investing in the super safe loans from DelphinGroup, which recommends highly.

Moncera (Placet Group) has been a bit of a disappointment since I started investing with them in March 2021, they’ve actually returned a touch under 10% annualised since the beginning. Around November 2021 I moved money out of Mintos because all the high quality loans there dropped to below 10% annual return. I moved them onto Moncera because they claimed theirs were over 10%. However there have been some cash drag issues, plus quite a lot of them have gone late, and that’s dragged down total return quite markedly. It’s not just Moncera, Afranga also saw cash drag and a large increase in failure to repay, most noticeable in the reduced return in April. So I suspect the war in Ukraine, higher living costs, and all the other kinda-recessioney stuff is beginning to bite in Eastern Europe.

Obviously, with inflation now running in the EU at 7% and climbing it rather ruins my strategy of keeping a portion of my cash in these p2p loans to offset losses to inflation. One is losing value in any case, and I’m going to need all my money by next year for the house build, so time to start winding all these down.

This may or may not be my last post on P2P investing. I may be coming into an amount of money soon which cannot be remitted into Ireland which will need placing somewhere. To explain, under Irish tax law non-domiciled people such as myself only pay Irish tax on monies I remit from outside Ireland into Ireland. All the money in these P2P investments to date has been post-tax money saved from income, but if I do come into money from outside Ireland then I’ll need to keep it outside Ireland so I don’t pay tax on it. These P2P lenders are domiciled outside Ireland and the loans are not invested in Ireland, so once my post-tax money has been paid out, I may reuse the accounts for pre-tax money. All this is months out whatever the case, but it may generate a few more posts here next year maybe.

(You may wonder why not put the unremitted money into an index tracking fund or mutual fund? Irish tax law currently ‘sees through’ non-domiciled status for investments in offshore funds domiciled in the OECD, which is pretty much all those which are safe, and taxes said offshore funds at a fixed rate of 41% rather than as income or capital gains. So you cannot put unremitted monies into offshore funds without creating a large tax bill. You might then think of shares in companies, but most countries charge a withholding tax on dividends, so they’re out. You’re now down to investing in gold, commodities or going synthetic with Contracts For Difference (CFDs) which are how you bet on the stockmarket – using CFDs you can synthesise an investment in something without doing the investment, and crazily enough the Irish tax authority is just fine and happy with that, which makes no sense to me. Because P2P lending is still too new, withholding taxes haven’t been levied on it yet, so for now at least this is an option)

Up until now capital preservation with easy access was the priority in my P2P strategy, so I have invested accordingly. If I wasn’t intending to remit investments for many years, then a very different P2P approach would make sense, one mainly based around secured lending. This should pay out around 11-12%, which is about what Mintos historically has done for me, but with much lower risk as collateral such as a building or a farm is used to guarantee loans. And if you want a bit more risk, you can also crowd purchase whole apartment blocks, take the rent from tenants as income, let the property value appreciate over a few years before exit. Then you can capture rising real estate prices in Eastern Europe, which is nearly a one way bet, at least compared to Western European real estate markets which see far lower growth.

And if you’re really keen on risk and have a long enough time horizon, there is p2p lending in aircraft leasing, artworks, sports cars and all sorts of niche things. Probably too rich for my blood, but glad to know it’s an option.

#mintos #p2p-lending

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