Initiative Ireland P2P

Daddy Ireland

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Anyone any thoughts on this.
www.northernsound.ie/plans-70-social-houses-announced-carrickmacross

A €3 million loan by P2P lending to construct 33 houses that are already pre-contracted to approved housing body, Tuath Housing. To be built in five stages over 16 months. 1st legal charge and loan to value ratio approx 60%. Initiative Ireland operating since 2015 and have a 100% record in repayments to lenders. Not sure of interest rate but between 6% and 8% p.a Better than money wasting in the bank or not. As they are pre contracted to a housing body is there great comfort in an exit strategy. Or is this all very very risky ?
 

MrEarl

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Hello Daddy,

I'm pleased that you've started a discussion on this, as I've heard Initiative Ireland mentioned quite a few times and have been intending to research them, potentially with a view to investing.

On their website it says:

Earn Passive Income of 6.00- 8.00% APR Target Return
...so it's not a guaranteed return as I read it, and furthermore, it's likely to be gross so approx half of that, if you invest in your personal capacity and pay tax at the higher rate.

So, we are hoping for 3% - 4% pa net of tax, from investing in property development.

That return seems low to me, given Banks would be charging annual interest rates of between 6% - 12%, plus fees, to fund property developers, and they would be in a far more secured and stronger position, than a small investor like myself.

How much are they actually charging the Borrowers, and how much are they taking in fees at Initiative Ireland ?

Most P2P websites are raising funds for Borrowers that are trading entities, so there are monthly repayments over the fixed period of time (assuming all goes well). However, given the nature of these property development projects, I expect that there are no repayments of any money until the project is completed, and the properties are sold. So, you get no cash back over the term of your loan, hence the risk is greater than if you were getting regular repayments over say 36 months. Yet, the returns appear the same, or perhaps even lower here, than those offered for some forms of borrower on the likes of Linked Finance. With your entire cash at risk until the properties are sold, don't you think you would deserve a higher return (even if you have some form of claim over the property itself) ?


Secured Property Lending

Just like with a mortgage, as a property lender the loans are secured against the property title deeds from the start. We carefully assess each loan to assure a minimum of €133k in property collateral value is in place for every €100k released to the borrower throughout the course of the loan. This collateral cover protects you as a lender from market volatility, providing a more predictable return for lenders without all the work and risks usually involved with direct property investing. By helping to deliver social, affordable family homes, you are also doing good, making a real difference to Irish Families across the country.
So, how do they calculate the €133k in value per €100k released ?

Sure, it seems quite straight forward on Day 1, but how about half way through a development project, when you've twelve half built houses, and how about the risk of the developer going bust or walking off half way through the job, then what's it worth ?

I note the use of the phrase "direct property investing" above, but actually investing in completed investment properties is a lower risk than investing in property development, which is actually what this is.
 
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RedOnion

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How much are they actually charging the Borrowers, and how much are they taking in fees at Initiative Ireland ?
Most of these property ones work in a similar way. This one is 2% arrangement fee, and 1 to 2% exit fee. Platform seems to keep the fee entirely, and pass on most of the interest.

But there simply aren't enough developments being funded to avoid concentrated exposure. With this platform there are also corporate investors who can take the lion's share of the bigger / better ones. A single bad loan will destroy their reputation with private investors because they'll be too concentrated in a small number.

Just my 2 cents.

I think with government intervention providing funding now for anything with 10+ homes, at normal lending rates, and the banks happy to lend to proven developers in the 2-3m+ space, these platforms have a short life span, or be stuck with just the riskier small developers.
 

Daddy Ireland

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Thanks for replies. I thought the thread would have generated more interest in this era of low returns. My case if investing is that I am a 20%tax payer. The fact that I Ire. have a 100% record though only operating since 2015 is very attractive. On the other hand one bad deal would sour them completely so they are very particular what projects they take on. They are very much operating along the same lines as Crowdproperty in the UK who have 100% record and fantastic Trustpilot reviews. I really would have no hesitation in dealing with Crowdproperty but I would need a UK bank account. Back to I Ire. the fact that the particular Carrickmacross venture has an exit purchaser does give solid aspects to investing. They also had another social housing project earlier on in Mooncoin where the Co Council has prepaid a deposit for the finished project which would mean a lot as a potential investor. So I am hoping there are more thoughts from people out there on this whole idea. Perhaps its easy to open a UK bank account and go with Crowdproperty but there projects are normally taken up in minutes.
 

Daddy Ireland

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I dont see that disclosed anywhere. On a google search some headlines re the odd loan. One has to register as a lender to see the available projects which are likely to be only one currently I would think. Relatively young company no doubt exceptionally choosy in the event of failure of a project. Exit stategies in place on Mooncoin and Carrickmacross make such type projects appealing or does anyone disagree ? Decent interest rate 6 to 8% taxed at 20% with an exit in place. Does PRSI OR USC apply on investment income ?
 

RedOnion

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Ah, Iniative Ireland isn't just a P2P lender. I'm not familiar with them so did a little reading.

They also launched a fund late last year (minimum 100k investment for private individuals) with institutional backing.
It's most likely developments like this would be backed by the fund rather than P2P as the funds can be guaranteed available up front.

 

RedOnion

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I jumped the gun a bit. I was thinking if it was a solid investment it wouldn't actually be available P2P but via the fund.
The Carrickmacross one is P2P.

Interesting history reading county council meeting minutes. Its an unfinished estate, was supposed to start last June but actually changed hands after that delaying negotiation with Tuath. Council still are expecting the 33 units to be available this year. Could end up being a very short loan, depending on the condition of the unfinished estate. You could end up making a very small return if your money is only lent for a short term.
 

Daddy Ireland

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Thanks.
Might be short term as you say but still way better than what I would get in a bank for short term.
Any more thoughts Mr Earl ?
 

Daddy Ireland

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I see Mr Earl you have begun withdrawing and will continue withdrawing funds from Linked Finance. Are not Initiative Ireland P2P and Property Bridges P2P type loans more secure and especially where an exit strategy is in place e.g Co Council / Tuath have committed to purchasing finished product.
 
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