Fractional property investment with Select Estate

jamesd

Andrey1 wrote: »

Has anybody tried fractional property investment with Select Estate? They offer 8% net income for 5 years fixed and assured exist strategy with 110% capital return starting from 10000£ investment. ... Sound very good, therefore raises concerns.

Why not do some nice P2P at 12% (many platforms) or some VCT buying at 10% tax free after a refund from HMRC of 30% of your purchase price instead (Albion VCT)?

It's always fun laughing at people on the phone trying to pitch 8% deals and telling them that I'm averaging around 19% interest rate on my P2P investments. Not currently available to new investors, this includes a platform not desirable any more and investment in a beta product from an existing platform. But 10%+ is easy enough to get with patience.

bowlhead99

jamesd wrote: »

or some VCT buying at 10% tax free after a refund from HMRC of 30% of your purchase price instead (Albion VCT)?

Which Albion offers are projecting 10% income on top of the tax refund? Or do you mean they are projecting 7% which is an effective 10% on the 70% effective cost?

Obviously the offer in the OP is to be avoided. But with the new rules on what VCTs can now do with money raised, they are not as attractive as they once were, because there are restrictions on all kinds of investments that they could once have got away with under the old rules (things that are too safe, or usefully lucrative MBO deals etc). As we get to the end of the tax year I'm interested on your views on which live offers are decent, as I haven't had the chance in the last few months to look too closely at the current crop.

jamesd

It's the 7% on total purchase price, which becomes 10% on the actual out of pocket cost after HMRC's refund of part of the purchase price. That's the Albion VCT. Albion's Crown Place projects and has while I've held some been paying 11.1% but it has less security backing than the 100% of the Albion VCT. Albion VCT isn't affected by the rules change becuase it already didn't do what was changed to being barred and it doesn't affect past investments. At the moment they are well advanced on construction of three care homes in the SE of England that aren't affected by the changes. With equity rather than debt funding the economics of those should be much better than the reports in the news about trouble for borrowing-financed care home groups, though wages changes will undoubtedly have some effect.

Not sure I can usefully review VCT offers because what people want differs and my focus is on good asset backing to compare with secured P2P lending but with the boost of getting the tax relief early on and the income being tax free without using ISA allowance or SIPP. This means I'm not selecting for highest anticipated total return but rather for stability of total return and capital protection.

mapk

jamesd wrote: »

Why not do some nice P2P at 12% (many platforms) or some VCT buying at 10% tax free after a refund from HMRC of 30% of your purchase price instead (Albion VCT)?

It's always fun laughing at people on the phone trying to pitch 8% deals and telling them that I'm averaging around 19% interest rate on my P2P investments. Not currently available to new investors, this includes a platform not desirable any more and investment in a beta product from an existing platform. But 10%+ is easy enough to get with patience.

James, probably the wrong place to query this, but I'm curious about the undesirable platform..?

jamesd

Bondora. The returns that were available when I started using them are no longer available and can now be beaten with investments that don't involve exchange rate risk, or if you accept that risk there are alternatives like Mintos that offer better returns today, with things like bad loan buybacks so you don't lose out when the inevitable happens. Add in assorted issues with not properly describing some investments, presenting return information in a way that makes things look better than they are and recently announcing no charges for something but continuing to charge anyway for up to 30 days and I think the place is best avoided for UK investors at the moment. They do some things extremely well but that's not sufficient today to make them desirable IMO. And there are some pretty decent UK deals available that have lower risk so I don't think there's really enough benefit today for a UK investor who hasn't already got more than they want in the UK options.

This is one of those do as I say today rather than do as I did three years ago situations.

While you probably can't achieve this there today, my average interest rate there is around 26% at the moment and after exchange rate losses my XIRR with all defaulted loans assumed to have no recovery (too pessimistic!) is around 9.5% in Pounds and rising, with that probably continuing to happen until it reaches 15%-20%. 60% recovery would make the picture today around 13%. In Euros those are 17% (no recovery) and 19.5% (60% recovery), illustrating the exchange rate effect. I haven't invested in new loans there for more than a year so I've already passed through the time when borrowers are most likely to default. For this sort of thing the interactions between interest rate, default rates and default recoveries matter a lot. It'll be about three and a half years until the last of my new loans reach end of original term though quite a lot have adjusted schedules. I'll reach the point of having taken out more than I paid in in about ten months. You can get more than 26% for new lending there today but the risk profile of the borrowers to do that is less desirable so the overall return is not likely to be as good.