In today’s episode we interview Jørgen from Denmark about peer to peer lending, how to do your p2p lending research and diversifying your portfolio with real estate. An awesome episode.
What we talk about:
- Reaching FI in Denmark
- P2P lending and what it’s about
- The best research strategy
- Crowdlending vs index funds
- How to get started with p2p
- Real estate
- His FI journey
Let’s get to it!
Who is Jørgen?
Jørgen Wolf is 38 years old and lives with his girlfriend and two daughters in Denmark. He works as an IT project leader and has worked his way up for over 16 years. He knows all about the corporate world and after realising he wanted a bit more, he got started in the FI world some 3 to 4 years ago.
He did a bit of research into personal development and realised that the rich have several income streams. And of course, like many others, Jørgen only had one from his job, and so decided to it was time to expand a bit. And in came P2P lending, or ‘crowdlending’.
Reaching FI in Denmark
It’s no secret that Denmark has the highest tax in the world, as high as 40-50% depending on your income and personal situation. Our American compatriots would go crazy at that number – how do you even make money???? And yet Jørgen is on his path to FI just like any other European or American FI nerd.
What does he do about it? He deals with it. He says that although taxes are high, people do earn quite a bit more and the benefits of free healthcare and education does make it worth it.
Do you agree? We’re always interested in hearing what other people say (pop it in the comments below!)
What is P2P lending?
Put simply, a p2p platform is where you can lend money to people or companies and get paid an interest rate either monthly or at the end of the loan. What’s attractive is that they offer much higher yields than the stock market, some with 9% and some with an incredible 17%.
‘This is a scam’! you will say.
Well, Jørgen has invested in over 10 platforms and is using these crowdlending platforms to reach financial independence. He says it’s not a scam and is a great way to increase your returns.
The reason why people are scared of p2p is because it’s relatively new, the first platform starting in 2007/8 after the financial crisis. And he explains that the interest rate is so high because lending in the past was done through banks, who got a nice big cut every time it was done through them. Now it is much more efficient online and you can actually keep your earnings. It’s also true that there are a lot of scams out there and one must be careful – but Jørgen has a strategy to get past these.
Jørgen’s research strategy
As mentioned before, Jørgen has invested in 10 different platforms. He says his investment strategy does change with each different platform – some are more for short term loans and some others are long term. I (Araminta), for example, invest in Mintos that offers a huge variety of short and long term loans.
Jørgen confirms that he does a lot of research before investing with a p2p platform. He has to be interested in what they’re offering, and then he pops onto Google and scours the forums seeing what other people say about the platform. He also likes to talk a lot with the customer service line to see if they are good with their customers.
Sometimes, he even takes it next level: visiting the offices. He did this with Envestio; everyone said it was a scam but Jørgen liked the look of them. So he and his mother went for a trip to the Balkans and talked and asked the company a few questions – a scammer would never allow people to visit. He now invests with them and you can see how his portfolio is going here.
If he wants the money immediately he either sells the loan to another investor or waits till the loan matures.
Crowdlending vs index funds
An important debate. The FI community always raves on about index funds, so Alvar took this opportunity to ask Jørgen why he believes crowdlending (another way of saying p2p) is superior to index funds.
What he says:
- Index funds are related to the stock market (it can crash)
- Crowdlending is a good way to diversify from the stock market correlation
- There is not as much market volatility
- You get a monthly revenue
As Jørgen says, the p2p platfrom Bondora got through the financial crisis and it did not affect their returns. So this kind of investing could be seen as more stable and secure.
As then both Alvar and I mention – it does require a ton of research if you want to use p2p lending to reach FI. Not only do you need to make sure the platform is secure, you need to learn how it operates and what kind of strategy you want to use. With index funds, you just put in the money and bam. Done. Jørgen agrees, p2p lending is a bit like stock picking in terms of research, however it’s much more stable when it comes to market volatility.
How to get started
What holds most people back is lack of understanding and lack of experience.
So Jørgen recommends:
- Try something with a small amount. Put something small like 50€ in a platfrom like Mintos, Grupeer or Envestio
- Check out Jørgen’s information on each of these platforms: Mintos, Grupeer, Envestio – he has charts and really well written step by step information
- Test and investigate: try different types of loans, read up on forums what people think of the platform and read the company’s information.
Jørgen’s experience with real estate
Jørgen has also tried doing a bit of real estate in Denmark and his numbers are pretty amazing. Although it’s not very passive, he knows there’s a good potential for income. He tells us he paid 19,000€ on a down payment and is charging his tenants 17,250€ per year!!! That means in just one year and a half he gets his payment back – pretty amazing.
As Alvar mentions, Jørgen is thrashing the 1% rule (earn 1% of the value of your property per month). He also recommends looking for duplex or triplexes, then you get several flats in one building and can get more from the overall property.
The FI journey
Jørgen is aiming to earn 3,000€ a month in passive income – he has 3 to 5 years left of work to reach this. He tells us how his dream used to be to buy a big house and nice cars. Now it’s to have the freedom to do what you actually want to do. Inspirational.
I really loved interviewing Jørgen in this episode and I especially love how open Jørgen is with his numbers. You go to his blog and you’ll see every single expense is tracked with every single chart and forecast – he really is holding himself accountable. I like how committed he is to p2p lending and the effort he puts into making sure the platform is as good as it sounds. A great blog for beginners who want to see how others do it!
Here are some cool links to do more research and learn more about Jørgen:
P.S. The Donald Trump parody in the beginning of the episode was brought to you by MR RIP