As more Canadian investors grow frustrated with traditional real estate and stock and bond investments, awareness around alternative investments, like Mortgage Investment Corporations (MICs) and individual mortgages, is growing rapidly. With returns ranging from 6% to 14%, depending on location, equity and scenario, it’s little surprise that mortgage investing, and mortgage investment corporations, are becoming increasingly popular.
“MICs are a great vehicle for Canadian investors right now, whether they are experienced or new to alternative investments,” says Bryan Jaskolka, VP of Canadian Mortgages Inc. (CMI). “It is a relatively passive entity. When describing MIC investments, I make the comparison between an investment into a REIT and buying your own homes and managing them. With a MIC, there is less stress, and lower levels of responsibility, vs. direct mortgage investments.”
The underlying assets of the MIC are fully secured by real estate, with properties that will be appraised and borrowers analyzed, and investors have the benefit in sharing the risk with the other investors of the fund along with the fund diversifying its risk across many mortgages.
A MIC is, essentially, an investment fund whose assets are made of carefully selected mortgages, just as traditional mutual funds buy stocks and bonds or a mix of the two. Many MICs also allow investors to choose between receiving a monthly income payment and re-investing for a monthly compounding effect, MICs insulate investors from the all of the operational aspects of the underlying investments in the fund.
“Whether it’s a MIC or a direct mortgage investment, investors still get to be involved in real estate but with a built-in buffer,” Jaskolka says. “Even if the property market declines and real estate holdings may lose money, it doesn’t necessarily mean the MIC or mortgage investments will lose money. Generally, people pay their mortgages, particularly when they live in the home. Furthermore, investments are generally limited to 80% or less of the property value (75% or less overall LTV in the CMI MIC), and as a result, these investments represent a good defensive play while still achieving healthy returns and maintaining exposure to the real estate sector.”
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The minimum investments available with CMI are as follows:
Mortgage Investment Corporation (MIC) minimum investment: $25,000
Direct investment program (non-mic) minimum investment: $250,000+ of liquid capital to commit to investing (can be broken up into multiple mortgages), and a net worth of $1M+