Real estate investment is typically associated with purchasing an investment property for rental income and/or renovation for the purpose of resale. Another less popular option is providing a private mortgage at a high interest rate. But another option that doesn’t often come to mind when we think about real estate is investing through a Mortgage Investment Corporation (MIC for short).
While the potential return on investment may not be is a high as a private mortgage or investment property, there a several advantages to investing in a MIC:
- Significantly Reduced Risk. By investing in a MIC, you are buying shares in a broadly diversified portfolio of mortgages which significantly reduces risk. Could you invest directly in an investment property or mortgage by yourself? Yes, but you would need a substantially greater investment (both time and capital) and face far greater potential for capital loss should the borrower go into a default proceeding.
- Set it and forget it. Once you have purchased shares in the MIC you can sit back and watch your investment grow. The MIC will report back to you regularly on how your investment is performing and issue dividends on a predetermined schedule.
- No fuss. Investing in a MIC means not having to worry about Landlord duties, tenant disputes, rent or mortgage payment collection, and other administrative duties. The MIC handles all of this for you.
- No unexpected expenses. Never mind the upfront cost of purchasing an investment property. Repairs, maintenance, and other unexpected expenses can seriously reduce the potential return on an investment property. These expenses can rise quickly if your tenants don’t treat the property with respect.
- Significantly Higher Liquidity. An investment property or private mortgage is not nearly as liquid as MIC shares. Shares in a MIC have a retraction policy specifically outlined in the Shareholder Agreement. It will be much faster and less costly than pulling equity out of a home or exiting a lender-borrower relationship.
Investing in real estate doesn’t have to be difficult. By thinking outside traditional real estate investment methods, you can really start putting your hard-earned capital to work. A MIC can do all the work for you while you reap the benefits.
Alex serves as Analyst of Corporate Development for Magenta and holds a Bachelor of Arts degree in History from Queen’s University and a Graduate Diploma in Business from the Smith School of Business.