OverviewMortgages as investments
As an investment vehicle, mortgages can offer high rates of return with relatively low risk since each mortgage is secured by a property, like a house.
Magenta is a Mortgage Investment Corporation that sources and administers mortgages. Our shares represent ownership in a professionally managed portfolio secured by real estate in Eastern and Southwestern Ontario. Our portfolio is primarily made up of residential, owner-occupied, first mortgages that fall just outside recently elevated bank lending criteria.
Mortgage Investment CorporationsHow a MIC works
MICs are special companies created by the Canadian Income Tax Act (Section 130.1) to enable investors to invest in a pool of mortgages. MICs may also borrow from a bank or other lender, so they can use both the shareholders’ capital and loan proceeds to fund its mortgage portfolio. Newly invested share capital, as well as the proceeds of repaid and discharged mortgages, are used to fund new mortgages.
As a MIC, Magenta is responsible for all operational aspects of managing the portfolio, including:
- Sourcing of suitable mortgage investments
- Adjudication of mortgage applications
- Negotiation of applicable interest rates, terms and conditions
- Instruction of solicitors
- Mortgage administration
Return On InvestmentHow a MIC generates returns
The Income Tax Act requires that one hundred percent (100%) of a MIC’s annual net income be distributed to its shareholders in the form of a dividend. Like any company, a MIC’s net income is equivalent to its revenues minus its expenses.
Magenta’s revenues are primarily made up of mortgage interest and fee income. Expenses may include the cost of administering the fund, the cost of the annual financial audit and other professional fees and loan interest.
Magenta distributes its income to shareholders in the form of monthly dividends. The dividend rate is based on an annual target return on investment (ROI) set on June 1, the first day of the fiscal year.
My quality of life would not remotely resemble what it is now, had I not invested in Magenta. I’ve realized my lifetime dream of owning a waterfront lot and a gorgeous two acre property.Beth Ferrier, Magenta Shareholder since 2003
Magenta’s PortfolioHow we manage our mortgages
Magenta’s rigorous and proprietary mortgage adjudication process ensures that only high-quality mortgages that meet our elevated underwriting criteria are included in our portfolio. Our 25 years of consistent returns can be attributed to the three key features of a Magenta mortgage:
A High-Quality Home
We confirm real estate values through trusted, local partners. We also ensure the property can be sold, and the value of the loan recovered, in case of default.
A High-Quality Neighbourhood
We only lend in strong, stable real estate markets.
A Responsible Borrower
We concentrate on residential, owner-occupied, first mortgages that fall just outside recently elevated chartered bank lending criteria.
Magenta SharesThe benefits of investing in Magenta
Since 1994, Magenta shares have consistently met or exceeded annual targets. Magenta shares provide:
Peace of Mind
Our shares have a fixed value equivalent to the issue price and do not fluctuate in response to market forces.
Reliable Monthly Income
Dividends may be paid in cash or reinvested in additional shares at the shareholder’s election.
Since inception over a quarter century ago, year in and year out, our shares have generated annual returns at least equivalent to and typically greater than the Floor Rate of Return used to determine monthly dividend payments.
Our shares are RRSP, RRIF, RESP, LIRA, LIF, and TSFA eligible and may be redeemed at any time with one (1) to three (3) months’ notice, depending on the share type.
FAQFrequently Asked Questions
What is a private mortgage investment?
A private mortgage is a mortgage held by an individual, group of individuals, or private corporate entity, such as a Mortgage Investment Corporation (MIC), instead of a bank or other institutional lender.
The legal status of any mortgage is the same, regardless of who holds the mortgage. The mortgage borrower is legally obligated to repay their loan, at a stated interest rate, to the mortgage holder within a stated time period. The mortgage loan is secured by a charge on the underlying real estate owned by the mortgage borrower.
Private mortgage interest rates are typically higher than bank mortgage rates.
How does a MIC differ from directly held mortgages?
An individual investor may fund one hundred percent (100%) of an individual mortgage and hold the mortgage directly. In this scenario, the investor is solely responsible for sourcing and evaluating the mortgage investment, negotiating the interest rate and other terms and conditions applicable to the mortgage, instructing the solicitor preparing and registering the mortgage. In addition, the investor has to collect the payments and deal with any arrears or default problems that may arise.
Given the typical principal amount of mortgages in today’s real estate market, the investor would require a significant amount of capital to fund even a small mortgage portfolio.
A MIC on the other hand, allows individual investors pool their investments to fund a professionally managed portfolio of mortgages.
Key differences between direct mortgage investing and a MIC are summarized below.
|Investment Amount||Substantial to achieve even minimal diversification||Relatively small|
|Management||Individual investor wholly responsible||Professional manager|
|Return||Depends on mortgage type and the expertise and diligence of the investor||A professionally managed MIC, employing the prudent use of financial leverage (debt), should achieve higher returns, with lower risk|
|Risk||Depends on portfolio size and composition and the expertise and diligence of the investor||Portfolio size, and the underwriting and portfolio administration expertise of the manager, serve to reduce risk|
|Liquidity||Mortgage repaid at maturity provided borrower is capable of doing so||Shares may be retracted any time|
|RRSP/RRIF/TFSA Eligibility||RSP/RRIF Only; High trustee fees; Large principal amounts reduce flexibility||Yes; Minimal fees depending on the Trustee; Any share amount may be deposited; Greater flexibility|
How are MICs regulated?
All investment related activity is stringently regulated by Provincial Securities Commissions and all investment transactions must adhere to the regulations prescribed by the Canadian Securities Administrators (CSA).
Mortgage lending and administration is regulated by the Financial Services Regulatory Authority (FSRS) of Ontario.
All MICs must also comply with the rules prescribed in Section 130.1 of Canadian Income Tax Act.
Who can invest in Magenta shares?
Canadians and non-residents may subscribe for shares. Shares may be held individually, jointly, in trust, in a corporation, or in a self-directed RRSP, RRIF or TFSA.
Are Magenta shares RRSP, RRIF and TFSA eligible?
Yes, our shares are RRSP, RRIF, RESP, LIRA, LIF, and TSFA eligible.
What are the minimum investment amounts?
|Minimum initial subscription:||$25,000|
|Subsequent subscription amounts:||$5,000|
|Subscription deadline:||Issuance of new shares may be suspended without notice at the sole discretion of the Board of Directors|
How can I monitor my investment?
All shareholders receive a copy of the annual audited statements and an individualized statement reflecting dividend calculations and share-related activity, as well as quarterly management prepared financial statements.
Shareholders holding their shares outside of a registered plan also receive a T5, reflecting the amount of their annual taxable dividend. Activity pertaining to shares held within an RSP, RRIF or TFSA will also be reflected in the statements provided by the registered plan trustee.
We welcome shareholder inquiries at any time and are always happy to discuss company results and progress.
How and when can I liquidate my investment?
Shares may be redeemed at any time with one (1) to three (3) months’ notice, depending on the share type. A retraction fee may apply.
Who are the companies' auditors?
Ernst & Young LLP
99 Bank St. Suite 1200, Ottawa, ON K1P 6B9
Fund Fact SheetInvestment highlights
Review Magenta Capital Corporation’s most recent fund fact sheet (PDF format).