If you’re looking to explore your options in your investment portfolio, alternative investments, like MICs, may be an excellent fit. A MIC investment can provide investors with exposure to a diversified and managed portfolio of private mortgages that generates income for its investors. Not all MICs are the same — do your due diligence when choosing a MIC investment. Questions you should want to ask include:
- What are the MIC’s investment objectives?
- How often are distributions paid?
- What are the retraction/redemption options?
- How is the MIC and your dividends taxed?
- Does the MIC address conflicts of interest?
- What are the risk factors?
- How has the portfolio performed over time?
- Are the mortgages in good standing?
- Does the MIC use leverage?
- Are the fees and expenses clear and easy to understand?
- Who provides management and administrative services to the MIC?
- How does MIC communicate with its shareholders?
These are only some examples of the questions that you might have when evaluating a potential MIC to invest with.
Investor Income
Investor income from a MIC is generated by the portfolio of mortgages based on rates of interest unique to each mortgage in the portfolio. When looking at different MICs, be sure to look at what the MIC invests in, for example:
- What is the underlying property (residential vs commercial)?
- How many first mortgages vs. subordinated positions?
- What is the loan to value?
- What geographic area does the MIC specialize in?
- What is the past performance of the MIC?
- How is the MIC managed?
Assess the risks
All investments carry risk, including an investment in a MIC. Many factors can impact the risks of a MIC investment. MIC investments should be considered a speculative offering, and investors should be aware of the risks of investing in MICs and the real estate sector as a whole. A MIC investment is not guaranteed or insured. The ideal investor in a MIC is comfortable accepting risk and illiquidity in their investment. The risk rating of a MIC should be identified on its fact sheet, and specific risk factors should be identified in its offering documents.
Investing decisions are important, big decisions. You wouldn’t walk into a car dealership and just buy the first car you see without doing any research, would you? It’s essential to do your homework before you commit to an investment. MICs provide you with indirect access and involvement in the real estate lending industry. The more you know and understand MICs, the better and more informed your investment decision will be. If you feel like it’s time to get involved and invest in a MIC, Get in touch with our agent today through our website!
Communication
Nothing beats experience and tangible results when it comes to a MIC, but investors should also consider if the MIC is publishing:
- Monthly portfolio updates
- Monthly shareholder statements
- Annual audited financial statements
You’re trusting the MIC with your investment, and they are honouring your trust with transparency.
Giavest™ Capital Mortgage Investment Corporation is a Canadian exempt market product intended for distribution by way of Offering Memorandum only in those jurisdictions where it may sell securities through a registered exempt market dealer, and this information is not to be construed as an offer or solicitation for the sale or purchase of securities. There are no guarantees of future performance or dividends. Prospective investors should read the Offering Memorandum before making an investment decision.