Alternative investments allow investors to explore opportunities to potentially preserve and grow personal or corporate wealth. A prime example of an alternative investment opportunity is a private Mortgage Investment Corporation (MIC).
What is a MIC?
A MIC offers investors the ability to generate income from Canadian real estate lending markets. A MIC pools investor funds to provide private mortgages to borrowers that may require alternative sources of financing than what is available from traditional mortgage providers, such as banks and credit unions.
To maintain its tax status, a MIC will flow-through all its taxable income to investors in the form of monthly, quarterly, or annual distributions in accordance with the MIC’s dividend policy.
Not all MICs are created the same. Each MIC will be managed by a set of unique investment parameters that are overseen by its management team. A MIC’s portfolio can include first or subordinated mortgages secured by real Canadian property.
Here are four reasons that MICs may be valuable to your investment portfolio:
Investor Income
A MIC distributes income to its investors. Investor income from a MIC is generated by the portfolio of mortgages based on rates of interest unique to each mortgage in the portfolio, less management fees, and operating costs. Some MICs offer a Dividend Reinvestment Plan (DRIP) which allows investors to use their dividends to automatically purchase additional shares and experience the power of compounding.
Risk Management
All private MICs should be considered high-risk investments. However, MICs manage their risk by assessing the creditworthiness of borrowers, loan-to-value ratios, appraisals, location and quality of the mortgage, and ultimately having the MIC’s mortgage portfolio secured by real Canadian property. A MIC may also manage its risk by having its mortgage portfolio professionally managed in accordance with investment guidelines and policies.
You should review the MIC’s portfolio and offering documents prior to investing to assess risks and whether investing in a private MIC is suitable for you.
Indirect Access to the Market
A MIC is a way to get involved in the Canadian real estate lending market. It gives investors the opportunity to generate passive income and participate indirectly in the private mortgage market through the ownership of MIC shares. The management team of the MIC will oversee daily operations of the mortgage portfolio and provide certain reporting to help investors stay up to date on their MIC investments. The manager will also carefully select mortgages based on strict investment guidelines unique to the MIC.
The MIC’s management team will do all the hard work managing the mortgage portfolio, so you don’t have to.
Diversified Portfolio
A MIC investment can provide investors with a diversified managed portfolio of private mortgages. It also broadens the choices an investor can make beyond that of traditional publicly traded stocks, bonds, and mutual funds.
With expected cash flow, risk management, diversified portfolios, and your key into the private mortgage lending market, MICs may be a valuable addition to your investment portfolio. At Giavest™ Capital Mortgage Investment Corporation (Giavest Capital MIC), we want to help investors like you get involved by supporting the real estate lending industry in Western Canada. Still have questions or wondering if Giavest Capital MIC is a good fit for you? Get in touch with our agent through our website for more information and to discuss if a MIC is for you!
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.