Private mortgage investment has become all the rage. Once an unknown niche, mortgage investing is now touted for stable returns backed by hard assets. With the right approach, this alternative investment vehicle can lead to attractive, stable returns and a recurring income stream that can help investors diversify their portfolios and hedge against market volatility. In an uncertain climate, mortgage investing can provide much-needed stability and consistency.
The alternative mortgage market is on the rise as more Canadians seek non-traditional lenders to finance their real estate purchases, refinance or renovate existing property, acquire bridge loans and consolidate debt. Due to stricter lending guidelines and a booming entrepreneurial sector, individual investors and mortgage investment corporations (MICs) are driving more people to non-bank lenders. These lenders appeal to individuals who can’t or don’t want to borrow money from a traditional bank. For non-bank lenders, this has created a highly lucrative marketplace with plenty of upside for considerable growth.
Investing in the mortgage market can be done individually, and by joining a MIC. In the case of individual investments, the investor lends to a direct borrower.
Mortgage investments are secured by real estate. By working with the right mortgage originator, the properties should be thoroughly appraised and the borrower’s financial situation fully analyzed to deliver a turnkey investment opportunity to the investor. Although recent home sales figures give the impression that mortgage investing is a can’t-lose proposition, the success of your portfolio will largely depend on the investment program you choose. Poor planning, excessive fees, overexposure or high risk loans are just some of the risks investors face. For new mortgage investors, the benefits are obvious. Even for long-term mortgage investors, intermediaries can management a portfolio of loans and lending opportunities.
A MIC is a more passive mortgage investment vehicle, which is a share acquisition of a “pool” of mortgages. Owning a share in a MIC allows investors to earn regular dividend payments that can often be taken as cash or re-invested. Investments are typically cash, corporate, or registered funds eligible.
It’s important to recognize that each MIC is different. In the case of the Canadian Mortgages Inc. (CMI) MIC, we provide our investors with exposure to a mix of low, medium and high yielding mortgages backed by residential real estate. MICs come in all shapes and sizes however, and some focus on residential land development, while others construction and commercial proprieties. MICs source, acquire, and distribute the net income generated from the loans in its portfolio without any investor involvement, resulting in a fully passive investment. This is an excellent option for those who do not have enough capital to build a multi-mortgage portfolio on their own. For these investors, investing in a MIC allows offers strong diversification benefits, including the ability to tap into many mortgages. It is also a great option for those who don’t want the headache of dealing with the loans themselves.
Both programs provide an attractive risk-adjusted return opportunity for investors looking to earn passive income secured by real estate, which can provide higher levels of safety as opposed to equity or syndicated investments.
CMI has been key player in the mortgage market for more than ten years. We offer individual investments nationwide, and a MIC focused on single family homes in the Golden Horseshoe. Through our investor-centric subsidiary Canadian Lending Inc. (CLI), we have secured over $100 million in successful mortgage placements for our investors in the last few years alone. Our nationwide expansion in recent years has allowed us to increase the variety and scale of our investment opportunities, offering more diversification benefits for investors seeking stable returns.