What Is A Mortgage Investment Corporation (MIC)?

What is a mortgage investment corporation (mic)?

For those seeking better returns than simply trying to earn interest from what a savings account offers, there are multiple options available to you. This is especially true for those that have been diligent enough to become an accredited investor. In regards to being an accredited investor, there are a few requirements to consider.

First is, their net assets need to be typically over $1 million, and their average salary needs to be around $200,000 or $300,000 with a spouse. It also needs to be reasonably assumed that those salaries are consistently achievable for the next few years. Those assets that are net assets against any liabilities cannot include your primary residence. That means you cannot use the appreciation in your home in recent years to push you into accredited investor status.

How does this relate to a MIC?

It is typically a requirement to be such an investor for those that want to be part of a mortgage investment corporation. The reason being is the type of investment fund this portrays. A MIC is an investment fund that raises capital from its investors to then turn that capital around as mortgages for homes and other real estate properties. It’s an excellent way to make real estate investments without purchasing one house at a time and taking on all the real estate risk on your own.

What's so attractive about these types of investments is that they tend to pay out dividends consistently, even monthly, because they are invested into real estate directly. That makes this an excellent income option for would-be investors. The operational aspect of a Mortgage Investment Corporation has a team running it.

First, they handle looking for new mortgage investment opportunities. Then, reviewing and processing applicants for said mortgages and handling what type of interest rates these applicants will receive.

It's a much simpler investment than buying real estate directly and attempting to rent it out for passive income. Plus, by investing in a MIC, an investor is able to reinvest the dividends to grow their shareholder percentage, which in turn increases the overall monthly dividends.

What are the associated risks with a MIC?

Due to the fact that there is collateral on the asset, which is the real estate itself, the risk is minimized in case of a default on the mortgage payments themselves. Yet that itself is where the inherent risk can actually come from.

Mortgages and loans typically offered by a MIC can be higher than what interest rates are with banks and more traditional mortgage lenders. This can lead to more defaults in a poorer market and while it won't leave your investment lost as you still have the asset, it could potentially stop the dividends.

That's because while a MIC needs to disburse 100% of its profits as dividends to its shareholders according to Canadian tax laws, that is related to profits. So if there are no profits for a month or three, then there's no obligation for those lucrative dividends either.

Where do you begin?

Getting started is as simple as sending us a simple message or giving us a call! Reach out and let’s start compounding your money!