September 5, 2023
Selecting the Right Mortgage Investment Corporation
Investors
Early on in your journey into alternative investment options, you likely came across the term Mortgage Investment Corporation (MIC). MICs have entered the spotlight in recent years as a key piece in both the wealth accumulation and the wealth preservation strategies of a variety of investors. This surge in popularity can be credited to the many advantages this investment format has to offer, such as reduced risk through diversification, as well as strong and reliable rates of return.
Choosing which MIC is right for you is not as simple as who has the highest Return on Investment (ROI).
Here are five factors to consider when deciding to invest in a MIC:
- Liquidity
Read the subscription agreement closely to see how quickly you can withdraw your investment. No one wants to be in a situation where they need access to capital but are stuck in a long waiting period to withdraw an investment- and some MICs will only allow redemptions once per year.
- Consistency
Ask for information on the actual ROI vs. target ROI of the past 5-10 years. This will give you a sense of how accurate the MIC is at estimating ROI and indicate if the MIC can consistently meet or exceed target ROIs. While macroeconomic factors such as the Bank of Canada rate directly affect MIC ROIs, it’s still vital to look for trends in the data to determine the growth trajectory of a MIC.
- Risk
Learn which housing markets you are investing in and what types of mortgages your money is financing. The specific housing markets and types of mortgages that compose a MIC’s portfolio, whether urban or rural, first mortgage loans or second mortgage loans, are important factors that go into how a MIC determines interest rates and subsequently the potential pitfalls associated with an investment. You should find a MIC whose acceptable level of risk matches your own.
- Reward
Ask when and how dividends are distributed, especially if you plan to reinvest the dividend in the MIC, as the investment is compounded based on a predetermined schedule. Not all MICs issue dividends on the same schedule, some issue monthly, some quarterly, and others annually.
- Communication
Prudent investors keep tabs on their investments, and prudent MICs know that the best questions are the ones shareholders shouldn’t have to ask. Check to see not only that the MIC reports with clarity and regularity, but that they can handle ad hoc requests for information. You never know when you’ll need to be able to access relevant details related to your investment at a moment’s notice. Your prospective MIC should have an investor relations manager ready to answer questions, provide additional information, or help you understand the product.
Investing with Magenta
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind. Magenta has delivered strong returns and reliable income to our investors while safeguarding capital by applying a risk-mitigated portfolio strategy. The portfolio is constructed of residential, primarily first mortgages located exclusively in carefully selected Ontario markets.
Investing with Magenta offers:
- Flexibility
- Liquidity
- Regular income
