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Mortgage Investment Corporations Today

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MICs in our Marketplace

Our experienced team of real estate professionals have identified a select group of quality Mortgage Investment Corporations with proven track records, strong management teams and have generated consistent returns.*

Nest Capital Mortgage Investment Corporation (Class A Units)
CMI High-Yield Opportunity Fund (Class A Units)
RESCO Mortgage Investment Corporation
Target Annual Net Return
10.0%
10.0-11.0%
8.0%
AUM
$22,300,000
as of 9/1/2021
$23,780,583
as of 9/1/2021
$56,810,000
as of 10/31/2021
Minimum Investment Amount
$1,000
$5,000
$10,000
Registered Funds Eligibility
Yes
Yes
Yes
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* Past performance is not indicative of future performance. Always review the offering documents and seek professional financial or tax advice before investing. Fundscraper Capital Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

How it Works

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Investors buy shares in a Mortgage Investment Corporation (MIC)
The MIC lends money to borrowers.
Borrowers make interest and fee payments to the MIC.
MIC passes the net profits / losses to investors.
Dividends received from a MIC are taxed in the hands of the shareholder generally as interest income or return of capital.

10 Year Return - Centurion REIT

How your money will make money. 

What to Look For
in a MIC?

Investing in your first MIC? Here’s a checklist on how to pick them

Are MICs right for you?

Alternative to GICs and Government Bonds

Are you looking for a passive investment opportunity, but are unsatisfied with traditional fixed-income securities like government bonds and GICs? It’s rare to find a GIC that pays even 2% for a one-year term these days. Similarly, government bonds offer low yields, even for 10-year terms. Mortgage investing provides a real estate secured investment option with the potential for much higher returns than government bonds and GICs. MICs in our marketplace have historically delivered 7-10% annual dividend yields.*

* Past performance is not indicative of future performance. Always review the offering documents and seek professional financial or tax advice before investing.

Diversified Risk

Instead of owning a syndicated (often unregistered) interest in a single mortgage, investors can be shareholders in a tax-exempt flow-through entity. Depending on the size of the MIC, the portfolio of mortgages is generally broadly diversified which significantly can reduce investment risk compared to investing in a single investment property or individual private mortgage. MICs, with their strict audit and reporting regulations, are a streamlined and effective way of investing in diversified portfolios of mortgages and real estate.

Lower Upfront Capital

You can invest in a portfolio of mortgages with as little ast $1,000 in our marketplace. On the other hand, an investment property or syndicated mortgage investment requires a substantially greater investment (both time and capital) and faces far greater potential for capital loss should the borrower go into a default proceeding.

Set and Forget

Once you have purchased shares in a MIC you can sit back and monitor the performance by professional management of the MIC. The MIC reports back to you how your investment is performing and issues dividends on a periodic schedule. You don’t have to worry about Landlord duties, tenant disputes, rent or mortgage payment collection, and other administrative duties. The MIC handles all of this for you.

No Unexpected Expenses

Never mind the upfront cost of purchasing an investment property – repairs, maintenance, and other unexpected expenses can seriously reduce the potential return on an investment property. MICs charge an annual fee in return for handling all the administrative work (typically known as the “Management Fee”. Our marketplace showcases returns on a net basis meaning it is already accounting for Management Fees, before taxes.

Lower Transaction Costs for Liquidity

Liquidating an investment property or an interest in a private mortgage is restricted, time consuming, and expensive. Shares in a MIC however, may have a retraction policy specifically outlined in the Shareholder Agreement or a clearly laid out redemption process. It may be much less costly and time consuming than selling a property or exiting a lender-borrower relationship. Minimum terms can range from 1 – 5 years.

Fundscraper Capital Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Do you have a question?

12 months
Investment Term
$5,000
Min. Investment (CAD)
7.5%
Projected Annual Retrun
6 months
Investment Term
$5,000
Min. Investment (CAD)
7.5%
Projected Annual Return

Find tailored investments to fit your goals.

Meet our Issuers

Mortgage Investment Corporations are a great real estate investment alternative. Nest Capital MIC has provided 10% historical annual returns to investors. Investments are spread across the entire pool of mortgages.

Learn from one of our proven Issuers how to invest in Mortgage Investment Corporations.

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FAQs

  1. Credit Quality – MICs outline their underwriting criteria and credit quality review process in their offering documents so be sure to review them to get an understanding of how the MIC lends.  They generally perform a thorough background check on the borrower although they have more lenient credit quality conditions compared to traditional bank mortgages.  This makes MIC portfolios more risky than typical bank financed mortgages, but that is also why investors are expected to get compensated with a higher return. 
  2. Liquidity Mismatch – MICs can be prone to liquidity mismatch when investors are in a hurry for an exit. This situation can happen when the MICs do not have sufficient funds on hand to pay back their shareholders retraction or redemption requests.  Many MICs will reserve excess cash not only to take advantage of lending opportunities but also to satisfy redemption or retraction requests, however, sometimes excess cash is not sufficient.  So investors need to be careful of their own liquidity needs as it relates to the proposed investment amount. 
  3. Fluctuations in Value of Real Estate – Rapid changes in housing prices may affect the value of the properties used as security or collateral for the MICs mortgages, thus creating a negative impact on MICs. Some MICs might fail to recover an expected value based upon an appraisal that might no longer reflect market values.  

There are many more risks related to investing in the private exempt market such as MICs. These risk factors we highlighted are only some of the major risks associated with investing.   Always seek professional advice before investing. 

Generally, you can invest both cash (non-registered funds) and with registered plans such as TFSA, RRSP, RRIF, LIRA, LIF, and more. Create a free account in minutes to view all offerings including investment documents and full offering details to determine which registered plans are eligible. We wrote another article about investing from your registered plans here.

Prospective investors can invest individually, jointly, or through their corporate entity.

Mortgage investment corporations lend money to people who would or have been turned down by more traditional outlets like banks, credit unions or large alternative lenders. As such, they are able to charge significantly higher interest rates on their mortgages (in some cases in excess of 10%). With the hot housing markets in areas such as the GTA and Vancouver, many borrowers have sought money from MICs to purchase homes or bridge gaps in funding.

  • Contractors, entrepreneurs, and small business owners who have volatile income and have a difficult time retaining traditional bank financing;
  • “New to Canada” immigrants who are likely to find jobs, form households, and buy homes, but do not have credit history in Canada yet so are not able to obtain traditional bank financing;
  • Borrowers with challenging credit history;
  • Asset accumulators who invest heavily in rental properties and have ‘too much debt’ on paper, making them riskier to schedule A banks;
  • Investors purchasing income properties or second properties for family/recreational use;
  • Those acquiring certain rural and agricultural properties that have residential components.
  • A rental property may appreciate in value and may experience the tax advantages of depreciation and other expense allowances. A MIC is a “flow through” investment and, in fact, the MIC must distribute 100% of its net profit to its investors every year. It is not designed to accumulate profit and is not likely to increase in value as a rental property might.
  • While a rental property is likely to be an active investment involving hands-on management, the MIC is more a passive investment. It simply flows dividends through to its investors in whose hands the dividends are treated as interest income for tax purposes. The MIC sometimes, but rarely, flows capital gains or losses through to its investors.
  • A MIC is likely to be purchased at a nominal $1 per share, for example, and may end at a $1 or lower per share redemption or wind-up value. It is expected to provide dividend income throughout the investment period. In exceptional circumstances the MIC might experience a capital gain if, for example, the MIC buys a property or forecloses on a property, takes it into inventory, and sells it at a profit. The MIC may flow capital gains – and capital losses – to its investors, but these are relatively rare occurrences.
  • As stated, dividends paid to MIC investors are treated as interest income for tax purposes. Income from a rental property is taxed differently depending, for instance, on whether it is held personally or in a corporation. Investors should consult tax experts when choosing between a MIC and a real estate investment, such as rental property.
  • MIC lending is private as opposed to conventional lending, so risk and reward must be viewed from that perspective.
  • The number of impaired mortgages as a percentage of the total number of mortgages in a MIC at any given time is one consideration.
  • The dollar volume of impaired mortgages as a percentage of the total dollar volume of the portfolio is another.
  • The level of impairment is also a consideration. For example, an NSF cheque is one level, non-payment of property taxes, insurance or strata fees is another, and non-payment of the mortgage on maturity yet another.
  • Assessing the number of mortgages and the dollar volume of mortgages in a portfolio that is under default or foreclosed upon is important and you should compare it against the overall MIC industry as a benchmark.  Based upon the Financial Services Regulatory Authority of Ontario, they publish an annual report that indicates what proportion of mortgages (as voluntarily reported by the MICs) the percentage of # of mortgages under default and under foreclosure.  
  • Impairment doesn’t necessarily mean a loss of interest or capital. At any time a MIC may have 5-10% of its loans in an impaired state, but that does not mean it will lose 10% of its capital. It may not lose any capital, it really depends on if the MIC’s management team is able to successfully foreclose on defaulted assets in a manner that does not significantly jeopardize the principal capital value, recovers owed interest, and completes in a timely manner.
  • Any discussion of impairment level must take into account the composition and relative risk of a MIC’s mortgages, and risks vary from one MIC to another. Some MICs underwrite lower risk 1st mortgages (including insured mortgages), some MICs underwrite more risky 2nd mortgages, and some MICs underwrite the full spectrum of mortgages: 1sts, 2nds, land development, construction, mezzanine financing, and so forth. It is difficult to assign impairment ratios without carefully considering the portfolio mix.
     
     

How can you start?

Get consistent, predictable cash flow with alternative investments in real estate. Here’s how:

1.

Learn

Make sure you meet the eligibility requirements by signing up for a free account.

2.

Choose

Review the prospectus and connect with our licensed experts to discuss your options.

3.

Invest

Plan to diversify, which means investing in small amounts to lower your overall portfolio risk.

4.

Grow

Receive updates and enjoy passive returns until the completed term or re-invest for compound growth.

Resources

Blog
Gregory M. Colford, B.A., J.D., C.I.M.®

How to Evaluate MICs

Historically low-interest rates in recent years have become the driving force for many savvy investors to build wealth through one of Canada’s hottest private real

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