Pros & Cons Of Mortgage Investment Corporation (MICs)

Pros & Cons Of Mortgage Investment Corporations (MICs)

A portfolio of loans backed by real estate is held by a mortgage investment corporation, or MIC. These groups or pools enable individual investors to participate in the real estate market by combining their funds and using them to fund several private mortgages.

Private mortgages are the means by which MICs lend money to borrowers by pooling the cash of individual investors. Consequently, the corporation uses the money put in by investors for investment purposes, and private investors are given the chance to partake in the residential or commercial real estate market. Interest and mortgage borrower fees account for the majority of income received by mortgage investment corporations.

Pros of Investing in MICs

  • Moderate Initial Investment

MIC investments in Abbotsford do not require large upfront investments, in contrast to typical real estate investments like rental properties or private lending. A varied portfolio of mortgages can be collectively financed by lenders without substantial resources because MICs aggregate the finances of several investors.

  • Lower Risk

Investments in residential, commercial, and construction mortgages are made by Mortgage Investment Corporations, among other pre-qualified mortgage assets. By distributing the risk over several loan types, borrowers, and properties, this diversification lowers the total credit risk for individual investors.

  • Consistent Revenue

MICs are a type of fixed-income investment that generates a consistent revenue stream from borrowers’ timely interest payments. This interest rate is predetermined for each mortgage investment a MIC makes, enabling the company to pay out fixed, regular dividends to its investors.

  • Tax Benefits

MICs receive favorable tax treatment under the Income Tax Act of Canada, with cash inflows and capital gains being free from taxation. Thus, double taxes are avoided. Also, investments in mortgage investment corporations do not attract tax deductions in some cases.

Cons of Investing in MICs

Like any other investment organizations, MICs are subject to certain limits.

  • Market Changes

Properties used as collateral may lose value when residential market values change. The profitability of the MIC can be adversely affected by this fluctuation.

  • Uncertainty

Although MICs perform extensive background checks on borrowers, subprime borrowers cannot always be identified with absolute confidence.

  • Risk Rate

This investment philosophy states that greater yields on MIC investments entail larger risk levels.

At Versa Platinum, our Mortgage Investment Corporation (MIC) in Abbotsford allows investors to pool their money together to lend on real estate. MIC allows regular people to invest in real estate and lend on mortgages like the banks. Investors buy shares of the company which allows them to own the company and become partners. For more details, contact us right away or schedule a free consultation.

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