Alternative fixed income investment such as MICs (mortgage investment corporations) are becoming more popular because of their sustained returns year over year. We’ve gathered our top 7 most commonly asked questions to help inform you and hopefully shed some light on what a MIC is and how it could help ad variation to your existing investments.
A Mortgage Investment Corporation, (MIC) is an investment and lending company designed for mortgage lending in Canada. Owning shares in an MIC enables you to invest in a company which manages a diversified and secured pool of mortgages. Shares of an MIC are qualified investments under the Canadian Income Tax Act and are eligible to be held in RRSPs, RRIFs, TFSAs, RESPs and RDSPs. MICs are generally provincially registered and licensed, with the management of the mortgage fund under the direction of a provincially licensed mortgage broker. Mortgages are secured on real property, often in conjunction with other forms of security such as personal and corporate guarantees, general security agreements, and material contracts.
Investors purchase shares at a price of $1 per share in the MIC.
There is a minimum investment of $5000, and this is invested for a period of one year. If repayment is not requested, your investment is reinvested for an additional year. Income earned in the MIC is paid as interest income to the investor on either a monthly or quarterly basis, depending on the MIC chosen.
Cooper Pacific currently offers three different MIC funds. The MIC funds are based on a diversified pool of first and second short-term construction and interim loans to builders and developers in Greater Victoria, Vancouver Island, Greater Vancouver, and Alberta. Investor income can be received in the form of cash, or it can be reinvested as additional shares in the MIC in order to obtain compounded investment returns.
Diversification is why you should invest in an MIC. Private MICs are not correlated to public markets, therefore MICs reduce the volatility of your portfolio without compromising your yield.
MIC investments are considered passive investments; you simply invest and start earning returns as either cash or shares. Cooper Pacific RRSP, RRIF, and TFSA investment plans carry no annual fees, transaction fees, or plan transfer fees that tend to reduce your investment returns.
Cooper Pacific invests in both first and second mortgages on loans that are short term in nature. Construction loans on subdivisions, single family dwellings, condo projects, townhouse projects, and some commercial developments are the majority to which we lend.
However, we also lend on land purchases, some holding properties, and from time to time, some income commercial properties.
Deals with solid borrowers, developers, and loans in solid real estate locations are certainly the major comfort factors in determining which loans are right for Cooper Pacific. I deal with well-established borrowers with good track records in locations that are well established and in major urban centres. Every mortgage that Cooper Pacific funds must be unanimously approved by our credit committee which is comprised of a minimum of any two directors, but more often, three are present.
Borrowers like our very quick service and the fact that our process is devoid of the bureaucracy that sometimes plagues institutional lenders. A borrower can bring a deal to us and we can have it approved and funded within a couple of days.
Cooper Pacific has over 22 years of experience providing customized lending products to borrowers, and a proven successful track record for maximizing investor’s returns.
Investors benefit from a knowledgeable management team with a strong reputation for honesty, reliability, and integrity in business, supported by one of the strongest, most respected Board of Directors in the real estate industry. Cooper Pacific prides itself on their dedicated commitment to ensuring quality service to both investors and borrowers.
As a local MIC, they are able to be nimble and flexible in the marketplace, adapting quickly to changes in the real estate market.
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