If you were thinking of answering something like, “The lead singer of only the BEST band in the world”, I’m with you.
Unfortunately, this isn’t a blog about music. So the MIC I’m referring to here is a “Mortgage Investment Corporation”. Feel free to hum some Rolling Stones songs while reading.
A MIC is simply a structure that takes in investment dollars and then doles the same dollars out to borrowers. To secure its investment, it typically registers mortgages against real property. Investors receive distributions from the MIC derived from borrower payments. There is typically some sort of expense that the MIC charges for doing the work.
Just for illustration, the hypothetical example would be a MIC lending its money out to borrowers at, say, 12%. It could perhaps, take 2% as an annual management fee, leaving 10% left for investors as a distribution each year.
Now, there is obviously quite a bit more to that, so I suggest you do further research on it. For now, here is a quick checklist of things you will want to review, BEFORE investing:
- What is the record of payments to investors over the life of the MIC?
- Who are the principals and what is their experience?
- Does the MIC lend to connected or affiliated parties?
- What does the corporate governance structure look like? Do they have one?
- What professional firms do they use to report activities?
- What is the loan to value (LTV) of the portfolio currently?
- What percentage of 1st and 2nd mortgages is in the portfolio?
MICs are tremendous investment vehicles. Although they don’t get the media attention or advertising, like mutual funds do, they are worth considering.
I did a video discussion on the topic. To learn more about these types of investments, please click on the video link below.
Marty Gunderson is a self proclaimed Exempt Market geek. He has served in a variety of leadership positions in the industry, from sales to issuer to dealer. He is the founder of www.BetterReturns.ca, a site that highlights a few quality exempt market offerings. To contact Marty, please email marty (at) idealeader.ca