Recent stock-market turbulence has stripped the lustre from traditional mutual-fund investments and directed many toward the thriving real estate market.
But how can you combine the diversified balance of mutual funds with the high-yield opportunities of Alberta’s sizzling real estate industry? The answer is the Mortgage Investment Corporation, or MIC.
The MIC is a mortgage pool that functions much like a mutual fund, with a professional manager and administrator working on the investor’s behalf.
|The Venstar Financial team, from left, Alex M. Tye, Brian Illingworth and company president Alan Baumann.|
“The MIC gives the individual investor access to a high-yield real estate debt instrument – with all the safety features that come with diversification and professional management,” explains Alan Baumann, president of Venstar Financial.
Venstar, a growing, seven-year-old Calgary-based commercial mortgage brokerage with offices in Victoria and Vancouver, has consistently produced returns of 10 to 13 per cent through short-term mortgages.
“Everybody loves earning 10 to 13 per cent, of course, but the MIC is also an ideal vehicle for RRSPs and RRIFs, so, ultimately, your return on investment is even greater,” says Baumann.
“We are seeing a lot of RRSP and RRIF funds rolling into the MIC. People don’t want to mess around with their income streams – present and future – and the MIC is a great way to maximize your returns while deferring taxes.”
The MIC’s professional management and diversified nature mitigate risk factors inherent in the lending industry, such as a borrower default on the loan or other risks specific to the property or to the economy in general.
In addition, investing in short-term commercial real estate mortgages offers investors a stable, predictable return not usually experienced in the equity markets.
Direct investment, says Baumann, is better suited to individuals who have previous experience in real estate lending and the time necessary to manage their investments.
“Today’s professional just doesn’t have time to wade through thousands of real estate opportunities to find the ‘right’ one,” he adds. “And even though real estate offers excellent investment opportunities, investors are smart enough to avoid putting all their eggs in one basket.
“The MIC gives you all the advantages of investing in this dynamic real estate market – without exposing you to the risks associated with ownership.”
Venstar’s numbers speak for themselves:
* The first-mortgage MIC has generated a stellar 10.6-per-cent return in the three years since its inception.
* The second-mortgage MIC has produced a 13.8-per-cent ROI since it was first offered in January of 2001.
The new blended MIC, incorporating first and second mortgages, is projected to produce a return between 10.5 and 13 per cent.
And you don’t have to be Bill Gates to invest in a MIC.
“You can get in the game for as little as $10,000,” says Baumann. “That gets you into a pool where you are the co-lender for high-quality projects ranging from shopping centres to office buildings to multi-family residential developments.”
So why have short-term commercial mortgages existed in relative obscurity?
“When we do our presentations, a common question is, ‘Why doesn’t everybody do this?’ And it’s a good question.”
One reason for the low profile of commercial mortgages is that the major financial institutions rarely offer them as short-term investment options, explains Brian Illingworth, one of Venstar’s investor relations representatives.
“We focus on short-term mortgages, typically six to 18 months in length. And our private investors really appreciate the short-term nature of the investment.”
Another reason for the low profile is that short-term mortgage investments are perceived as being risky, because they offer higher rates of return than other debt instruments.
Yet, while indeed there is some risk involved, it is what Baumann describes as “managed risk” because the mortgages are carefully screened by the Venstar management team before being offered to investors.
“We look at the borrower, the property and exit strategies and make a thorough analysis before proceeding,” says Illingworth.
Call Jeff at 403.509.0115, ext. 223, or toll free at 877.509.0115 for more information on the Mortgage Investment Corporation.