Mortgage Investing (private or publicly traded MIC's

Leveraging, renting vs owning, making an investment or buying a home?
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mpav
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Mortgage Investing (private or publicly traded MIC's

Post by mpav »

I have been looking at options at investing in mortgages, either as the principal and negotiating with the party directly or through publicly traded Mortgage Investment Corp's.

On the private side, I hold some mortgages for family. Was doing some early stage thinking in expanding that investment, and wondered in anyone in our forum had any experience with that. Seems sourcing oppurtunties is the most awkward, as I havent found any type of brokering service.

On the public side, not a lot of traffic on the MIC's that trade in canada. Atrium Mortgage Corp (AI.T), Timbercreek, Firm Capital are some of the options. Not much comments on these type of investments so any general feedback would be appreciated.
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Re: Mortgage Investing (private or publicly traded MIC's

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Re: Mortgage Investing (private or publicly traded MIC's

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Re: Mortgage Investing (private or publicly traded MIC's

Post by mpav »

Thanks for that....apologies for not using those other threads, somehow missed in my search.

Interesting, my initial reaction on reviewing Mics and syndicated mortgages, all point to high risk, high fee structures.....banks and reit stocks seem to be more logical.
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twa2w
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Re: Mortgage Investing (private or publicly traded MIC's

Post by twa2w »

Most mortgage brokers have a list of private investors who will put money up for mortgages. Also a number of lawyers keep a list but this is harder to break in to.
Contact a few mortgage brokers and ask if they are looking for private money to invest in mortgages. You can give them the general parameters of the type of mortgage you would be willing to invest in and the $ you would be willing to put up per investment. If they are interested, they will add you to the list and call you when an opportunity comes up.
It can be lucrative but it is risky - the brokers are concerned about placing the mortgage and getting their fee - not protecting you.
The mortgage broker inductry has not had a good reputation for ethics, in the past, so be careful if you follow this route and do your due diligence.
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Post by ghariton »

twa2w wrote:The mortgage broker inductry has not had a good reputation for ethics, in the past, so be careful if you follow this route and do your due diligence.
You mean unlike bank issuers of mortgages.

I had my office above a mortgage broker, and from time to time I would go out to coffee with her and her employees. She specialized in mortgages that banks had turned down because they didn't satisfy all of the bank's criteria (a) borrower's earnings (2) property value and liquidity (3) borrower credit score (at least I think that was the third criterion). As she explained it, a bank had to be satisfied on all three criteria, while she might recommend a mortgage that was satisfactory on only two. The interest rate was higher in line with the extra risk.

I thought she did a good job laying out the extra risks for her mortgages, including expected default rates for that type of loan.

The only unethical aspect of the business was that she didn't ask too closely where the money came from.

George
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Transformer »

I have done a lot of private mortgage lending in the past, always working through mortgage brokers. The loans were done in the name of a small investment company I set up, and in my RRSP. Be prepared to get your hands dirty. I have been through about 3 foreclosures, 2 of which involved repairs and repaints etc. Happy to say I never lost money on any deals. I started out at 19%, and went as low as 12% and when the second mortgage rates dropped below this I exited the market. To me the risk of default never changed but at 6% you were not being compensated for the risk. The other problem was that the two mortgage brokers I dealt with both started their own Mic's. So you know where the best deals went and the quality of the deals I was being offered was falling faster than the interest rate. I do have investments in the Mic's you mentioned. Not a lot of money. I also have money in one of the Mic's started by one of the brokers I dealt with. Interestingly the public Mic's pay more than the non listed one, and I consider the listed ones as more risky. With the unlisted Mic I once a year phone up the guys, review their holding, default rates, geography of holding etc so I have a high comfort level with this holding.

Doing mortgages is more like a business than an investment. You have to really dig in, run around, and be prepared to deal with legal and property issues you cannot anticipate at the outset. However for me it was a very good way of rapidly building up capital. Also when I was doing the lending I was employed doing subdivision development and apartment construction which gave me a leg up and meant I had no fear factor to overcome. On the other hand I know of one person who put all his money in a non public Mic that has imploded and now he has to postpone his retirement.
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Spudd »

Does Genworth Financial qualify as an MIC?
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Transformer »

Genworth is a mortgage insurer, rather than a holder of mortgages, and thus is not a Mic, despite its trading symbol of MIC. By the way the dividends of Mic's are treated as interest for tax purposes and the dividend of MIC would I think be treated as a regular dividend.
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Re: Mortgage Investing (private or publicly traded MIC's

Post by randomwalker »

Thought I'd post this for people's consideration,

A company called Expert Mortgage,

"Earn solid returns at a risk level you feel comfortable with by investing in mortgages (including RRSP investments):
invest in mortgages with EXPERT MORTGAGE you can choose investments terms from 6 months to 5 years
invest in mortgages with EXPERT MORTGAGE value of real estate appraised by independent licensed appraisers
invest in mortgages with EXPERT MORTGAGE all documents reviewed by your own lawyer for your protection
invest in mortgages with EXPERT MORTGAGE all appraisal, legal and brokerage fees paid by the borrower
invest in mortgages with EXPERT MORTGAGE minimum investment of $10,000 required"

http://www.expertmortgagebroker.ca/default.asp
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Transformer »

Looks like they are the type of broker that also blasts commercials out over the radio. There are no shortcuts to mortgage investing. Go ahead and talk to them and suck what ever info you can out of them. Before you talk to them commit yourself to not doing business with them. Fact finding only. Do this with a few brokers. But no matter how much info you collect I would not venture into this market unless you have a good mentor who has been doing mortgage investing for a number of years, and the mentor should be a mortgage investor not a broker. As I said earlier mortgage investing is more like running a business than it is like buying stocks or bonds. My suggestion, and I have done a lot of mortgages in the past, with interest rates now so low they do not compensate for the risk and the time involved, would be to invest in one of the publicly traded mic's (mortgage investment corporations). You end up with more diversification than you can get on your own, you can go back to cash instantly, and the return you will earn (as opposed to the rate you are promised) will not be significantly less than what you can do on your own.
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Re: Mortgage Investing (private or publicly traded MIC's

Post by ALBrockville »

I've worked in MICs and private investments for a decade -- would be happy to answer questions about them.

See this current discussion of private MIC vs. public: http://www.canadianmortgagetrends.com/c ... -mics.html
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Re: Mortgage Investing (private or publicly traded MIC's

Post by MortgageQueen »

We seem to have lost the OP. . .

I agree with Transformer. Getting a Mentor would help alot. Another possibility is hooking up with a good lawyer. I know many investors that depend fairly heavily on their solicitor to guard their interests.

I also would like to comment on the relationship between mortgage brokers and Investors. You have good and bad in both categories. In the broker world we have what is known as "shark" investors. They will take on high risks, but charge huge fees (their APR coming in just below 50%) and are ruthless in taking possession of properties. Than there are brokers that fail in "full disclosure" aspect and for a fact are indeed only interested in their fee. That can certainly leave an inexperienced investor with a big mess.

My advice would be, learn as much as you can, talk to experienced investors, pick their brains, hopefully find a mentor, find a good lawyer to work with, find one or however many brokers that you can trust as ethical. BUT. . . do not expect them to make your decision for you! They will provide you the facts and full disclosure, but in the end, YOU are the one making the money and taking the risk. Do your due diligence! Over time, you will likely get comfortable with certain people and be able to slightly relax, but the ultimate person responsible is You.

In regards to MICs, there are a few solid performing private ones that return 10 to 12%
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Re: Mortgage Investing (private or publicly traded MIC's

Post by randomwalker »

Ontario watchdog revokes licence of Fortress’ lead mortgage broker BDMC
FSCO said BDMC and three mortgage brokers that marketed Fortress products were fined a total of $1.1 million

Reuters, Matt Scuffham, February 2, 2018

"...Reuters revealed that the Canadian province’s regulator had been investigating brokers raising funds for projects associated with Fortress since 2011 but had failed to take action despite repeated warnings that the marketing of the risky investments broke provincial laws. Syndicated mortgage investments, which pool the funds of private lenders to raise funds for real estate development, have grown in popularity in Canada as investors looked for ways to generate better returns from their savings with bank savings accounts offering record low interest rates."

"In the past decade, more than 20,000 retail investors have put as much as $1.5 billion into syndicated mortgages, mostly in Ontario, according to regulatory sources. Roughly 90 per cent of those investments, the sources said, have ended in a loss or are at risk of doing so..."


http://business.financialpost.com/real- ... ments-area
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Re: Mortgage Investing (private or publicly traded MIC's

Post by OnlyMyOpinion »

RandomWalker, interesting article, thanks.

I actually hadn't realized that Reuters did investigative reports. :oops:
The original article, out in Nov 2017 and also authored by Matt Scuffham is here:
https://ca.reuters.com/article/topNews/ ... U1YP-OCATP

The lack of previous action by some of FSCO's senior management seems odd. Maybe some folks just kick back once they've made it onto the Sunshine List?
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Re: Mortgage Investing (private or publicly traded MIC's

Post by randomwalker »

Inside the fall of Fortress

Fortress Real Developments raised $920-million from 14,000 Canadians who thought they were getting low-risk, steady income. Now, as the company comes under the pressure of an RCMP investigation and faltering projects, some face the prospect of devastating losses

Janet McFarland Real Estate Reporter, The Globe and Mail, December 14, 2018


"The couple wanted to put the money into a safe, income-generating investment but had little experience with investing...The adviser, whom the couple did not want identified, recommended a condominium and retail development in Barrie, Ont., known as Collier Centre. Investors in the Fortress-led project could earn 8-per-cent annual interest and would receive their principal back within a maximum of two years, making it a safe investment with a fixed return, the adviser told them."

https://www.theglobeandmail.com/busines ... -fortress/
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Re: Mortgage Investing (private or publicly traded MIC's

Post by AltaRed »

If it sounds too good to be true......
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Just a Guy »

The problem with real estate is there are lots of ways to increase your profits through fraud. If you watch shows like American Greed, at least half of the episodes revolve around real estate fraud.

When you have someone else managing your money with little oversight, and big money there is a lot of temptation.

Personally, I’d avoid it. There is a lot more profit involved in owning the real estate than there is on lending on it.
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Re: Mortgage Investing (private or publicly traded MIC's

Post by Flaccidsteele »

AltaRed wrote: 23 Dec 2018 10:17 If it sounds too good to be true......
I understand this quote, but sometimes find it difficult to agree with

I know that I'm younger, but I've experienced a couple of stock market and real estate crashes, and during those times things look and sound too good to be true... but they've been both good and true... really good
randomwalker wrote: 23 Dec 2018 08:21 Fortress Real Developments raised $920-million from 14,000 Canadians who thought they were getting low-risk, steady income. Now, as the company comes under the pressure of an RCMP investigation and faltering projects, some face the prospect of devastating losses
This was the problem - that people thought that they were getting a low-risk/steady income product

The product was too far detached from rational cash flow considerations to be considered low-risk

The best time to form a MIC was right after the Great Recession - no institution was lending and all product was at fire-sale prices
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