Simply put, a Mortgage Investment Corporation (MIC) is a federally recognized corporation that invests its capital in Canadian Real Estate. The purpose behind the creation of a Mortgage Investment Corporation is to allow all Canadians to benefit from investments in real estate and mortgages on real estate with relatively small amounts of capital. Some MIC’s will accept investments of $1,000 or less while others are traded on the TSE and investors can buy shares for about $15 each.
Although only a few MIC’s are publicly traded, they all are required to behave like a publicly traded entity. This means higher auditing standards, more communication and greater regulation. MIC’s hold a special tax advantage in that that all profits must be passed through to shareholders. As long as the profits flow through then the Mortgage Investment Corporation will be exempt from paying any corporate income tax and the investors will claim their dividends as interest income.
MIC’s typically have little capital appreciation, but pay a consistent dividend. Depending on the risk appetite of the Mortgage Investment Corporation you can expect a rate of return between 5% and 10%. More information on publicly traded MIC’s can be found at www.mcanmortgage.com or www.timbercreekfunds.com .