High Yield Investments in Toronto Real Estate
Real estate has long been the go-to investment for high net worth investors. Investing in real estate, especially in robust regions like the Greater Toronto Area, is an excellent way to watch your investment grow. Because the Toronto real estate market is so resilient, it’s also a great way to protect your capital.
More and more wealthy Canadians are investing in real estate because housing prices are strong and interest rates, on fixed income products, such as GICs and annuities, are paltry. A five-year GIC might provide a return of two percent, but Toronto real estate prices have been increasing between six percent and 10% annually. Those types of high yield investments are what attract wealthy investors to real estate.
Why Investing in Real Estate Provides a High Return
High yield investments in real estate are not just for the ultra-wealthy though. The accredited Canadian can invest in real-estate backed mortgages in Toronto through a Mortgage Investment Corporation or MIC.
A MIC is a corporation that pools shareholder capital and lends that capital out as mortgages on residential and commercial real estate. The MIC earns income from these mortgages on interest charges (which are higher than what traditional banks charge) and fees, which it passes onto investors as monthly dividend payments. MCOCI’s primary focus is on residential mortgages in the GTA.
MICs have grown significantly in popularity over the last number of years because of stricter lending rules at Canada’s big banks, and new stress tests that home owners have to pass. Potential home buyers who would have once had no problem qualifying for a mortgage, are being turned down. This has resulted in higher quality Canadians turning to private lenders to secure a mortgage. Because of this, Mortgage Company of Canada can be more selective about who it lends to.
Where investing in real estate has a high barrier to entry, investing in a MIC does not.
Below are just some of the reasons why real-estate backed mortgages provides both high yields and protects your capital.
Earn an Income
A MIC is an excellent way to generate regular cash flow. Because of the way a MIC is structured, it has to legally return 100% of its earnings to shareholders because it is a flow through, meaning the corporation doesn’t pay any taxes. That’s the real appeal of a MIC, the yield. Mortgage Company of Canada has been able to provide investors with a high yield annual dividend of 9.25%, with distributions paid monthly. In addition to strong annual yield, MICs also provide investors with attractive tax breaks.
When it comes to strong yields, there is normally a risk/reward trade off. The higher the return the greater the risk. MICs provide the best of both worlds. Mortgage Company of Canada invests in real estate backed mortgages in the Greater Toronto Area, the strongest market in Canada and one of the most resilient markets in the world. Investing in a MIC like Mortgage Company of Canada helps protect your capital and ensures you have a monthly, high dividend yield cash flow.
Diversify Your Portfolio
Investors are also drawn to MICs because they pool their money with other investors into diversified holdings across a large number of different types of properties and mortgages. The vast majority of Mortgage Company of Canada’s mortgages are located in the GTA and roughly 75% of those are made up of first mortgages. On top of that, nearly 100% of the portfolio matures in less than one year. Because of its diversified portfolio, Mortgage Company of Canada has been able to generate stable income for its investors.