This question was posed by The Globe and Mail this week in the article titled “Investing in property: a young person’s game?“
The article goes on to talk about how the stock and bond markets are spinning their wheels and many Canadians are looking for alternative places to invest their money.
The thought for many is that investing directly in real estate is a large effort. If you are a home owner you already know the effort of managing house maintenance, insurance, property taxes, not to mention the monthly mortgage payment, utilities and the required upgrades from time to time. The thought of owning rental property for many Canadians adds a few more items to that list; finding tenants, keeping them happy, collecting rents, dealing with move-outs and move-ins etc. And if you happen to have a bad tenant, watch out, it can be a bit of a nightmare.
So, some of the alternatives that Canadians turn to when they think about investing outside of equities, stocks, bonds or mutual funds… is to look at real estate investments that do not carry the burdens of home (or condo/townhouse) ownership. These include REITs and MICs. A REIT is a Real Estate Income Trust and a MIC is a Mortgage Investment Corporation. They have many similarities and a few key differences. Think of it simply this way:
- In a REIT, investors are essentially investing in real estate through the REIT entity and the REIT entity manages the many things required in real estate ownership (both commercial properties and multi-unit residential). The REIT entity generates its income from the monthly rent collected from tenants of the properties.
- In a MIC, investors are essentially investing in real estate through mortgages. The MIC entity manages a portfolio of mortgages secured by Canadian based real estate (both commercial and residential). The MIC entity generates its income from the monthly mortgage payments collected from borrowers of the properties.
As an investor in either a REIT or a MIC, the key is to understand the current portfolio of the entity you are considering investing in along with feeling comfortable with the key personnel that operate the entity. Find the right combination and you should experience long term consistent returns that outperform many traditional investments.
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If you are interested in learning how you can share in the returns generated by mortgages, we invite you to learn about Alta Pacific MIC. We focus on consistent returns for registered investors (those with RRSP, LIRA, RESP, TFSA etc.) or open investments (for Canadians with cash on hand). Alta Pacific works with Western Canada’s best Exempt Market Dealers and will work to understand your current situation and future need. Feel free to contact us directly with any questions you might have.
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