With an array of investment vehicles out there, few can match the consistency and return delivered by those involving real estate.
Traditionally, that meant purchasing a property in a region or neighbourhood showing promise of appreciation, and hopefully not too much in the way of ownership responsibilities and costs, such as managing tenants, property upkeep, insurance, taxes, and other ownership-related expenses, all of which can eat into your investment return.
Then, there’s always the risk real estate market conditions could shift, generally or specifically to where you invested. But overall, owning real estate was historically a pretty solid investment proposition.
In today’s market, though, things have changed, taking some of the shine off the strategy of buying, holding, and then selling a property. Economic conditions, including rises in borrowing costs at the banks, have made some properties harder to sell quickly - often made more challenging when dealing with larger properties. Not to mention, ownership costs have become an increasing burden with inflation on the rise.
So, how do you stay in the real estate investment market without the negatives of ownership overhead and still see a decent return on your investment?
Mortgage investing with a trusted partner
And just like its name suggests, mortgage investing involves investors, often with the help of companies such as CMI Financial Group, acting as private lenders to home buyers and owners who require financing, but are unable to qualify with a traditional lender.
Spanning an average term of 12 months, mortgage investing historically delivers returns of six to 16 per cent and is backed by the property involved. Investors receive regular income instead of relying on potential capital appreciation, which can take varying lengths of time.
“Mortgage investments deliver steady income and aren’t correlated with publicly traded markets, so investing in mortgages can help investors boost their portfolio returns while also reducing volatility,” says Chris Baker, CMI’s vice president, Investment Sales.
Mortgage investments are backed by property rather than a direct investment in property. As a result, mortgage investing doesn’t incur significant overhead costs or potential liquidity constraints, negative cash flow, or vacancy risks. Mortgages also act as a stabilizing force in an investor’s portfolio with consistent cash flow and can be tailored to suit the risk-return profiles of defensive, moderate, and high-yield-seeking investors.
“The resilience of private mortgages to changes in monetary policy, coupled with their tangible collateral and short-term nature, makes them an attractive option in today's investment landscape,” Baker says.
Investors can go it alone or partner with a private lending company, depending on their preferences, resources, and expertise. Top private lenders like CMI have access to a wide range of mortgage investment opportunities and specialize in evaluating loan applications, performing due diligence, and managing ongoing mortgage servicing. Investors benefit from their experience and resources, eliminating the need for them to manage the mortgages themselves.
Unlike the many regional operators, CMI lends from coast-to-coast across Canada with a significant presence in Western Canada.
Diversifying your investment portfolio
Mortgage investments are also a suitable option for investors looking to diversify their portfolio beyond traditional stock and bond investments and for those seeking a reprieve from the volatility of public markets without sacrificing returns.
Whole mortgage investments are suitable for accredited investors with at least $1.5 million in liquid capital and a minimum net worth of $5 million.
Investors who don’t meet the net worth and capital requirements can invest in private mortgages through a mortgage investment corporation (MIC), a pooled fund that invests in a diversified portfolio of private mortgages on behalf of investors.
“As fixed-income investing continues to evolve, mortgages deserve serious consideration for inclusion in diversified investment portfolios,” Baker says.
CMI Financial Group is a non-bank, financial services provider dedicated to helping investors achieve competitive fixed income returns for their investment portfolios by sourcing high quality mortgage investment solutions - backed by real estate - that match their investment objectives and risk tolerance.
For more information about the benefits of mortgage investing and determining if it is the right investment strategy for you, visit investments.thecmigroup.ca
