As an investor, you know diversification is key to helping your portfolio weather the ups and downs of the market and general shifts in the economy. By incorporating a variety of investment types, you can spread risk, capitalize on growth opportunities and reduce exposure to downturns.
That sounds like solid advice, but have you considered expanding beyond traditional diversification strategies to include real estate?
Think beyond the typical approach of purchasing bricks and mortar, which often comes with financing challenges, high overhead and maintenance costs, and the headaches of being a landlord, and consider mortgage investing instead.
What is mortgage investing? Put simply, private mortgage investing involves lending funds to borrowers for real estate purchases or refinancing, with the property serving as collateral.
Private mortgage investments, with no correlation to public markets, can provide a stabilizing effect within a portfolio. The consistent income from mortgage payments helps ensure predictable returns, even in times of uncertainty.
“Mortgage investments also provide a hedge against inflation primarily because they are backed by real estate collateral,” says Chris Baker, senior vice president, Investment Sales at CMI Financial Group, a leader in the mortgage investment market. “As inflation rises, property values typically increase, strengthening the value of the underlying collateral and ensuring it retains or even enhances its ability to cover the loan amount.”
Another key benefit is that mortgage investments can be held in registered accounts, such as RRSPs, RRIFs, TFSAs and RESPs, offering tax-advantaged growth opportunities.
Also, the opportunity to diversify your mortgage investments across Canada’s varied markets – from urban centers to suburban and rural areas – allows you to strategically capitalize on regions where the demand for private financing is most pronounced - and return potential is higher.
Overall, mortgage investing offers many unique benefits that make it a compelling addition to your investment strategy.
“Mortgage investments provide an element of protection in market downturns due to their structure and asset-backed nature,” Baker says. “While Canadian homeowners have a strong track record of paying their mortgages, this provides a layer of security that helps protect investor capital since the underlying property can be used to recover funds in the event of borrower default.”
So, how much weight should be given to mortgage investing in a typical portfolio?
“It depends on the individual's financial goals, risk tolerance and overall investment strategy,” Baker says. “It’s best to consult with a financial advisor to tailor the right allocation based on the investor’s specific financial situation and objectives.”
And what sets CMI Financial Group apart from its competitors?
“We stand out by combining deep industry expertise with a client-focused approach to mortgage investing,” Baker says. “Our investment programs, including our suite of Mortgage Investment Corporation (MIC) funds and our custom-curated mortgage portfolios, are designed to cater to diverse risk and return profiles, ensuring alignment with each individual investor’s unique goals and preferences. With more than $1 billion in mortgage assets under management, our proven track record reflects our commitment to transparency, rigorous due diligence and consistent performance.”
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.
