A Mortgage Investment Corporation (MIC) and a Real Estate Investment Trust (REIT) may sound similar, but are quite different in terms of how the dollars are invested. They both are alternative investments, specifically pooled funds dealing with the real estate.
A group of independent investors pool their funds to purchase shares in something they couldn’t afford on their own. This type of investment is ideal for real estate since it allows investors to acquire shares in a range of properties, diversifying their investment portfolio further.
Difference Between MICs & REITs
- Property Type
The biggest difference between a Mortgage Investment Corporation and a Real Estate Investment Trust is where the money ends up going. With an MIC, your investment is placed in private property mortgages. REITs, on the other hand, invest in income generating properties, such as apartments, hotels, retail centres and infrastructure.
- Scope of Investment
MICs, unlike REITs, cannot manage or develop actual properties; instead, they can only deal with mortgages. Mortgages provide a certain level of security because they are loans that a borrower must repay. They are also less prone to unforeseen complications than physical property.
- Trading Type
REITs are often traded openly, whereas MICs are privately held. When you invest with a company that specializes in a single sector and devotes all of its time to that type of investment, you can have significantly more security. However, because REITs are publicly listed, they provide more flexibility.
- Investment Percentage
MICs and REITs have some similarities that differ in terms of percentage. One such example is the percentage of property in each fund that must be Canadian-based. An MIC must retain 50% or more of its mortgages in Canadian properties in comparison to an REIT, which needs to maintain 75% or more.
Which Investment Option Is Best For You?
Alternative investments give investors a number of options to choose how they want to invest money. Many of these options may overlap, but there are distinct variances that can make the decision-making process for investors challenging. One of these scenarios is while deciding between a Mortgage Investment Corporation and a Real Estate Investment Trust.
As with other investments, the selection is ultimately based on your investment objectives and risk tolerance. Versa Platinum is a leading mortgage investment company in Abbotsford, assisting potential investors in boosting their wealth by putting their dollars in our mortgage pool. If you have any further questions about MICs and how they might help your investing portfolio, give us a call today.
