A Perfect Investment
Many people spend a great deal of their time and energy looking for ‘The Perfect Investment’. Over the past three decades, I have repeatedly had clients actively seek an investment that will produce a steady double digit return risk-free. This ideal investment – high reward for no risk – has become the elusive ‘Holy Grail’ for most investors.
Too many investors, following the latest hot investment tips without doing proper research, end up disappointed, disillusioned, and potentially demoralized when confronted with their losses. Even smart investors are too easily motivated by greed and don’t use common sense when confronted with a ‘get rich quick’ investment scheme that sounds too good to be true.
The simple truth is that every investment carries risk. Even not investing carries risk – inflation can decrease the value of your ‘nest egg’ and reduce the purchasing power of your money! The first step, and the key to successful investment, is fully understanding the risk you are exposed to and using management tools such as portfolio diversification to reduce your overall investment risk.
The next step to becoming a successful investor is to stop listening to others for financial advice. You know the kind: the advice offered at social gatherings and in break rooms, from people who, quite frankly, really don’t understand what they are talking about. Have your own investment rules and stick to them. These are rules and guidelines you establish to stop you from making rushed emotional investments which almost always end in a loss.
Cultivating investment mentors – successful long term investors whose opinions you trust – is the final and, in my opinion, most important step in the process of becoming a successful investor. If you ask these mentors for investment recommendations, be prepared to really listen, as these sources should have no ulterior motive. Your best mentors will often be close friends and family members. In some cases, they may offer you the name of a trusted Financial Advisor, or share what I call ‘established investment truths.’ These truths are the rules of investing that they have successfully used over the years. A few of these successful investors might even recommend that a portion of your diversified investment portfolio be invested in shares of a first mortgage MIC such as First Accredit Mortgage Corp. They might even say that it’s as close to a perfect investment as they have found.
Paul E. Croy
Investing in Real Estate
There are several issues and considerations when investing in real estate.
#1- Residence
Purchasing a home tends to be the largest capital investment most people make. It also tends to be the best investment most people make.
Rents go up but mortgage payments remain constant. So with time, the cost of mortgaging remains constant while rents rise with inflation. (There are interest rate fluctuations both up and down but I am assuming a constant interest rate for this example.)
It may seem a long way off at the beginning, but mortgages do get paid off and any capital appreciation from your own house is non-taxable. Equity in property also provides the ability to access funds for other investment opportunities.
#2- Investment Properties
There are several types of investment properties:
A – Revenue Investment (Residential, Commercial, Industrial revenue properties)
I do not have a pension other than CPP so I need to plan for my retirement by creating an income stream that is indexed so that inflation doesn’t erode my standard of living. Buying a rental property can be an effective method to satisfy this goal.
When looking for revenue property to meet this goal, you need to consider how soon the property’s income will cover all of its expenses including debt servicing, management, maintenance, repairs and of course, the various taxes. This may mean that you will need to cover a shortfall at the beginning, but when you have reached the breakeven level time becomes your ally and the property will start paying you an indexed cash flow.
B – Speculative Investment
This investment is to attract a capital gain by selling a property for a higher price than you paid. This investment is quite popular when the market is increasing or expanding. An example of speculative investment would be buying a piece of land that is not yet developed but is in an area where development is approaching. When development does reach your property then there will be an increase in its value. This type of investment is higher risk than rental property (time is not your ally) but it does not require as much ongoing work and can be very lucrative. This investment is more interested in the market and not in revenue.
There are several investments that are part revenue and part speculative. One example is an underdeveloped property that does not have cash flow to pay all costs but can offset some of the costs.
Housing is something that we all need. It has proven to be a stable and manageable investment that one can control or at least influence. Talk to your realtor, lawyer, accountant, mortgage broker, neighbour etc. Everyone has something to say about real estate and some of them can give you good advice, but remember that it is your choice. Be bold and you should be rewarded.
Rory Campbell
Video: What are the Average Yields Earned by Great Pacific MIC Funds?
Rory Campbell and Jeffery Moses discuss the current and historical yields of the MIC funds they manage. Investing in MICs is not like investing in stocks. It is a slow process of getting rich.
Video: What is the risk of investing in Mortgage Investment Corporations?
A discussion on the risk of investing in Mortgage Investment Corporation (MIC) Funds at Great Pacific Mortgage & Investments. – Rory Campbell and Walt Neufeld
What We’re Talking About
It’s time somebody started a conversation about Mortgage Investment Corporations (MICs) – so here we are. And while we’re at it, we will also provide a fresh perspective on the topics of economy, real estate, investing and borrowing.
On a weekly basis, we will be responding to and providing our perspective on financial and real estate news and we will begin a discussion about MICs starting with what they are, how they work and how to ensure you are investing in a quality investment, whether it’s a MIC or not.
You will meet the team of Great Pacific over time as we all participate in this discussion. We don’t always agree but that’s part what makes us good at what we do and it does make life just a little more interesting.
By Rory Campbell, Walt Neufeld & Jeff Moses
