An Introduction to Mortgage Investment

What is Mortgage Investing?

Mortgage investing is a form of investment where individuals or entities invest their money in mortgages or mortgage-backed securities. This type of investment typically provides regular interest income to the investors. It allows investors to get involved in the real estate market without the need to buy, manage, or sell properties.

Investors make money from the interest payments on the mortgages. These interest payments are often higher than the interest rates from traditional credit products like government bonds or savings accounts. Given that mortgages are backed by properties, the risk adjusted return is attractive to many investors.

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Mortgage Investment Options

There are a number of options available to invest in mortgages in Canada. 

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Public Mortgage Funds

These are types of mutual funds that gather capital from various investors to invest primarily in mortgage loans and mortgage-backed securities. They are publicly-traded, meaning investors can buy and sell shares on a public exchange. They often offer better liquidity than other mortgage investment options and may also invest in a broader range of mortgage-related assets.

‍Private Mortgage Funds

These are pooled investment vehicles that collect capital from various investors to invest in mortgages or mortgage-backed securities. Unlike public funds, they are not publicly-traded and are generally only accessible to accredited or institutional investors due to their private nature and higher minimum investment requirements. They often have more flexibility in their investment strategies compared to public funds.

‍Mortgage Investment Corporations (MICs)

MICs are specific types of corporations defined by Section 130.1 of the Canadian Income Tax Act. They pool investments from many investors to lend out as mortgages. MICs are structured to allow individuals to invest in a diversified and secured pool of mortgages, and they provide a steady stream of income, usually in the form of dividends, to investors.

‍Mortgage Syndicates

These are groups of investors who come together to fund a specific mortgage or a small group of mortgages. Each investor in the syndicate directly invests their money into the mortgage, and their investment is not pooled with others. They allow investors to have a direct relationship with the mortgage and may offer the potential for higher returns compared to other mortgage investment options, but also carry a higher level of risk since the investment is tied to the performance of specific mortgages.

Each of these options offers different levels of risk and reward, and the right choice depends on an individual's investment goals, risk tolerance, and other factors.

A Look at Vector Mortgage Trust

Vector Mortgage Trust (VMT) is an investment opportunity that offers access to a diverse portfolio of loans designed to generate consistent returns while safeguarding your principal.

With a 50-year history of providing risk-adjusted returns and maintaining low operational costs, the Vector Group has established itself as a trusted name in the industry and an expert in the GTA. 

The core strategy revolves around funding 1st-secured mortgages and short-term bridge financing. They primarily focus on acquiring land in high-demand and high-growth markets, located within a 60-minute radius of the Greater Toronto Area. This targeted approach allows Vector to capitalize on redevelopment opportunities and leverage the region's thriving real estate market.

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Here’s why Parvis likes this fund:

Long track record: The Vector Group, with its 50-year history, has established itself as a reputable and experienced company. Although the Vector Mortgages Trust is relatively new, having been established in April 2022, the parent company's strong track record of performance in the Greater Toronto Area (GTA) is a testament to its capabilities. This history of success instills confidence in the trust's ability to navigate the market and generate positive returns.

1st secured position: VMT exclusively invests in first position mortgages and retains the right of first refusal. This strategic approach places Vector Mortgages in a favorable position when it comes to enforcing mortgages, as they have priority over other lenders. The company’s impressive track record of zero losses over the past seven years is a clear demonstration of their conservative lending practices and effective risk management.

Compelling risk-adjusted returns: VMT aims to deliver attractive risk-adjusted returns to investors seeking exposure to land loans in the GTA. The trust's targeted annual return, combined with rigorous due diligence, an experienced team, and a well-defined investment strategy, positions VMT as an appealing investment opportunity. Investors looking for a balance between risk and return can find value in the trust's ability to assess and manage risks effectively while striving to deliver competitive returns.

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To learn more about the Vector Mortgage Trust opportunity on the Parvis platform, create an account today or book a meeting with one of our representatives below.

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