- ICI (industrial, commercial, investment), often just referred to as commercial
- Property
- Income
- Appraisal
- Environmental Site Assessment
- Lenders
- Timing
- The general framework for calculating net operating income is as follows:
- Gross Potential Revenue + Other Income – Vacancy and Bad Debt Allowance = Gross Realized Revenue (also called Effective Gross Income) – Operating Expenses (paid by landlord) = Net Operating Income
- The debt service coverage ratio (DSCR or simply DCR), is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity’s (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio is, the easier it is to obtain a loan.
- An investigation in relation to land to determine the environmental condition of property and includes a phase one environmental site assessment and may include a phase two environmental site assessment.
- Required whenever there may be concern about contamination of land
- A mortgage funded by a private lender
- For a first mortgage, a private lender will traditionally charge in excess of 7% interest, and as high as 9% interest, while on a second mortgage interest rates of 13% and higher are typical, making second mortgages the vehicle of choice among most private lenders.
- This requires the private lender to understand the underwriting process (the process of assessing the merits of an application) as well as being able to analyze the borrower’s credit, income and debt service ratios. If the private lender is not sophisticated enough to complete these analyses, then they will have to rely on their mortgage agent to make a recommendation.
- These are mortgage investments that can be arranged by a mortgage brokerage. A qualified syndicated mortgage must meet the following criteria:
- It is arranged through a mortgage brokerage
- It secures a debt obligation on property that,
- is used primarily for residential purposes,
- includes no more than a total of four units, and
- if used for both commercial and residential purposes, includes no more than one unit that is used for commercial purposes.
- At the time the syndicated mortgage is arranged, the amount of the debt it secures, together with all other debt secured by mortgages on the property that have priority over, or the same priority as, the syndicated mortgage, does not exceed 90 per cent of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property.
- It is limited to one debt obligation whose term is the same as the term of the syndicated mortgage.
- The rate of interest payable under it is equal to the rate of interest payable under the debt obligation.
- It doesn’t meet the definition of a qualified syndicated mortgage
- A mortgage-backed security is an investment in a pool of amortized residential mortgages insured through CMHC under the National Housing Act (NHA).
- A mortgage investment corporation (MIC) is a corporation that enables small investors to invest in a diversified pool of mortgages on residential real estate with the benefit of using the corporate form by purchasing shares in the corporation.
- Yes, because selling shares back to the corporation requires the corporation’s approval, which may or may not be provided, based on the subscription agreement
- Yes, a MIC is generally treated as a conduit for income tax purposes. Its income may be flowed through to its shareholders and taxed in their hands without tax at the corporate level.
- FSRA’s definition of Permitted Clients are entities and individuals that are presumed to have significant experience and knowledge regarding financial matters, including investments, and robust financial means.
- FSRA’s Interpretation of Non-Individual Permitted Clients typically includes, for example, financial institutions, regulated pension plans, governments or government agencies, dealers or advisers registered under the securities regime and high-net-worth companies (net assets of at least $25 million). Non-Individual Permitted Clients may be Mortgage Investment Vehicles (MIEs) whose: (a) units are sold only to Permitted Clients investors; and, (b) units’ distribution is regulated under another regulatory regime such as the Securities Act.
