its income taxed before being distributed to shareholders and would lower returns considerably. Manager (In)competence - the success of the MIC depends to a critical degree on the experience, expertise, judgement and good faith of the managers. Do they know the business, do they know their market, and do they have a record of success? Can, and will, they find a steady flow of new mortgages to keep the income flowing in? Think of it as a job interview. Leveraging - the rules allow the MIC to borrow money, but some do more than others. The spread between the lower rate of the MIC's borrowing and the lending will boost the ability to generate shareholder returns, but it also increases risk. The audited financial statements will show how much the MIC has borrowed. The prospectus will say if the MIC has a policy to cap what it will borrow. Many of the MICs are fairly short term lenders - 24 months or so - which reduces interest rate risk and should allow the MIC to continually readjust its lending rate to match increases or decreases in general interest rates and keep the spread between its lending and its bank borrowing rates constant. Default on mortgages - mortgage borrowers may not pay back what they owe; all the MICs claim to be very careful about who they lend to, but some are explicitly in a niche where the banks don't tread or in second mortgages. The MIC gets a higher interest rate, but that is associated with the higher risk. At least one MIC - Cooper Pacific - has two funds, one that lends out first mortgages with an 8% return and another with second mortgages with a 12% return. "You make your pick, and you take your chances." Market downturn / geographical concentration - some MICs, the smaller ones, are concentrated in very limited markets, like Westboro in Ottawa or Edgeworth in northern Alberta. Ottawa is a stable market, but what happens to Edgeworth if the oil industry cools off considerably, as it has done in the past? A general economic recession would everywhere increase the number of borrowers having difficulty to repay. Liquidity (can't sell) - the basic method to get your money back is not a sale in some market, since while some MICs (23 or so) are publicly quoted companies, not all are. For non-public MICs management