Investors love talking about returns.
Michael Ruge does too, but he believes there is one question that should come first.
How do you get your original money back?
It is a lesson shaped by decades in real estate development and one Michael describes in simple terms: focus on the return of your investment before worrying about the return on your investment.
That philosophy sits behind the way he thinks about funding.
The difference is more important than it sounds
Suppose somebody offers you an attractive projected return.
Naturally, that gets your attention.
But a percentage on paper is only part of the story.
What is securing the investment?
What happens if the project takes longer than expected?
What creates the value needed to repay the loan?
What is the exit?
Michael believes those questions need to be answered before people become too excited about projected profits.
That is particularly important in real estate development, where projects can move through several stages before reaching completion.
How Michael structures private lending
Michael’s model involves private investors lending to development projects in increments of $250,000.
The loan is secured directly against the asset.
While the money is in place, it earns 10 per cent annually, compounded each year.
When the development reaches the appropriate next stage, perhaps through acquisition, refinancing or the involvement of a larger development partner, the lender is intended to receive the original principal and accumulated interest.
Depending on the project, a performance dividend may be added.
The order is deliberate.
Principal first.
Return second.
Why developers need early-stage funding
Real estate development creates an unusual challenge for lenders.
A project may have strong potential without yet having predictable income.
Before an apartment building exists, land needs to be secured, approvals need to move forward and planning work has to be completed.
Banks often prefer to enter once more of that uncertainty has disappeared.
Private investors can participate earlier.
Their capital can help move the project through the stage where value is being created and towards the point where conventional or government-backed financing becomes more appropriate.
What happens after repayment?
One particularly interesting part of the structure Michael describes is the possibility of continuing participation after the original loan has been paid back.
In some cases, a lender may retain a small equity interest, often in the 1 to 5 per cent range depending on the project.
That can allow them to share in future building performance after their initial capital has already been returned.
For Michael, that is where real estate development starts becoming a longer-term wealth conversation rather than simply a loan transaction.
Funding should suit the stage
Michael does not believe every project should rely exclusively on private money.
Nor does he believe traditional banks have no place in development.
The question is timing.
Banks and institutional lenders are often more comfortable after approvals have advanced and risk has been reduced.
Canadian housing financing programmes can also become valuable for qualifying rental projects once certain conditions are met.
Private capital can help create the bridge to that stage.
Different money does different jobs.
That is a much more practical way to think about real estate funding.
Real assets and real projects
Many of the private investors Michael speaks with have spent years building businesses, careers and savings.
They may be interested in earning more from their capital, but they do not necessarily want to chase speculative investments.
Real estate-backed lending offers something tangible.
There is property.
There is security.
There is a defined development process.
That does not mean there is no risk. Real estate development always involves uncertainty, and every opportunity deserves proper evaluation.
Michael’s point is that investors should understand exactly what sits behind the investment and how the structure is supposed to work.
Experience teaches priorities
The longer Michael Ruge has spent in real estate development, the more important the basics have become.
Security.
Timing.
Funding.
Execution.
Partnerships.
And above all, getting people’s money back.
Potential profit is important.
But it should never distract from the first question.
Before asking what you can make, ask how your capital comes home.
Michael Ruge’s new book “Building Hope in the Housing – How to Solve the Rental Affordability Crisis” will be realeased this fall (2026).
Links to Michael Ruge, Affordable Apartments and his Initiatives:
Michael Ruge on Why You Should Never Pay for Your Tenant’s Electricity
The Regulatory Maze – How Well-Intentioned Rules Became the Biggest Barrier
The 15-Minute City – Michael Ruge’s Blueprint for a Kinder Future
The Do Less, Build More Model: Michael Ruge’s JV Strategy for Solving Housing Crises
