Most people who think about investing are familiar with the usual choices.
Stocks. Bonds. GICs. Mutual funds. REITs.
Those are the investments that dominate financial conversations, and there is nothing wrong with them. But Michael Ruge believes investors should at least understand that other possibilities exist, particularly when it comes to funding real estate development.
For decades, Michael has worked with real estate projects and seen the same problem appear repeatedly.
Developers can have worthwhile opportunities, but traditional banks are not always prepared to fund the stage where the most important early work happens.
Private capital can help bridge that gap.
The part of development people rarely see
When you drive past a completed apartment building, you see the finished product.
You do not see the years that came before it.
The land assembly. The planning. The engineering. The consultants. The municipal process. The negotiations. The countless conversations required before construction could even become possible.
All of that costs money.
This is one reason early-stage real estate development can be challenging to finance. Banks tend to favour predictable income and projects where much of the uncertainty has already been removed.
Developers often need funding before they reach that point.
Michael sees private lenders as an important part of that earlier stage.
A tangible approach to funding
Many of the investors Michael speaks with are business owners, retirees or families who have spent decades building capital.
They are not necessarily looking for excitement.
Often, they are looking for a sensible way to put money to work without relying entirely on the daily movement of public equity markets.
That is where real estate-backed lending becomes interesting.
The money is attached to something tangible.
There is a real property behind the loan. There is a development plan. There is a defined stage where the capital is being used.
For the right person, that can feel very different from watching a market ticker move up and down.
Security before performance
Michael’s funding model puts considerable emphasis on structure.
The private lender participates in increments of $250,000 through a loan to the development, secured against the asset.
While that capital is in place, it earns a 10 per cent annual return, compounded annually.
The important word, however, is not necessarily “return”.
It is “secured”.
Michael believes the conversation has to begin with how the money is positioned and how it ultimately comes back.
His rule is straightforward: return of investment first, return on investment second.
In other words, before getting excited about the potential profit, understand how the original capital is expected to be repaid.
What happens when the project moves forward
The private lender’s capital is generally positioned during an earlier phase of real estate development.
As planning advances, approvals are achieved and uncertainty is reduced, the project can become more appealing to institutional lenders, larger developers or long-term financing programmes.
That later capital can then help refinance or acquire the project.
At that stage, the private lender’s principal and compounded interest can be paid.
Depending on the structure, an additional performance dividend may also be included.
Michael also describes situations where the lender retains a small ownership position after repayment, allowing them to continue participating in the building’s future performance.
Private capital and public financing can work together
Michael does not see private and government-backed funding as competing systems.
They can serve different purposes at different stages.
Canadian housing programmes through CMHC can provide attractive financing to qualifying multi-unit developments, particularly projects that achieve certain affordability, energy-efficiency and long-term rental objectives.
But those programmes generally become relevant after considerable development work has already taken place.
Someone still has to get the project there.
That is where private capital can be valuable.
The bigger opportunity
Michael Ruge’s approach to real estate development is practical.
Use private funding where private funding makes sense.
Use institutional or government-backed financing when the project becomes suitable for it.
Work with larger partners when their resources can move the development forward.
There is no need to force one financing source to do every job.
For investors, that creates another way to think about capital.
For developers, it creates another route to get worthwhile projects moving.
And for communities that need housing, it can mean one more project has a chance to become something real.
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:
The Car is the Culprit – Michael Ruge on Walkable Wealth
Canada’s Housing Wake-Up Call (And Why We Can Fix It)
Michael Ruge’s Affordable Apartments: A Sustainable Solution to the Cowichan Valley’s Housing Crisis
