The Truth About Private Lending Returns: What You Can Really Expect
- Marinella Nicolosi
- Oct 20
- 2 min read
By Marinella Nicolosi, Private Lending Queen
Private lending is one of the most consistent ways Canadians are earning steady, hands-off income from real estate. But when people hear about double-digit returns, they often wonder—is that really possible, and what’s the catch?
Let’s break down what private lending returns actually look like in Canada, and how to set realistic expectations for your portfolio.
Typical Private Lending Returns in Canada
Most private lenders earn between 8% and 12% annually on their capital. The exact return depends on the type of deal, borrower profile, and level of risk involved.
First Mortgages: Usually the lowest risk and typically pay 7%–9% annually. These loans have first claim on the property if the borrower defaults.
Second Mortgages: Slightly higher risk, often paying 10%–12% annually. These are suitable for lenders comfortable with additional exposure but backed by strong property equity.
Construction or Bridge Loans: Short-term and higher-yield (up to 14%) but require experienced underwriting and a clear exit plan.
While these returns outperform many traditional investments, they rely on proper due diligence and legal protection.
Factors That Influence Returns
Your returns in private lending are shaped by three main variables:
Loan-to-Value (LTV) Ratio: Lower LTV means less risk, often with lower returns. Higher LTV can boost rates but increases exposure.
Borrower Strength: Investors with proven track records or substantial equity tend to pay less interest than high-risk borrowers.
Term Length & Market Conditions: Shorter loans can yield more annualized interest, while longer terms lock in stability.
Managing Risk for Reliable Results
Private lending isn’t about chasing the highest rate—it’s about balancing reward with protection. To ensure consistent returns:
Always register your mortgage on title.
Use a qualified real estate lawyer for every transaction.
Verify property value and borrower exit strategy before funding.
Diversify across multiple loans instead of concentrating your capital in one deal.
The Real Truth: Stability Over Speculation
The true appeal of private lending isn’t just high returns—it’s predictability. Monthly interest payments can provide consistent cash flow while preserving your principal. Many lenders reinvest their earnings to compound returns over time, growing wealth steadily without managing properties or tenants.
Private lending won’t make you rich overnight, but it can help you build a reliable, asset-backed income stream that complements your retirement plan or investment portfolio.
Published: October 20, 2025 - 3 min read
By Private Lending Queen
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Whether you want to be hands-on or make your money work for you and earn through passive income, we’ll give you the step-by-step clarity, tools, and confidence you need to invest with purpose and power.
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