How Private Lending Works: Earning 8% Through a Promissory Note
Plenty of people want exposure to real estate without becoming a landlord, a renovator, or a project manager. Private lending is the simplest way in: you lend capital to a builder who does the work, and you earn a fixed return for putting your money to work. Here's exactly how it operates with SIP — how you're paid, the difference between a secured and an unsecured arrangement, and the risks worth weighing before you commit.
What private lending to SIP actually is
When you lend to SIP, you make a private loan to Strategic Investment Planning Inc., documented by a promissory note — a written, legally binding agreement that sets out the amount, the interest rate, the payment schedule, and the term. In plain terms, it's a formal IOU. You are a lender, not a part-owner: you don't take on the renovation, the tenants, or the resale. SIP uses the capital to acquire and improve properties across the Niagara Region, and repays you according to the note.
How you earn: the 8%
The note carries a fixed 8% annual interest rate. In a typical structure:
- Interest is paid monthly, giving you predictable cash flow rather than waiting until the end.
- Your principal is returned in full at the end of the agreed term, usually tied to a project's completion.
- The rate is set in the note, so your return doesn't swing with the outcome of any single deal the way an equity partnership would.
"Fixed" describes the contractual rate, not a guarantee against risk — more on that below.
Secured vs unsecured — your choice
By default, the note is unsecured. That means it's backed by SIP's commitment to repay and its track record, not by a registered legal claim against a specific property. As an unsecured lender, you rely on the company's performance and ability to pay.
If you'd prefer a registered security interest — for example, a charge against the property the loan helps fund — that can usually be arranged, with the legal work handled at your own cost. It's worth understanding the distinction clearly, because it changes your position if something goes wrong. We're happy to walk through both options so you can decide what fits your comfort level.
Who it's for, and the typical timeline
Private lending tends to suit investors who want passive, predictable income and would rather not deal with property management, contractors, or market timing. Terms generally align with project timelines — measured in months, not decades — so your capital isn't locked away indefinitely. It's also worth knowing that SIP invests its own capital alongside its lending partners, which keeps everyone's interests pointed in the same direction.
The risks, and doing your due diligence
No honest discussion of lending skips the risks. All investing carries the possibility of loss, including loss of principal:
- Repayment depends on performance. With an unsecured note, getting your money back depends on SIP's ability to complete projects and stay solvent. If a project underperforms, your capital is at risk.
- Real estate isn't guaranteed. Property values can fall, renovations can run over budget, and sales or refinances can take longer than planned.
- Promissory notes can be regulated as securities in Ontario, so the rules around how they're offered matter. Independent advice is sensible.
Before lending, read the note terms carefully, understand the track record behind it, consider independent legal and financial advice, and only commit capital you can genuinely afford to put at risk. You can review completed Niagara projects in our portfolio and see how the structure works on the invest page. To understand the kind of value-add work your capital helps fund, our explainer on duplex conversions is a good read.
Private lending rewards investors who value predictability and want a hands-off way to participate in real estate. If you'd like to understand whether it fits your goals, get in touch — we're always glad to talk it through, no pressure.
This article is general information only, not financial, legal, or investment advice, and is not an offer or solicitation to buy any security. All investing carries risk, including the risk of loss of principal; a fixed interest rate is not a guarantee of repayment, and an unsecured loan is not secured against any property by default. Promissory notes may be regulated as securities. Do your own due diligence and consult qualified legal and financial professionals before making any investment decision.