Private Real Estate Debt: The Definitive Guide to Understanding and Properly Analyzing a Project.
What is private real estate debt?
Private debt is a form of financing provided to a company by investors or funds, outside the traditional banking system or listed financial markets, in exchange for interest payments over a specified period.
Private real estate debt applies exactly the same principle to a real estate project. The principle is simple: a project developer borrows a sum of money to finance a project, commits to repaying the principal according to a set schedule, and pays interest in return.
Unlike equity financing, where the investor becomes a shareholder in the project and shares in both the profits and the losses, in this case you are a creditor: you do not become an owner, you receive interest at a rate set in advance, and you get your principal back at maturity. The target return is higher than that of traditional investments, but the principal is not guaranteed: the money is tied up for the entire duration of the project, and delays or defaults on payments are possible.
Debt or Equity
How does private real estate debt financing work?
- Submission of the application: An operator applies for funding for a project.
- Analysis: Operator experience, financial strength, asset quality, budget, projected sales prices, guarantees…
- Fundraising: The project is offered to investors, often in the form of a fixed-rate bond.
- Project Lifecycle: Construction, Marketing, and Monitoring
- Repayment: Upon maturity, through the sale of the assets or refinancing. Interest and principal are often paid in a single lump sum at the end of the project.
Who Takes Out Loans? Borrower Profiles
- Real estate developers: construction of residential, office, or retail properties.
- Real Estate Investors: Acquisition, Construction, Renovation, and Resale
Raizers pays particular attention to the developer's track record, the company's financial health, and the guarantees provided.
What kind of return can you expect?
The rates quoted in the private real estate debt market typically range from 9% to 12% gross per year, depending on the source, for terms of 6 to 24 months. These are unsecured target returns.
As of October 16, 2026, the weighted average annual interest rate on transactions financed by Raizers since 2016 stood at 10.30 percent, with a weighted average term of 21 months.
*Single Flat-Rate Withholding
This table is for illustrative purposes only, assuming repayment at the scheduled maturity date. It does not constitute a forecast or a promise of performance.
What is your investment horizon?
Private real estate debt offerings on Raizers typically last between 12 and 36 months.
Three things to keep in mind:
- The funds are held until repayment.
- The announced duration is not guaranteed: it may be extended in the event of construction or marketing delays.
- Balloon payment: The principal and interest are often paid at the end of the project, not during it.
LTV, LTC: The Two Ratios You Need to Know
LTV (Loan-to-Value): The ratio of debt to the property's value (current value or value upon completion, depending on the transaction).
Example: Loan of €230,000 – Asset value of €736,256
→ Formula: Loan / Property Value × 100 = 31%
This ratio compares the amount of debt to the value of the financed asset. It thus makes it possible to assess the margin between the debt and the value of the asset: the larger this margin, the more the value of the asset can theoretically decrease before falling below the amount of the debt.
The LTC (Loan to Cost): debt relative to the total cost of the project (land, construction, fees)
Example: Loan of €230,000 - Total cost of €443,900
→ Formula: Loan / Total cost × 100 = 52%
This ratio compares the amount of debt to the total cost of the transaction. It measures what portion of the project is financed by debt and what portion is funded by other resources, particularly equity contributed by the operator. The lower the LTC, the greater the difference between the amount of debt and the total cost of the project, indicating a higher contribution by the operator to the project’s financing.
These two ratios are complementary: the LTV provides information on the extent to which the asset's value covers the debt, while the LTC provides information on the project's financing structure.
How do you analyze a private real estate debt transaction?
The interest rate alone is not sufficient to evaluate a private real estate debt transaction. Before investing, several factors must be analyzed together: the operator’s experience, the quality of the asset, the local real estate market, the project’s financial structure, its marketing, its timeline, and the guarantees in place.
1. The operator's experience and reliability
The first question is simple: Who is leading the project?
A developer’s or real estate broker’s experience provides insight into their ability to see a real estate project through to completion. In particular, it is helpful to review their background, projects they have already completed, those still in progress, and the financial standing of the companies involved in the project.
2. The Asset and Its Real Estate Market
A real estate project must be consistent with its surroundings.
The analysis therefore focuses on location, property type, positioning, and anticipated sale prices. A student residence, a high-end villa, and a multi-unit housing development do not meet the same criteria in terms of location and demand.
Estimated prices are compared with properties and transactions that are as similar as possible in terms of neighborhood, square footage, condition, amenities, and whether the property is new or old.
This comparison makes it possible, in particular, to determine whether the sales assumptions used by the operator are consistent with market conditions at the time of the analysis.
3. Financial Statements and Financing Structure
Next, we need to understand how much the project actually costs and how it is funded.
The project budget includes the main costs: purchase of the property or land, construction work, financing costs, and other expenses necessary for the project.
On the other side are the sources of funding to meet these needs: the operator’s equity, bank financing, private debt, and—depending on the transaction—proceeds from sales.
The equity ratio is particularly important: it measures the capital that the operator commits to the project itself.
It is also at this stage that ratios such as LTV (Loan-to-Value) and LTC (Loan-to-Cost) become particularly meaningful. They are used to measure the debt burden relative to the asset’s value or the total cost of the project.
4. Margin and Marketing
The projected margin is another important figure.
It represents the difference between the expected revenue from the transaction and its total costs. A sufficiently large margin makes it easier to absorb certain contingencies, such as an increase in construction costs or a decrease in the selling price.
We also need to consider the pre-commercialization stage.
In a development consisting of multiple units, knowing the number of units that have already been reserved or sold—and the percentage of total revenue they represent—provides an indication of market interest in the project.
However, not all commercial commitments carry the same weight: a simple offer, a reservation agreement, a preliminary agreement, and a final contract do not all represent the same level of commitment.
5. The repayment schedule and repayment capacity
A project may be profitable on paper but could run into difficulties if its timeline is unrealistic.
The schedule analysis must therefore verify the consistency among the various stages of the project: acquisition, administrative approvals, construction, marketing, sales, and debt repayment.
It is also essential to identify the source of the reimbursement.
In a real estate brokerage transaction, the profit generally comes from the resale of the property or its individual units. In a real estate development project, it depends primarily on the progress of construction and sales.
Finally, the cash flow plan makes it possible to verify that the operation has sufficient resources to continue until the next inflows of cash.
6. Warranties
Finally, the analysis focuses on the guarantees associated with the financing and their priority. A guarantee can improve the prospects for recovery but never eliminates the risk of loss. These mechanisms are detailed in the following section. Depending on the transaction, guarantees may include:
- A mortgage or a pledge of the asset as collateral
- A pledge of the securities of the company carrying out the project
- A guarantee from the executive or his or her parent company.
- A first-demand guarantee
- A security trust
A comprehensive analysis rather than a single indicator
None of these factors, on its own, is sufficient to determine the quality of a transaction.
A low LTV may be reassuring, but it does not necessarily offset an excessively high sales price. Strong pre-sales can reduce commercial risk but not the risk associated with construction work. A solid guarantee can improve the prospects for recovery without guaranteeing repayment.
The analysis of a private real estate debt transaction therefore involves evaluating all of these criteria together to assess the project's soundness and its level of risk.
What happens in the event of a default?
Short definition: A default is a failure by the borrower to meet their payment or repayment obligations. It is not the same as a loss.
A definitive loss may sometimes not be recognized until several years after the financing, particularly when collection proceedings are underway. A default rate should also not be confused with a net loss rate: one must take into account the amounts that can be recovered through guarantees.
What kind of tax system?
Interest is considered investment income and is taxed by default at the Flat-Rate Withholding Tax (PFU) rate of 31.4% in 2026 (12.8% income tax + 18.6% social security contributions), with the option to choose the progressive tax scale.
Bonds, SCPIs, and Crowdfunded Private Debt: A Comparison
Summary table: Specifications vary by product.