# Can You Earn 8% on $1 Million? An Honest Answer

> A direct answer to the question thousands of people ask every year: what genuinely pays 8%, what it costs you in risk and liquidity, and what does not qualify.

Canonical: https://matadornotefund.com/blog/8-percent-yield-on-1-million
Author: Apurva Sanghavi
Published: 2026-10-02T17:59:50.003Z
Tags: Debt Fund, Private Lending, Real Estate Investing

## Short answer: yes, and here is what it costs

Eight percent exists. It has existed in most decades, in several asset classes, and it exists now. The difficulty is not finding the number. The difficulty is understanding what you are handing over in exchange for it.

There are only three things an investor can sell in return for yield. You can sell credit quality, accepting that the borrower might not pay. You can sell liquidity, accepting that you cannot have your money back on demand. You can sell simplicity, accepting structure, leverage or complexity that makes the outcome harder to predict. Most 8% investments are a blend of the first two.

A useful benchmark is the return on short-term government debt. That rate is the price of money with essentially no credit risk and immediate access. Everything above it is payment for risk somebody has agreed to carry.

As of early October 2026, the 3-month Treasury bill yielded a little above 4%, and the 10-year note sat around 5.3%, per the US Treasury's daily yield curve.

Subtract that number from 8%. The difference is your risk premium. If the premium is three or four percentage points, you are being asked to carry a meaningful amount of risk for it. That can be a rational trade. It is not a free one, and nobody who understands the arithmetic will tell you it is.

## Where 8% does not come from

It does not come from an insured bank deposit. It does not come from Treasury bills. It does not come from a money market fund, an investment-grade bond ladder held to maturity, or any instrument where the principal is both guaranteed by a government and available on short notice. If those paid 8%, every pension fund on earth would own nothing else, and the yield would collapse within a week.

It does not come from a structure that pays you 8% while telling you the principal cannot decline. Principal that cannot decline is the definition of a risk-free instrument, and risk-free instruments pay the risk-free rate.

It does not come from a manager's confidence. Strong track records are useful evidence about process and judgement. They are not a mechanism. A rate is paid out of cash flow produced by assets, or it is paid out of somebody else's capital, and the second one ends badly.

And it does not reliably come from a number printed in a marketing document. A target is a statement of intent under assumptions. When the assumptions fail, the target is missed. Anyone presenting a forward-looking yield without the word "target" attached is either careless or worse.

The search for a risk-free 8% is the single most expensive habit in private investing. It is what makes investors reach for the highest number in a stack of offers rather than the most clearly explained one. Yield chasing is not a moral failing. It is simply the process of buying the least honest disclosure in the set, because the least honest disclosure always shows the best number.

## The four places 8% genuinely lives

**High-yield corporate credit.** You lend to companies with weaker balance sheets, through a fund or an ETF, and you are paid a spread over Treasuries for the risk that some of them default. The trade is real, the market is liquid, and pricing is transparent. The cost is that you are marked to market daily and the asset class tends to fall hardest at exactly the moment other things you own are also falling. Correlation with equities in a crisis is high. Moody's long-run data on speculative-grade issuers puts the average annual default rate since 1983 at roughly 4.4%, swinging from about 1% in good years to over 10% in 2001's downturn, with the historical average senior unsecured recovery rate running near 45% — though recovery drops well below that average in a real downturn, as it did in 2008.

**Private real estate debt.** You lend against property, usually in first position, at a loan-to-value ratio that leaves equity beneath you. The borrower pays a double-digit rate because speed and certainty are worth more to them than the difference between 9% and 6%. According to Private Lender Link, the average Houston hard money interest rate in the second quarter of 2026 was 9.84%, on an average loan size of about $570,000 across 247 loans. The spread between what the borrower pays and what the investor receives covers the manager's operation, defaults and profit. The cost to you is illiquidity, dependence on the manager's underwriting and servicing, and the real possibility of a workout that takes months.

**Equity real estate with debt on it.** Buy a building, put a mortgage on it, and the cash yield on your equity can reach 8% or well past it. This is the most familiar route and the most misunderstood. The yield is a product of the borrowing, which means the same arithmetic runs in reverse when occupancy drops or the rate resets. You also own the roof, the tenants, the insurance premium and the tax protest. That is not passive income, whatever the listing says.

**Concentrated dividend and income strategies.** Utilities, REITs, MLPs, closed-end funds, covered-call funds. Some yield 8% or more. The trade varies by structure, but the common pattern is that a high advertised distribution is often partly a return of your own capital, or is sustained by a payout ratio that a single bad year will break. A high yield in a liquid market usually means the market is pricing a cut.

Each of those is a coherent way to target 8%. None of them is a way to avoid choosing which risk you want.

## The illiquidity premium, quantified

The illiquidity premium is the extra return you are paid for giving up access to your money for a defined period. It is the most rationally earned premium available to a patient investor, because unlike credit risk it does not require anything to go wrong for you to collect it.

The arithmetic of deciding whether the premium is adequate is straightforward. Take the yield of the illiquid investment. Subtract the yield of the closest liquid equivalent with similar credit risk. What remains is the premium. Then ask what the lock-up costs you in a scenario where you need the capital.

| **Illustrative comparison** | **Liquid credit fund** | **Private debt fund** |
| --- | --- | --- |
| Targeted annual yield | 6.0% | 8.0% |
| Access to capital | Daily | 24-month lock-up, then notice and quarterly caps |
| Implied illiquidity premium | n/a | 2.0 percentage points |
| Premium on $1,000,000 | n/a | $20,000 a year |

Illustrative only. Figures are chosen to show the arithmetic and are not offers, projections or representations about any fund.

Two percentage points on $1,000,000 is $20,000 a year, or roughly $1,667 a month, for accepting that the money is not available on demand. Whether that is a good trade depends entirely on facts about you that no article can know: what else you hold in cash, what your income looks like, what you would do if a large unplanned expense arrived in month fourteen of a twenty-four-month lock-up.

A premium of two points for a two-year lock-up is a different proposition from two points for a ten-year lock-up, and both are different from two points for a lock-up with a gate the manager can close. Read the redemption terms before you value the premium. The stated lock-up is the beginning of the answer, not the whole of it.

## The $1M allocation question

Not all of it.

That is the only allocation statement in this article that applies to everyone, and it applies because concentration risk does not care how good the investment is. Any single private fund, any single sponsor, any single asset class can be impaired by something the investor could not have seen. Institutions size private credit as a slice of a portfolio for precisely this reason, and they do it while employing analysts who visit the manager's offices.

Beyond that, this article will not tell you a percentage, and you should be suspicious of any article that does. The right size depends on your total net worth, your income, your tax position, your age, your other holdings, your liquidity needs and your temperament in a bad quarter. Matador Lending is not a registered investment adviser, and a percentage recommended by someone who does not know those facts about you is marketing, not advice.

What is worth saying is how the question is usually approached by people who do this professionally. They start from the liquidity side, not the return side. They establish what cash and near-cash they need to hold through a two-year period with no distributions at all. They size the illiquid sleeve from what remains, not from what the projected income would be nice to have. And they split the illiquid sleeve across managers and vintages rather than buying one fund in one year.

If you want a number, get it from a fiduciary you pay, who is obliged to consider your whole picture and who does not earn a fee on the allocation itself.

## What 8% looks like as income

| **Illustrative income at various rates on $1,000,000** | **Annual** | **Quarterly** | **Monthly equivalent** |
| --- | --- | --- | --- |
| 4% | $40,000 | $10,000 | $3,333 |
| 6% | $60,000 | $15,000 | $5,000 |
| 8% | $80,000 | $20,000 | $6,667 |
| 10% | $100,000 | $25,000 | $8,333 |

Illustrative only. Before tax, before fees, and assuming the rate is actually paid.

Eight percent on $1,000,000 is $80,000 a year and $20,000 a quarter. That is the entire glamour of the thing.

Now the parts that get left out of the brochure. That $80,000 is ordinary income in most private debt structures, taxed at your marginal rate rather than at long-term capital gains rates, which is why this asset class behaves so differently inside a retirement account. The $80,000 does not grow. A bond-like income stream has no inflation adjustment unless the underlying rate resets, and in a fund lending at fixed rates the coupon you receive in year five reflects the rates struck in year four, not today's. If inflation runs at 3%, your $80,000 buys roughly $69,000 of year-one goods by year five.

And there is no appreciation. A lender's best possible outcome is being paid back in full with interest. You do not participate in the borrower's profit, the property's appreciation, or the market's recovery. You gave up the upside deliberately in exchange for being first in line. That is the trade, and it is worth understanding as a trade rather than as a compromise.

## How to stress test any 8% offer

Five questions. Ask them in this order and write the answers down.

**1. Where does the cash to pay me come from, specifically?** Not "the portfolio." Which borrowers, paying what rate, on what schedule, secured by what. If the answer is a structure rather than a cash flow, keep asking until you reach a cash flow.

**2. What has to go right for this to pay 8%, and what happens if it does not?** This is the most important question in the list. Every 8% target embeds assumptions: a default rate, a recovery rate, a deployment level, a cost of funds. Ask for the assumptions and ask what the return looks like when each one is worse. A manager who has run that exercise will answer in a minute. A manager who has not will change the subject.

**3. Who gets paid before me?** A facility lender, a servicer, a fee, a senior tranche, a guarantor. Rank the waterfall from first dollar to last. You want to know exactly how many claims sit above yours and how large they are.

**4. What is the worst historical outcome, and did the manager live through one?** Ask for the losses, not the wins. Ask what the manager did in the worst loan they ever wrote, and who was harmed. A lender who has never taken a property back has either been lucky or has not been lending long enough for the question to have an answer.

**5. How and when do I get out, including in a bad market?** Lock-up, notice period, redemption caps, gates, and who decides. Then ask what happened to redemptions the last time the market was stressed. If the answer involves discretion, the discretion is a risk you are accepting, and it should be priced into what you think the yield is worth.

An offer that survives all five with specific, unflattering, documented answers is worth serious work. An offer that survives by producing a better-looking number is not.

## Frequently asked questions

**Q: What investment gives an 8% return?**<br />A: Several asset classes target 8% or more: high-yield corporate credit, private real estate debt, leveraged equity real estate, and concentrated dividend strategies. None of them pay 8% for free. Each one charges you in credit risk, in illiquidity, or in both at once. The right question is not which investment pays 8%, but which form of risk you are being paid to carry and whether the payment is adequate.

**Q: Is an 8% return realistic?**<br />A: Yes, as a target over a full cycle, in asset classes that carry real credit or liquidity risk. It is not realistic as a guaranteed figure, and it is not realistic in any instrument that also promises daily access and principal safety. Treat 8% as a number that can be targeted and sometimes missed, not as a number that arrives on schedule regardless of conditions.

**Q: How much income does $1 million generate?**<br />A: At 8% a year, $1 million produces $80,000 before tax and fees, or $20,000 a quarter. At 5% it produces $50,000. At 4% it produces $40,000. Those figures are arithmetic, not forecasts. What matters is the probability that the rate holds, what happens to the $1 million if it does not, and how quickly you could get the principal back if you needed it.

**Q: Is there a safe 8% investment?**<br />A: No. There is no 8% yield available with the credit quality and liquidity of a short-term government bond. If an offer pays several points above the risk-free rate, something is producing that spread: borrower default risk, collateral risk, leverage, a lock-up, or a manager taking risk you cannot see. Anyone describing an 8% product as safe is either mistaken or selling.

Matador Note Fund 1 LLC is a Regulation D, Rule 506(c) offering of interests in a Texas fund making first-lien loans on Texas real property, with an 8% non-cumulative preferred return paid quarterly and a target total return of 8–12% annually. If you want to run the five questions above against an actual set of documents, request the investor package and read the Private Placement Memorandum, including the risk factors, in full.

**Important disclosures.** This article is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any security. Any offer is made only through the Private Placement Memorandum, Operating Agreement and Subscription Agreement of Matador Note Fund 1 LLC, which govern in all cases and should be read in full, including the risk factors. Interests are offered only to accredited investors as defined in Rule 501 of Regulation D, pursuant to Rule 506(c); accredited status must be independently verified. Real estate debt investments involve significant risk, including possible loss of principal. The 8% preferred return is non-cumulative and is payable only from available distributable cash at the manager's discretion; it is not guaranteed. The 8–12% figure is a target objective, not a promise or projection of results. Targeted returns are not guarantees of future performance, and past performance is not indicative of future results. Figures describing prior lending are the manager's own lending record and are not audited fund performance. Nothing here is legal, tax or investment advice. Matador Lending LLC is not a registered investment adviser.

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