One of my coaching students recently asked me how to raise money for real estate deals, as she was having no luck raising money through hard money lenders. In fact, she had just paid a “guru” $25,000 to take a course and the entire course was on how to raise money.

Once she and many of the other students in the Guru’s class start talking, they discover that no one was having any luck raising money with hardcore lenders. They quickly learn that most of the lenders are out of business. The few that remain have such high credit requirements that deals are meaningless when you have to put up 50% of the income, sign in person, put up cash reserves and pay interest above 25%.

I was very confused and upset that I was paying this amount of money for information that was outdated and useless in today’s world.

I quickly explained that the answer to how to raise money for real estate deals today is to use “private money”, not hard money. The difference is that with private loans you are dealing directly with a private person who may want to invest in your business. You are not dealing with banks or hard money lenders who have no money in today’s post financial crisis.

Private loans are a constant source of money to buy discount real estate deals that you can return to again and again. The more you use private lenders, the more money will become available as you develop that relationship.

It is important for real estate investors to understand that over the next several years they will need to use and develop a private loan program, as other sources of money will dry up and become very difficult to come by.