If you are a real estate investor wondering how to raise and leverage private money to make more profit on every deal then you’re in the right place. On Raising Private Money we’ll speak with new and seasoned investors to dissect their deals and extract the best tips and strategies to help you get the money!
Jay Conner joins William Morales on Peer To Peer Real Estate podcast to talk about his favorite topic: Raising Private Money.
Listen to Jay’s story as he shares his first-ever real estate deal way back in 2003, selling the property by using creative financing without him even knowing what that is.
“Growth Comes From Challenges” – Jay Conner
Learn from Jay about how he overcome his greatest challenge when the bank closed his line of credit in 2009 which lead him to discover Private Money to fund his deals.
“It Is Impossible For You To Fail Until You Choose To Quit” – Jay Conner
Timestamps:
0:01 – Raising Private Money
0:53 – Who is Jay Conner, The Private Money Authority?
6:13 – Jay Conner’s First Real Estate Deal
12:45 – Jay Conner’s Creative Financing Deals
13:47 – Discovering Private Money
20:55 – What Is Private Money?
25:31 – Creative Financing & Private Money
32:46 – Why Private Lenders Will Invest Their Money To A New Real Estate Investor.
34:33 – Where Do You Find Private Lenders?
37:26 – Interest Only Payments For Your Private Lenders
42:34 – Where To Find Private Money: The Warm Market
44:42 – Where To Find Private Money: Expanded Warm Market
45:08 – Where To Find Private Money: Existing Private Lenders
48:51 – Jay Conner’s Private Money Academy: https://www.JayConner.com/Trial
– 30 days free trial
50:26 – What Keeps Jay Conner Motivated?
53:02 – Jay’s Free Private Money Guide: https://www.JayConner.com/MoneyGuide
Private Money Academy Conference:
Free Report:
https://www.jayconner.com/MoneyReport
Join the Private Money Academy:
https://www.JayConner.com/trial/
Have you read Jay’s new book: Where to Get The Money Now?
It is available FREE (all you pay is the shipping and handling) at
https://www.JayConner.com/Book
What is Private Money? Real Estate Investing with Jay Conner
https://www.JayConner.com/MoneyPodcast
Jay Conner is a proven real estate investment leader. He maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal without using his own money or credit.
What is Real Estate Investing? Live Private Money Academy Conference
YouTube Channel
https://www.youtube.com/c/RealEstateInvestingWithJayConner
Apple Podcasts:
Facebook:
https://www.facebook.com/jay.conner.marketing
Raising Private Money – Jay Guests on Peer-To-Peer – Real Estate Investing Minus the Bank
William Morales
00:00:18
Hello, everyone. Welcome to Peter peer real estate. Show me host with I Morales and on today’s show, I have Jay Connor. He is known as the private money authority. Jay, how are you? Thank you so much for being on peer top real estate show.
Jay Conner
00:00:29
Ha oh, my lands Will. I’m doing fantastic. I’m so excited that you invited me to come on here with you and talk about my favorite subject, which is private money and private lending.
William Morales
00:00:42
Well, it’s becoming, my favorite subject too, especially when, we did have a little chat before the recording. So Jay, tell us a little bit about yourself. Did you know that you wanted to be an entrepreneur early on? Did you know that you were gonna be the Warren buffet of private lending?
Jay Conner
00:00:57
My lands? No. When, when I graduated from college way back when I went to work for a restaurant chain for a couple of years, and that just about killed me. And then I went to work for a corporation for a number of years in the mobile home business, but I knew if I ever got outta the mobile home manufactured housing business, I wanted to be an entrepreneur and started investing in real estate, and single-family houses. I’ve done commercial shopping centers as well, but primarily single-family. So it wasn’t until I was, let’s see here now I’m on a date myself, but it wasn’t until I was about 40 years old that I said, you know what? I’m 40 years old. I want to make my own rules. I want freedom. I want the work when I want to work. I wanna do what I wanna do when I want to do it with whom I want to do it for as long as I want to do it. So I was about 40 years old when I really started focusing on the path. So I was a late BL late bloomer, but focusing on the path of being my own person, my own entrepreneur. And so that’s when I started focusing on it. And so, yeah, it’s been fantastic. I mean, right now, you know, we’ve been full-time in real estate investing since 2003. So we’ve been doing it for quite a while.
William Morales
00:02:23
Were you nervous about going out on your own? Did you, you know, you had the nine to five before, you know, you’re getting that steady paycheck, as they say, were you nervous going out, out on your own? Did you know? I would
Jay Conner
00:02:37
Say, I would say the better adjective would not be nervous. The better adjective would be
William Morales
00:02:43
Excited. Ah, okay.
Jay Conner
00:02:47
You know, just, I mean, it was like the world was opening up and I had, I, I mean, it’s like, now I can do whatever I wanna do. Right. And so I wouldn’t say I was nervous. I’ve got a very, very strong faith in God and trust and I believe I’m gonna be provided for, because of my faith and trust. I’m a hard worker, so I didn’t know how it was gonna turn out. We never know how things are gonna turn out until we actually lived through them. Right. But I put my plan together. So, you know, nervousness comes about when someone doesn’t feel prepared. Right? I think so I was more ex I was more excited about the opportunity and opportunities than anything else.
William Morales
00:03:32
No. Sounds good. Did you get the support that you needed was the support there for you once you, you knew you were gonna be on your own, you’re gonna be, you know, you’re excited about this new challenge of being an entrepreneur, getting into the real estate business. How was the support or,
Jay Conner
00:03:46
Ah, I’ve never, I’ve never been asked that question and I’ve been on hundreds and hundreds and hundreds of podcasts. That’s a great question. So I had the support, this is a writer, downer. I had the support I needed because I sought after the support like nobody came knocking on my door saying, Hey, Jay, let me support you in your new venture. Right? It’s like friends, nobody’s gonna come knocking on your door saying, Hey, well I want to be your friend. So I got all the support that I needed, but I sought the support I sought after people that had already blazed the trail, they had already been in real estate investing. So I sought after fantastic mentors and coaches to work with so that I didn’t have to like make stupid big mistakes by being able to work with other people. So yeah, I had all the support I needed, but I went and looked for the support.
William Morales
00:04:51
I remember one time I, I saw, I think it was Jim Rome. I’m a big fan of Tony Robbins studying under him. And Jim RO said, I think, and I’m paraphrasing here, but it’s like in the Bible, if, if you seek, you shall find
Jay Conner
00:05:07
Absolutely.
William Morales
00:05:08
You know, you, you know, you search, you find, you ask, you know, you’ll get the answers. And I’m just like UJA. I really believe in that, you know, I’m, I’m, I’m a big believer in the power of karma and just treat, treating people the way you wanna be treated. So I love that story that you sought for the, for, for your mentors, your guidance, you know, you, weren’t afraid to be out there and say, you know, for lack of a better make a fool of yourself because you didn’t care, you, you knew what your path was. And I loved that, that you knew it. So let’s talk about private lending, right? So you got into real estate in, was it 2003?
Jay Conner
00:05:47
Correct.
William Morales
00:05:49
So how was it, can you talk about your first deal? How did that go for you, those of you that if you see this, Jay is smiling? So I dunno if this is a good thing or a bad thing. Well,
Jay Conner
00:06:02
That first deal, that first deal has got more than one lesson out of that first deal. So I’ll give you the short version. So my very first deal, all I had done at that point in time. Now, this was 2003, February 2003. And all I had done at that point in time was I had a lot of experience in the manufactured housing and mobile home business, helping people own a home. Right. I’d done that for years, but I never invested in single-family houses and all, and I had never rehabbed and renovated houses. So the very first deal I’d all I’d done is read books. So I’d read a few books about being a real estate investor. So at least I got a little bit of education before starting, right? So I, I read in one of the books to look in the, now this is going to date me. Well, this is gonna lead me. Okay. So it said, look in the homes magazine now.
William Morales
00:07:00
Oh, I remember those. Yes. I remember
Jay Conner
00:07:04
That. Yeah. For your list of your listener, that does not know what a homes magazine is. Back in 2003 years ago, the local board of realtors or, and Realty companies, would publish monthly magazines in your local area with colored pictures of all the listings of the houses. Yes. And little writeups about ’em. And they were in coloring the list price and all that kind of stuff. So I went and got, so this is prior to the internet days. So I went and got a copy of the local magazine, the local realtor magazine. And I looked through and that book told me to look and find the ugliest nastiest smelling house I could find. And I found it, I found it. Okay. So I’m right here in a small market. Moorhead City, North Carolina, our total target, the market’s only 40,000 people. But today we do two to three deals a month averaging $71,000 a deal per month.
Jay Conner
00:08:05
Right? So those numbers work out anyway. So I find this house on Mayberry loop road here in Morehead City. It had been on the, it had been on the market for nine months. It had had over 60 showings. It was a bank-owned property and no offers. I said, sounds like my house. That’s why real. That’s what my realtor was telling me. Right. So I went and looked at it. I’m so excited. Now it was a piece of junk. Let me tell you, but, but it was all cosmetic. It was all cosmetic. So anyway, I put that house under contract for $50,000. Now, bear in mind. How did I fund it back in 2003, if you could like, you know, fog a mirror by blowing on it, they’d give you a line of credit unsecured? So I had a $250,000 line of credit, unsecured burning a hole in my pocket.
Jay Conner
00:08:58
And so I went this house, I put it under contract for 50,000. The renovation was gonna be about 50,000. So I’d have a hundred thousand in it. And the after repaired value at the time was $140,000. So not a huge big deal, but first deal, you know, I’m all excited about it. Well, Hey, look, I knew my wife, Carol joy was gonna be all excited about this first deal. She hadn’t seen it. So I took her to the house. She wouldn’t even get out of the drive. She wouldn’t even get out of the car.
Jay Conner
00:09:29
I said, why don’t you go look at this house? She says, you see that neighbor. You see that neighbor. I’m not getting outta the car. I said, well, to be sure, my dad will be all excited. So I went and get my dad. We went to lunch. I put him in the car. I took him to the house. He got out of the car, walked up to the driveway, steps inside. You have to like crawl over trash, everywhere. He looked at me. He says, Jay, have you lost your mind? I said, oh, no, no, I’m getting ready to find out. So anyway, I renovated that property. Well, what are you supposed to do when you go to sell a house, put it listed with a realtor, right? Sure. So I listed it with a realtor in Jan. So it went, it was on the market for 45 days with zero showing.
Jay Conner
01:10:12
And it was beautiful. It was beautiful. I had a and look brand new. It was all staged and everything. And so I read in one of the books that if you put an ad in the paper, advertising owner financing, your phone will ring off the hook. And it did. I put the ad in the paper, my phone rings off the hook. I talked to this guy named Earl. Earl says I wanna go look at this house. I said, well, Earl, it’s sort of hard to find. Well, it really, wasn’t hard to find if you come down this side of Mayberry loop, you’re looking good. You come down that side of Mayberry. Look not looking so good. As far as the neighborhood, right? I said, Earl, you meet me at the sea code gas station and you can follow me into the house. Earl followed me into the house. I took him in. He looked around, he absolutely fell in love with it. He looked at me, and he says, Jay, I’ll give you an $18,000 lease option deposit right now. I didn’t know what a lease option deposit was.
William Morales
01:11:09
Right, right.
Jay Conner
01:11:11
But the buyer did. And my daddy told me when somebody offers you money, take the money and you’ll figure it out. I said, Earl, you write me that check for the $18,000 option deposit. We’ll figure this out. Well, long story short, I was a mortgage broker at the time. And I was able to get Earl financed. I got him a mortgage. He had a mid-score of 585. I cashed him out and profited $40,000 on my first deal. And I really didn’t know what I was doing.
William Morales
01:11:40
Wow. That’s a great, great story, Jay. I love that. I love the fact that you got your first deal pre or you sold your first deal on creative financing and you, and basically you were like, okay, we’ll figure it out from there. See, and that’s the thing I noticed, Jay. I mean, talking to you right now is that you took action, and then you figured things out later. I think a lot of us, I know I’ve done it where we do this, analysis paralysis and we just keep on going and going and then no deals happen because we’re just analyzing the crap out of everything. So let’s talk about that. Right? So you sold your first deal on creative finances. I wanna financial lease options. And did you do more of those deals moving forward? And yeah.
Jay Conner
01:12:26
So
William Morales
01:12:27
Talk about some of those, and then your transition into private money. What made you switch to private money? And then we’ll ask you what is private money. I know that’s a lot to take, but let’s talk about your creative deals first.
Jay Conner
01:12:39
Sure. So I actually will, didn’t start doing creative deals until 2009. Okay. I didn’t know anything about creative deals. I mean, I mean that that, that lease option deposit that Earl offered me. Thank goodness. I, I was able to get a mortgage for him and apply that $18,000 to his closing cost and purchase price. Cause I didn’t know what the rent owner lease option was until 2009. So learning about creative financing and learning about private money really all came about at the same time. And here’s how, and here’s why
William Morales
01:13:19
You were doing I’m sorry. So you were doing more conventional.
Jay Conner
01:13:23
Oh yeah. I was, I was relying on the local bank. Right,
William Morales
01:13:26
Right.
Jay Conner
01:13:26
I was relying on, my first six years from 2003 to two nine, I relied on the local bank to fund my deals and I just put ’em in the multiple listing service and cashed them out. That’s all I knew to do right. The first six years, the first six years.
William Morales
01:13:43
So then you, you transition into more of the creative side six years later. So did you take the first lesson of that 2003 lease option deposit, and then you realize, Hey, there are more deals to be done this way than the conventional way? Cuz like you, in, in your bio folks, he, Jay talks about just being at the, at the mercy of the bank. You know, you’re talking about, you gotta put maybe 20% down or if you put less than now, now you gotta play, pay what private mortgage insurance. So, you know, that adds to you a course. That’s how I look at it. So talk about the transition. Again, this is an amazing story.
Jay Conner
01:14:22
Sure. So here’s how it played out. So I just didn’t wake up one morning and say, I think I’m gonna go, I think I’m gonna go raise some private money. So here’s what happened. In fact, this difficulty, this challenge, this pain was the biggest blessing in disguise in my business because you know, quantum leaps growth really comes from challenges and being able to press forward and find a better way to do your business. So I remember it well, like it was yesterday in January two nine, again from 2003 until the beginning of 2009, I relied on local banks to fund my deals. Right. So I remembered in January of 2009, I called up my banker and it was actually from this very landline phone. You know, we actually still have landlines in North Carolina,
William Morales
01:15:20
No North Carolina, we do here in New York. I mean, yeah. Cause you know, and the funny thing is Jay, we’ll get back to the story in a second. When you get a cable package, they still include the phone and I’m like, why would I need a phone? Oh, you could use it for business. Nah, that’s okay. I’ll stay on my cell. If I could always get a Google number or if I have to get a, a, a different of a, a second phone for my business, I’ll do that. Then have a laptop to go ahead, Jay. Sorry. That’s good. And Jay and folks, Jay showed me his landline. So this is incredible right there.
Jay Conner
01:15:59
So anyway, so I, so I called up, I called up my banker, right? And I had had this conversation will many times for six years, right? With my banker, I had two houses under contract to buy. I told him about the deals. They represented over $100,000 in profit that I was gonna make on those deals. And my banker went quiet on the other end of the phone, which is never a good sign. When your banker goes quiet and won’t talk to you. Right. And anyway, he finally cleared his throat. He says, Jay, I’m sorry to tell you, but the bank has closed your line of credit and you have no funding available for your deals. Oh. And it’s like I said, Steve, what are you talking about? What do you mean? I don’t have any funding. I said I’ve, I’ve made payments perfectly for six years.
Jay Conner
01:16:49
I got an 800 credit score. Why are you closing my line of credit? And he said, and bear in mind, I only had a million dollars. I only had a million dollars. Right. That, that I was, you know, rotating. Sure. And I said, what happened? He says, well, the bank’s just not loaning money out of real estate investors anymore these days. Well, you see, first of all, I wish I had known that prior to putting two houses a thousand contract. Right. And will 2009 in North Carolina in 2009, when you put Ernest’s money down, you couldn’t get it back in 2009, the laws have changed since then. Sure. But I mean like I’m stuck, right? My second thought was, so I hung up the phone. I hung up the phone with, I say for a second. And I tell you, what will I had a new mantra come to my mind that I have repeated in myself ever since.
Jay Conner
01:17:43
And my new mantra that morning when I hung up for my banker, that mantra became, it is impossible for you to fail until you choose to quit. It’s impossible to fail until you choose to quit. And, and, and quitting was not an option for me. So I sat here for a second and I said, you know what Jesus said, ask, and you shall receive, right? So who do I need to ask for help in this situation? So I thought of my friend, Jeff, who lived in Greensboro, North Carolina at the time he was real estate investing. We were good friends. We went to church together at different events. So I picked up the phone. I called Jeff. I told Jeff what had just happened to me at the bank. Jeff says, well, welcome to the club, Jay. Did I say, what club? He said, the club of losing your line of credit.
Jay Conner
01:18:38
My bank cut me off last week. I said, well, how are you going to fund your deals? He told me the phrase I’d never heard before private money. And I said, once private money, I never heard of private money. Right? And so I learned about private money and what it is. And within less than 90 days, what a blessing, and less than 90 days, I had 2 million, $150,000 in private money available. Two me from private lenders for me to make offers and buy houses. And by the way, those two houses I had on the contract, I closed on those two houses with private money, did not miss out on them. And since that time will, I’ve never missed out on a deal for not having the funding. So, you know, if it hadn’t been for that difficulty. So today my wife, Carol Joe, and we’ve got 44 private lenders, you don’t need 44 private lenders to start with one or two, right?
Jay Conner
01:19:40
44 private lenders funding, our deals, we got about eight and a half million dollars in private money that we move from project to project to project. I got about seven houses going right now, simultaneously. Right. You know, all funny with private money, I get my rehab money upfront. I get a checkup front. I never take money to the closing table. And it’s just been the biggest blessing. If it had not been for me getting cut off from the bank and choosing not to quit, you and I today would not be having this conversation.
William Morales
02:20:10
No, no, I definitely agree. I love the, again, I love the fact that you sought again, you, you, you sought out for help and you found your friend and he told you, Hey, you know, private money. So, so for those who might not know what private money is, can you explain it quickly? What, what are the, what the gist of private money?
Jay Conner
02:20:29
Sure. So private money, first of all, is not, is not hard money, right? Private money is not equal hard money. Hard money is typically a broker of money. They’ve raised up. They have a fund. They loan money out that hard money out to real estate investors. And the hard money lender or brokerage has raised private money for their fund. So who’s a private lender? A private lender is a human being. A private lender is an individual just like you, just like me. That loans us real estate investors money from either their investment capital, just their liquid funds, investment capital, or money from their retirement accounts. So learning about establishing a relationship with a self-directed IRA company that has account holders that have retirement funds in their self-directed IRA is huge because first of all, when you run across somebody in your network that has retirement funds, and they’re not happy with their rate of returns, you wanna be able to introduce ’em to the relationship that you have with a self-directed IRA company where they can transfer their funds’ penalty, free tax-free, and then they can invest their funds with you, the real estate investor.
Jay Conner
02:21:57
And they can earn unlimited returns per year penalty free, at least tax deferred. And depending on the type of retirement account, they earn tax-free. I got one private lender that has earned $65,000 a year from me, our company tax-free because of the type of retirement account. So it’s really important to have that in place. So a private lender, again, is an individual loaning us real estate investors, investment capital, and or their retirement funds for our real estate deals.
William Morales
02:22:33
Now you could, with these individuals, you could set an interest rate or no interest rate. It’s all negotiable, right? Instead of where, you know, you go hard money. It’s a hard 15% and four points down. And I want the money back in, in two, in two weeks, I know, six months, but you know what I mean? I’m just kidding. But
Jay Conner
02:22:52
So it’s a world of difference. It’s a world of difference. So with a hard money lender, if you’re borrowing money for a hard money lender, the hard money lender makes the rules. The hard money lender sets the interest rate, the hard money lender sets the length of a note, six months, nine months, they set, you know, 14%, 12%, 50%, the hard money lenders gonna charge origination fees or points, right? 4%, whatever. So, you know, on average, if you, if you’re with a hard money lender for a year, you’re gonna be all over 20% for a year. Well, in this world of private money, doing business with individuals, they don’t set the program. They don’t make the rules. You make the rules, right? You set the interest rate that you offer. In my case, I pay 8% and it’s interest only we can structure deals to where I don’t pay any interest and no payments until we cash out.
Jay Conner
02:23:50
Do you think that’ll help your cash flow? I always borrow more than I need to buy or purchase. And more than I need to renovate. If renovation, I always bring them a big check when I buy, who wants to get paid to buy properties and never bring any of my own money to the closing table? There are no origination fees. And it just really puts you in control of your business and puts you in control of your cash flow. You know, private money is the biggest and fastest way for even a new real estate investor to get a great big check in their checking account to fix their cash flow problems. So private money hands down. I put my stake on the
William Morales
02:24:32
Right
Jay Conner
02:24:32
Here, private money can and will make the biggest impact on anything in your real estate investing business.
William Morales
02:24:42
Yeah, no, I, I could definitely, I mean, I, I definitely know more about that, cuz I know I have some friends that do rely on private money. I haven’t used one yet. So, you know, it’s funny cuz when I downloaded your book, I started looking at it. I’m like, oh yeah, this is a good read. Do you know? So you had said something before we recorded, which I mean really hit home. If you could repeat that, Jay, when we talked about where 87% of sellers prefer this type of method. So if you could talk more about that versus 13%. And so this way my audience could really, you know, hear how much the difference of doing private money versus conventional or yeah, or I should I say creative?
Jay Conner
02:25:29
Sure. So I learned about private money and that year in 2009, I actually went to my very first real estate investing seminar.
William Morales
02:25:38
Right.
Jay Conner
02:25:39
Been in, been in the business for six years, and have never been to a seminar. So I went to a real estate investing training. And at that training, I learned about creative financing, and how to buy homes when we’re not in creative financing. You ain’t buying ’em outta the multiple listing service. You’re buying ’em directly from the owner for sale by owners FSBOs. So I learned about seller financing. In other words, how a seller and owner of a property would be willing to sell their house or their property, by the way, private money works for commercial deals and apartments as well. We just structure, it’s all the same money. OK. We just structure. We just structure it differently. So creative financing, the seller of a house in, in for the sake of our conversation agrees, and I know you’ve done a ton of this. Well, you’ve done a ton of this agree to say their property and take a note back and let the seller be the bank.
Jay Conner
02:26:34
Instead of going to the bank to borrow money, right? I’ve bought houses with no down payment and zero interest. And the payments go 100% towards the principle that’s creative financing. Another big creative financing is buying what we call subject to the existing note. I know you and your audience know all about that will, right? Yeah. But that’s where the seller has a mortgage. They have a mortgage on their property. They agree to transfer ownership and title to you, your entity. And they agree to leave the mortgage in their name and you agree to make their payments. Yeah. And people ask me, particularly new students who in the world in their right mind would be agreeable to giving me ownership of their property and trust me to make their payments while the mortgage stays in their payments. I mean stays in their name. It’s simple, a motivated seller.
Jay Conner
02:27:23
That’s looking, that’s looking for debt relief and to get out from underneath that property. So then you have options, you know, creative financing, you get an option on a property. You can do a sandwich, lease option in some states where you buy on a lease option, you stay in the deal, you turn around and sell it on terms of the lease option. And you sell it for more than you contracted to buy and you make a cash flow in the middle. Right. That’s a longer conversation, but that’s the gist of it. Right? So that’s all, that’s all the creative financing. So anyway, those are the big pieces. Well, so I’ve done a ton of those deals, but now, well I forgot what your question was. No, no. We were talking about it early before. Oh yeah. I got it. I got it. I’m sorry. So here’s, here’s what, that’s a great story though.
Jay Conner
02:28:12
But here’s what I’ve discovered with trying and buying houses with creative financing and this is gonna lead right into private money. Right? So don’t, don’t miss this. Don’t miss this, my friend. So not you will your listener. Right? So here, so I have reviewed thousands of property lead sheets. What’s the property lead sheet? It’s got all the information of the seller and the property that is for sale by the owner on it, you know, who’s the seller, what’s their asking price, how much they own their mortgage, the condition, all that kind of stuff. And so after reviewing thousands of property lead sheets, I went back and looked at my statistics over years and what I discovered, and by the way, me and my acquisition, I’ve had the same acquisition for 15 years, right? That negotiates with my sellers, my, for sale by owners, we discovered that only 13%, 13% of for sale by owners that we talk to are willing and we’re able to convince, to sell to us their property creatively.
Jay Conner
02:29:23
Like I just talked about, right? Well, what in the world are the other 87% of for sale by owners that require all the cash? And so some people, some real estate investors, some seminar trainers teach that you only need private money for the ugly house business, for the renovation of housing stuff, nothing could be further from the truth. You use private money, here’s a writer, downer. You use private money. When the seller of the property requires all the cash, regardless of the condition, regardless of the condition, I buy houses all the time. When the seller won’t sell to me creatively and it’s a pretty house and it doesn’t need any repairs, I’ll pay all cash with private money. Now I’m gonna need to buy it at some discount because I’m not gonna totally leverage that property at 100%. Right. I’m gonna protect my private lender and have some equity in there. So it’s not fully leveraged. But the bottom line is, if you, you know, I have now, I’ll have new real estate investors. Sometimes say, Jay, I don’t need any private money. I don’t need any private money. Cause I’m just gonna do the pretty house business and just do creative finance. And I go great. If that’s what you want to do, that’s a business decision. So do that. If you wanna miss out on 87% of the deals,
William Morales
03:30:49
I know I have. So because of, as you said, it’s its owners want, you know, it’s and it’s what you said too. They don’t know you. They don’t know that you’re gonna make the payments. You know, I’m in New York and I try to buy a property in Toledo and I’m just throwing this and they don’t know who the hell I am. So if, if you know cash is king. So I love this Jay that you talked about just, Hey, you know, you got the private lenders, 87%, which is a statistic I have to put down. They want the cash. They wanna get out. They don’t wanna wait 2, 3, 4, or 5 years. They wanna go. So,
Jay Conner
03:31:27
And you know, we’ll just real quick on top of that. If you, as a real estate investor, buy anything out of the multiple listing service, such as a bank-owned property. Sure. And they’re coming back this side of COVID such as a bank own property or a short sale or anything in the motor listing service, of course, you gotta have the cash. Right? Right. So, you know, auction.com, I love auction.com. So auction.com are free leads. You can sign up in your area anywhere in the nation, and put in the zip codes that you wanna be notified of any houses that are being put up for auction. But guess what? There ain’t no need to get no leads from auction.com unless you’ve got all the cash,
William Morales
03:32:10
Right? No, exactly. So should we ask family and friends about lending us money? Is that a wise position at the beginning of our career? Do we need some type of, what’s the word I’m looking for some experience? I mean, can a new investor get private money?
Jay Conner
03:32:32
Absolutely. So I get asked all the time and it’s a good question. If someone is brand new, they haven’t done many deals or maybe they haven’t done any deals. Right. It’s very, I mean, it’s a natural question for someone to ask. That’s new Jay, who in the world, what private lender in the world would loan me money on a deal and I’ve never done a deal? Why would they do that? The answer is very simple. First of all, yes, they will do it. And here’s the second reason that they, or here is the reason that they will do it. Here’s a write or downer. If you don’t pay the private lender, the property does what in the world does that mean? What does that mean? If you don’t pay the private lender, the property does. Here’s how that works. If you don’t pay ’em, they’re going to get the property, how they gonna get the property.
Jay Conner
03:33:28
We don’t buy, we don’t borrow any money from private lenders without securing the promissory note. So we collateralize the note with either a mortgage or deed of trust. It’s the same thing. Depends on the state that you’re in. Right? And so that gives the private lender, the legal right to foreclose on you and get the property in case you do not pay them. And that’s why we’re gonna give them an equity cushion and not fully leverage that property. Now, as far as family and friends go, that’s an excellent question, right there will, where are private lenders? I mean, who are they? Where do you find them?
William Morales
03:34:11
Yeah. It’s funny that I was gonna segue into that a little later. Where do, where are the best places to find private lenders, but let’s talk about family and friends first, and then we’ll. So what do you think about that?
Jay Conner
03:34:23
Yeah. Well, family and friends are part of the first category. OK. I’ll find the first category in a minute. Cause you want me to talk about family and friends? Yeah. Some people don’t wanna borrow money from family and friends. They’re scared. They’re scared to death that they’re gonna screw up the deal and the private lender’s gonna lose money. Listen, your private lender cannot lose money if you do two things, right? If you buy right. And if there’s, if there are repairs, if repairs are estimated correctly, I said two things. It’s really three things. Right? And thirdly, you don’t over-leverage the property. Right? So my rule of thumb is I don’t want to borrow more than 75% of the after-repaired value. Okay. I didn’t say 75% of the purchase. I said 75% of the after-repaired value. So my lands, my wife, Carol joy, and I, we got a ton of private lenders that are families and fr family and friends.
Jay Conner
03:35:29
Here’s the deal. When you come along and you’re gonna be paying like in my case, right now I’m paying 8%, right? Well, the local certificate of deposit at a bank is going to pay maybe a quarter of a percent. Today you pay ’em 8%. That’s 32 times more money than they can get in the local bank at in a certificate of deposit. Why would you not take care of your family and friends and give ’em high rates of return safely and securely? Where else are they going to get this kind of return safely and securely look, we got family and friends that have written us handwritten letters? Thank you. Letters, how we have changed their retirement years by being able to give them high rates of return safely and securely because private money, it’s not volatile like the stock market, right? They know exactly what they’re going to get. So you don’t have to borrow money from family and friends. Now I’ll tell you will.
William Morales
03:36:27
Sometimes,
Jay Conner
03:36:28
Sometimes I’ll have a new real estate investors say, Jay, all my family, and all my friends are broke. My people ain’t got no money. What it’s called, first of all, I don’t believe ’em right. Secondly, you don’t have to borrow from family and friends. There are two other big categories where you find private lenders in addition to family and friends.
William Morales
03:36:53
Okay. So we’ll get to that in a minute. So when you pay your private lenders, are you talking about inches-only payments or interest in principle, you do a balloon payment at the end of the term that you guys negotiated. How, how, how, how is that note negotiated? Sure. And the terms. Yeah.
Jay Conner
03:37:10
Well, first of all, first of all, it’s not negotiated. There
William Morales
03:37:13
Is, there no negotiation? I forgot you are in control. That’s true. I forgot about
Jay Conner
03:37:18
That. There is that again. And look quite frankly, they need us more than we need them. Yeah. Look, there’s more money out there on the street than ever before in history. There’s 31 trillion right now, before the white house prints any more money in the basement.
William Morales
03:37:33
There’s
Jay Conner
03:37:34
$31 trillion on the street right now, just in self-directed retirement accounts. Wow. Looking for a home. Right. So there’s so much money. I’m sorry. Will, what was the question I got derailed?
William Morales
03:37:48
No, I was asking if when you pay your oh,
Jay Conner
03:37:53
Interest only. Yeah, yeah, yeah, yeah. So here, so here’s what we do. If the private lender needs payments, monthly payments, quarterly payments, and some do, some are elderly and they’re relying on that income, right? Like to live off of, they don’t want to touch the principal. They don’t want anything to come out of the principal. They wanna live off of the return or help their principal grow. Right? So when we make payments to our private lenders, they are interest-only payments. And here’s why it’s a win for the private lender. And it’s a win for us, the real estate investor and borrower. Here’s why, when you make interest-only payments to the private lender, it’s a win for them because they make more money. If you make principal and interest payments to your private lender, you’re paying down the principal loan amount, which means they don’t have their full principal, still invested with you. And therefore they don’t make as much money on that. You know, on that investment, it’s a win for us. Interest-only payments. It’s a win for us because when you make interest, only payments, interest-only payments help your cash flow. Right? Interest-only payments are smaller than principal and interest payments. So we either make interest-only payments or accrue interest.
William Morales
03:39:21
I see. And, at the end of the term, is there a balloon payment that comes with it, or do you refinance, do you ever refinance with a bank to get the money out to pay your private lender? Or do you borrow another set of money from a private lender to pay the previous private lender? Sorry. If my question went all over the place,
Jay Conner
03:39:40
Right? So the length of the note, since it’s the program that you create, right? The length of the note is either two years or five years.
William Morales
03:39:49
Gotcha. Okay.
Jay Conner
03:39:50
The length of the note is two years. If they’re just using investment capital liquid funds on those liquid funds, I am probably gonna be cashed out well in advance of two years. Right.
William Morales
04:40:02
I gotcha. Yeah.
Jay Conner
04:40:03
Five years, if they’re using retirement funds from a self-directed IRA account that they have, I just do a longer term because the returns, the interest payments that we’re paying back to them do not go to them. Those interest payments go directly to their retirement account. So they’re not looking for those payments that we pay them to live off of. Right. See what’s going on in their retirement account. So when we, so we reserve the right to cash out a note early with no penalty to our private lender when we have a cash-out buyer, right? So if it’s a smaller amount of money, like 30 or $40,000 that we’ve just used for rehab, that we’ve just used to renovate a property, we will do a lot of substitutions of collateral. What in the world is that it’s also called a loan modification, by the way, the private vendors never want their money back.
William Morales
04:41:00
I heard that story. I heard that story too. Yeah.
Jay Conner
04:41:02
It’s like, it’s like they say, can’t you just keep the money. Can’t you just keep the money? Cause they know when they get the money back, they’re not earning any money on their money while the money is sitting in their checking account. So on these smaller amounts of money, you know, you can put private money in a junior or second position. So we’ll put private money just for the renovation piece, in a junior position underneath the primary private lender. I gotcha. So to keep that money and keep that note open, we’ll sell the property and then we, we will keep the money and we will, I mean, keep the note open, keep the money. And we will just substitute the collateral. We will now re-collateralize that note with another property and keep their note open to where they don’t have to get their money back. And don’t worry. You don’t know how you don’t know. You do not have to know how to do that because your real estate attorney handles all that for you.
William Morales
04:41:58
Okay? No, that’s good. We’re talking with Jay Connor, the private money authority. So what are, where are some places to find private lenders? What are good places? If you can name maybe 2, 3, 4, whatever you think is that three,
Jay Conner
04:42:12
Three primaries. Okay. So where in the world are these people? Where are they? Where are they? So the first category is what we call your warm market. OK. So family and friends is part of your warm market. Well, that’s not all of your warm markets. Who’s in your market? Everybody in your cell phone is a potential private lender. You’ve got some kinda contact with them. Everybody on your email list is a potential private lender. Everybody in your social connections, Facebook, and I don’t mean your fake Facebook friends. I mean for you, actually your Facebook friends, Instagram, LinkedIn, Snapchat, whatever it is,
William Morales
04:42:59
Any social media, there you go. What are your friends, not the fake friends? I love that.
Jay Conner
04:43:04
Yeah, exactly. So those are your connections, you know, who do you go to church with? What groups are you a member of? Who do you play poker with on Tuesday nights? Right? All those connections, right? Who do you have a day job? Who are your coworkers? Who are your peers? Who’s your boss, who are your subordinates, who are your high school friends? You know, any, any connection you have all that is your warm market, right? And by the way, I’m gonna give away for free my brand new money guide here in a little bit. That will take you through step by step, how to talk to these people and exactly what to say. So they’re chasing you and you’re not chasing them because look, I’ve never asked anybody for money. Since 2009, people say, Jay, how you got in a million dollars in private money. You never ask anybody for money.
Jay Conner
04:43:58
It’s simple. I put on my teacher hat, and I teach ’em about private money, private lending, and self-directed IRAs. Now they’re chasing me cause they can’t get this anywhere else. Anyway. Number one, category one market. Number two category is what I call you’re expanded warm market. Well, what in the world is your expanded market? Get involved in your community. Join the rotary club, and get involved, in the chamber of commerce. Get involved in your civic groups, get involved in your local church, whatever, and expand your warm markets. So you have more connections to use the five steps of getting private money from those individuals. The third category of private lenders is what we call existing private lenders. These are individuals that are already loaning money out to real estate investors. Well, how in the world do you find them three places that you find existing, private lenders?
Jay Conner
04:44:56
Number one, you can find ’em the way I started out. I don’t recommend it cause it’s sort of labor intensive. Right? I hired my real estate attorney's paralegal to search public records, looking for individuals, not companies, not LLCs, not corporations, but individuals that were loaning money out and are secured by date of trust or mortgage. Well, those individuals are private lenders. If you’ve got an individual name, loaning money out secured by real estate on public records, that’s a private lender. Right? Well, in 90 days I found two people. I said, pooey on that has gotta be.
William Morales
04:45:33
Yeah. That’s a long way. Yeah. Right? Yeah.
Jay Conner
04:45:36
So the second way is, and here’s a big secret, big secret. I’m gonna pull, I’m gonna pull the curtain back right now network. So, and here’s what I mean. It’s easy. So self-directed IRA companies. Self-directed IRA companies have networking events. They’re on zoom today. Now, this side of COVID they’ve opened back up in person. Well, did you know that over 70% of account holders at self-directed IRA companies are wanting to loan their money out to you? The real estate ambassador.
William Morales
04:46:14
Wow. Okay.
Jay Conner
04:46:15
That’s what they wanna do right? Over 70%. So when you go to a networking event, by the way, Will, do you recommend a particular self-directed IRA company?
William Morales
04:46:27
I mean, there are a few that I’ve heard. I
Jay Conner
04:46:29
Mean, do you recommend one that’s nationwide?
William Morales
04:46:32
Oh yeah. I, yeah, of course.
Jay Conner
04:46:33
Okay. But anyway, yeah. I’ll leave that up to you to whoever, whoever you
William Morales
04:46:37
No, I would say probably Andrus is one. I’m trying to remember what, what was the other? It was like, yeah. I,
Jay Conner
04:46:43
I use, QuestTrust.com. They’re outta
William Morales
04:46:46
Quest. That’s another one that through my local R they talked about them. Yeah.
Jay Conner
04:46:50
Let me tell you, they are amazing and listen, quest trust. And I don’t wanna make this show and podcast non-evergreen, but I will tell you coming up within the next few weeks, quest trust.com that’s twos back to got a networking event. It’s either two or three days. They’re expecting 1000 attendees. And can you imagine being in an event that’s got 700 people, 70% of a thousand that has money wanting to loan to you, the real estate investor? Do you think that might be a good event to network with?
William Morales
04:47:31
I definitely think so.
Jay Conner
04:47:34
So that’s a place to find existing private lenders in addition to public records. And then the third way is just to use my private lender data feed. I’ve got a software service. We get every private lender loan from the public record every month. And we got the private lender’s contact information, how much they’re loaning out the interest rate that they got on the deals. So my inner circle uses the private lender data feed. That just makes everything simple. So again, that’s all coming from public record. So how do you find them? Self-directed IRA companies and public records.
William Morales
04:48:11
That’s amazing. First of all, Jay, I wanna thank you so much for being on peer top real estate show. I mean, my guide, I could talk to you for probably another two hours. So, and before I’d like to go just a couple more things. Talk about your private money academy. I know you have, I think a course or, or, you know, talk more about that.
Jay Conner
04:48:29
Sure. So I have a membership, a membership site and a membership with me live on zoom twice a month. And I’ve got all kinds of real estate training out on the membership site. But the most exciting thing is I that my entire team, I go live on zoom twice a month, on the second and fourth Wednesdays of every month. And I talk private money just like I’m doing with you right here.
William Morales
04:48:56
Right.
Jay Conner
04:48:57
Right. And I answer any questions that my membership has. We’ve got almost 400 active members right now, all across the nation. We dissect deals on those zoom calls. So yeah, it’s a whopping 37 bucks a month. But for your audience, I’ve got the first 30 days absolutely free. They can check it out, come on, join me on zoom. See how they like it. And if they don’t wanna stay in that’s no problem just cancel out. But that 30-day trial in the private money academy membership, your audience can take advantage of that at www.JayConner.com/Trial And that’ll give ’em 30 days free in there. Come hang out with me on zoom and see how you like it.
William Morales
04:49:49
Yeah, no, I’ll definitely put that on the show notes. And before I let you go, just again, a couple of more questions, and thank you for that. What keeps you motivated? I mean, I already could tell, you know, but what is it that when you wake up in the morning and you know, you, you know, you, you gonna hustle and bustle, what’s that motivation for
Jay Conner
05:50:07
Sure. Well, let me answer it with a short story. So I was riding down the road, actually, this was some time back with a really good friend of mine. His name is Neil. We go to church together. We’ve known each other for 25 years. We’re riding down the road and all of a sudden out of the blue wheel, I mean, just out of the blue, Neil says, Jay, when is enough?
William Morales
05:50:31
Mm.
Jay Conner
05:50:32
I said, Neil, what do you mean? What is enough? He says, well, Jay, you know, you’re doing all these real estate deals. You don’t need the money. You’re, you know, you’re training and teaching and coaching other real estate investors, how to get all the private money they’d ever want. You don’t have to do that. Wh when is enough enough? Why are you doing all that? And I said, Neil, now I understand your question. And he went on to say, he said, Jay, how do you reconcile the scripture in the Bible from the apostle Paul that says to be content, no matter what state you’re in, how do you reconcile that scripture? Wow. With everything you’re doing. I said, Neil, that’s a fantastic question. And here’s the answer enough is never enough when it’s not about you.
William Morales
05:51:22
I love that. Never about you. Yes. So,
Jay Conner
05:51:25
You know, what motivates me is making an impact, making a difference, serving others, and giving back, right? And if I stop doing what I’m doing, I’m not gonna be, I’m not gonna be able to keep making that impact and making a difference. Our church is very, very important to us. We got a college down in Florida. That’s very, very important to us. And you know, I’m starting to get to the aged wheel. I’m starting to get to the age to where every now and then somebody will say, Jay, when you gonna retire, retire, what in the world? Is that? What in the world would I do? I don’t play golf. I don’t go boating. We live right here on the beach, in the ocean. I don’t go boating. You know, am I gonna sit home on the sofa and eat Cheetos and watch Andy Griff? What am I gonna do? I would much rather be motivated, getting up, going, going wide open all day long, you know, making an impact, doing real estate deals. And you know what? Living the definition of freedom, doing what you wanna do when you wanna do it for how long you wanna do it with, with whom you wanna do it. And you set the rules.
William Morales
05:52:28
No, I loved that. And if somebody wanna get in contact with you, what’s the best way.
Jay Conner
05:52:33
Oh, the best way to get in contact with me. I’m so excited it download for free. And you got my contact information.
William Morales
05:52:39
Yes, I do. I’ll put on the show
Jay Conner
05:52:41
Notes. Yeah. Brand new money guide, Private Money guide is called “Seven Reasons Why Private Money Will Skyrocket Your Real Estate Business and Help You Build Incredible Wealth”. You can get it absolutely free to put you on the fast track to private money, never missing out on a deal for not having the money. And you download it for free at www.JayConner.com/MoneyGuide
William Morales
05:53:14
Yeah, I know. I’ll definitely put that on the show notes. Well, again, Jay, thank you so much for being on pay to peer real estate show. I really, really appreciate it.
Jay Conner
05:53:22
Hey Will, thank you so much for having me. I had a blast. Me too. And, and I, and I tell you what, man, you are a fantastic interviewer and
William Morales
05:53:31
Well, thank you much. Appreciate it.
Jay Conner
05:53:33
Who knows? Maybe we’ll do it again
William Morales
05:53:35
Sometime. Oh, we definitely will. I’ll definitely contact you in the next three to six months. Believe me. Thank you, Jay.
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