In the latest episode of “Raising Private Money,” Jay Conner dives deep into the nuances of mortgage note investing and private money with his good friend, Jamie Bateman. Renowned for his success in raising over $3,000,000 in private money, Jamie shares his journey and insights into leveraging mortgage notes as a powerful investment vehicle. This episode is a goldmine for both seasoned investors and newcomers looking to expand their portfolios. Let’s break down the themes and insights discussed during this illuminating conversation.
Jay Conner’s Real Estate Wisdom
A Wealth of Experience
Jay Conner, a real estate investor who began his journey in 2003, has rehabbed over 500 houses. His experience spans various facets of real estate, making him a credible guide for aspiring investors. Conner emphasizes one crucial lesson: avoid operating in isolation. He avows that seeking mentorship from experts can save you from costly mistakes and accelerate your path to success.
Jamie Bateman on Mortgage Notes
The Strategic Advantage
Jamie Bateman, a prominent voice in mortgage note investing, emphasizes the versatility of this investment strategy. Mortgage notes offer a unique advantage: you can invest across state lines without ever visiting the properties. This location independence is a game-changer, making it easier to diversify your investment portfolio.
Moreover, mortgage notes come with a relatively low barrier to entry. Utilizing a licensed loan servicer simplifies compliance and licensing hurdles. This ease of access complements existing residential real estate investing experience and provides opportunities for creative and analytical investment strategies. However, Jamie notes that mortgage notes lack inherent tax advantages. Fortunately, this limitation can be mitigated with self-directed accounts.
Passive Investors’ Opportunity
Jamie offers a tantalizing glimpse into the potential for passive investors to earn high returns by partnering with him. For those interested, Jamie’s platform offers pathways to explore these lucrative opportunities further.
Understanding Private Money in Real Estate
Securing Single-Family Houses
Jay Conner elucidates how private money underpins real estate transactions, particularly in single-family houses. Utilizing promissory notes to secure private lenders is a prudent strategy, complemented by collateral via a deed of trust or mortgage. Insurance policies include private lenders as mortgagees, and Conner maintains a conservative loan-to-value ratio of 75%. Additionally, a 90-day call option provides a safety net for emergencies.
Collateral and Mortgage Notes
Mortgage notes employ a similar protective measure through hypothecation, where the note and deed of trust serve as collateral. An illustrative example is purchasing a $70,000 principal balance note for $50,000 and borrowing $30,000 against it. Such flexibility in terms is mutually agreed upon between lender and borrower, making mortgage notes a versatile investment vehicle.
Jamie Bateman’s Journey
Transition from Defense to Entrepreneurship
Jamie Bateman’s career transition exemplifies the allure of real estate for control and flexibility. After 14 years at the Department of Defense, Jamie ventured into real estate, leveraging his family background in the field. His journey began with rental properties using the BRRR method and pivoted to mortgage notes in 2018. Jamie’s varied experiences, including title work, have enriched his investment acumen.
Evolving Strategies in Raising Capital
Organic Growth
Jamie shares his organic approach to raising private money: documenting his investment journey on social media and blogs attracted interest from potential investors. This visibility led to his first substantial investment from a former college friend and finance professional.
Joint Ventures to Fund Models
Initially involving joint ventures with capital partners, Jamie’s strategy evolved. He now prefers selling partial notes and employing hypothecation methods. Currently, managing mortgage note funds simplifies accounting and scalability, a transition Jamie finds advantageous.
Building a Personal Brand
Jamie continues to leverage social media for investor attraction, underscoring the importance of building trust and a personal brand. He advises beginners to learn from successful peers, avoid overextending the “fake it till you make it” mentality, and align with experienced partners for credibility and learning.
The Integrity Income Fund
Tailored for Passive Investors
Jamie Bateman discusses the Integrity Income Fund, offering accredited investors an 8% annual preferred return for investments under $100,000 and 10% for investments exceeding that amount. Distributions are made monthly, maintaining a stellar track record with no missed payments in over 2.5 years. A 12-month lockup period ensures investor flexibility, distinguishing it from typical mortgage note funds with longer terms.
Final Thoughts
For those seeking more information, Labrador Lending’s website, https://www.LabradorLending.com, offers comprehensive details on investment opportunities. Jamie Bateman’s podcast, “From Adversity to Abundance,” and his contact email, batemanjames@labradorlending.com, are also valuable resources.
As Jay Conner urges, curious and ambitious investors should explore these insights further and consider subscribing to “Raising Private Money.” For additional resources, a free money guide is available at https://www.JayConner.com/Moneyguide, a perfect starting point for anyone looking to navigate the world of private money in real estate.
10 Discussion Questions from this Episode:
- Jay Conner’s Experience:
- Jay Conner emphasized the importance of not operating solo in real estate investments. What do you think are the biggest advantages of learning from experts in this field, and can you share a situation where expert advice saved you from a potential mistake?
- Mortgage Notes Advantages:
- Jamie Bateman mentioned several advantages of investing in mortgage notes, such as location independence and low barriers to entry. Which of these advantages do you find most appealing, and why?
- Challenges of Mortgage Notes:
- Although mortgage notes offer several benefits, they lack inherent tax advantages. How can investors mitigate this disadvantage using self-directed accounts?
- Private Money in Real Estate:
- Jay Conner discussed using promissory notes and deeds of trust to protect private lenders in single-family house investments. What do you think about these protective measures, and how do they compare to more traditional investment protections?
- Hypothecation in Mortgage Notes:
- Hypothecation was cited as a method for leveraging mortgage notes for further investment. Can you explain how this process works and its potential benefits for a real estate investor?
- Scaling with Private Money:
- Both Jamie Bateman and Jay Conner emphasized the importance of scaling using private money. What strategies have you found effective for scaling your business, especially when it comes to raising private capital?
- First Experience with Private Money:
- Jamie Bateman shared his experience of raising private money by documenting his journey on social media. How can personal branding and social media presence impact an investor’s ability to attract private money?
- Evolution to Fund Management:
- Moving from joint ventures to managing mortgage note funds was a significant transition for Jamie Bateman. What are the primary advantages of managing a fund versus handling joint ventures in your opinion?
- Advice for Beginners:
- One piece of advice given to beginners was to align with more experienced partners to gain credibility. Have you ever collaborated with a more experienced partner, and what outcomes did that partnership yield?
- Integrity Income Fund:
- The Integrity Income Fund offers different preferred returns based on investment size and has a 12-month lock-up period. What are your thoughts on these terms, and how do they compare to other investment opportunities you’ve encountered?
Fun facts that were revealed in the episode:
- Jay Conner’s Experience: Jay Conner has rehabbed over 500 houses since starting his investing journey in 2003.
- Jamie Bateman’s Background: Jamie Bateman transitioned to real estate investment after a 14-year career at the Department of Defense, bringing some humorous insights about government coordination.
- Jamie Bateman’s Fund: The Integrity Income Fund boasts an impressive record of never missing a monthly distribution in 2.5 years of operation.
Timestamps:
00:01 Raising Private Without Asking For It
04:14 Pursued real estate entrepreneurship for control and familiarity.
07:32 Scaling a business requires finding, managing, and raising capital.
12:48 Transition to fund model simplifies accounting issues.
14:57 Learn from others, avoid dishonesty, and understand deeply.
20:06 Mortgage notes connect property investment methods seamlessly.
21:07 Mortgage note investing combines creativity and analytics.
25:10 Using hypothecation to leverage mortgage notes.
28:29 Mortgage notes and podcast info: https://www.labradorlending.com
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