***Guest Appearance
Credits to:
https://www.youtube.com/@redknightproperties
“Using Private Money Lending In Real Estate With Jay Conner: Discovering Multifamily Episode 219”
https://www.youtube.com/watch?v=ZZTkJJ-_osE&t=2s
In the world of real estate investing, access to capital is often the deciding factor between missed opportunities and closing profitable deals. Traditional institutional lenders—banks and credit unions—have long been the go-to sources for financing. However, a growing number of investors are discovering the unique advantages of private money, a strategy that shifts the power dynamic, puts the borrower in the driver’s seat, and opens doors to greater financial success.
What Is Private Money?
Unlike institutional lenders, private money comes from individuals—friends, family, business associates, or even strangers you meet through networking events—who have capital they’re looking to invest for solid, predictable returns. As described by Jay Conner, private lending isn’t about seeking out banks; it’s about finding people who want their money to work as hard as they do. This capital can be sourced from investment funds or retirement accounts, such as self-directed IRAs, making it accessible to a wider pool of interested lenders.
Why Choose Private Money Over Banks?
The benefits of using private money are compelling and multifaceted:
1. You Make the Rules
When working with private lenders, the borrower sets the interest rate, the term of the note, and other critical terms. This is a stark contrast to banks, where all the rules—including interest rates and loan terms—are dictated by the lender. Greater flexibility means deals can be structured in a way that best serves the investor’s needs and decouples real estate growth from the constraints of rigid institutional processes.
2. No Lending Limits
Banks often impose “caps” on how much they’ll lend to a single investor—sometimes severely limiting growth. Jay Conner recounts only having a $1 million line of credit from his bank, which quickly hamstrung his ability to scale. With private lenders, there’s no institutional ceiling. Jay grew his network to 44 private lenders and now manages $8.5 million in private money, rapidly recycling it across multiple deals.
3. No Money Out of Pocket at Closing
A major advantage of private money is the ability to finance 100%—or even more—of project costs, including renovations. Banks typically require down payments (“skin in the game”), but private lenders can fund the full purchase price plus rehab costs, often providing the borrower a check at closing to cover renovations and other needs. This allows for improved cash flow and removes the hurdle of large upfront capital requirements.
4. Speed and Simplicity
Private lending can move much faster than banks, which often get bogged down in paperwork, appraisals, and long approval processes. This agility lets investors act on deals quickly and beat out competitors.
5. No Personal Guarantees
Perhaps one of the most overlooked benefits is the lack of personal guarantees with private money; the property itself is the security, which means your personal assets are protected. This is a crucial risk-reducer for investors building a portfolio.
Who Uses Private Money?
Private money is remarkably versatile—it’s not just for those rejected by banks. In fact, seasoned investors with stellar credit use private money to keep themselves in control, move quickly, and maximize leverage, whether they’re securing single-family homes or syndicating multimillion-dollar apartment complexes.
How To Find Private Lenders
Building a private lender network is less about pitching deals and more about education and relationships. Start with your “warm” network—people you already know through business, community groups, social connections, or local organizations like Rotary. Expand your network by attending community events, joining local clubs, and participating in self-directed IRA networking opportunities.
As Jay Conner emphasizes, the key is to educate, not sell: teach contacts about private lending, show them how they can earn attractive, secure returns, and let their interest naturally lead to funding. By putting on your “teacher hat,” you’ll build trust and create win-win relationships.
Conclusion
Private money has the power to skyrocket your real estate investing business while granting you unparalleled flexibility and security. By taking control of your financing and cultivating a robust private lender network, you can seize more opportunities, solve your cash flow challenges, and accelerate your journey to wealth. Ready to get started? Download Jay Conner’s free guide, “7 Reasons Why Private Money Will Skyrocket Your Real Estate Investing Business,” at www.JayConner.com/MoneyGuide.
10 Discussion Questions from this Episode
- What are the main reasons cited for using private money over traditional bank financing in real estate investing?
- How does the flexibility of private money, such as setting your own interest rates and loan terms, compare to the restrictions imposed by banks?
- Can you discuss the pros and cons of never needing to bring your own money to the closing table when using private money?
- In what real estate asset classes can private money be utilized effectively, and how might deal structuring differ between single-family and commercial properties?
- How does the process of raising private money through syndication for commercial projects differ from funding single-family properties individually?
- What are the common sources or networks for finding new private lenders, and how important is personal relationship-building in this context?
- How does educating potential lenders about private money differ from “pitching” them, and why does Jay Conner believe teaching is more effective?
- What are the typical interest rates offered to private lenders, and how do these rates compare with those of institutional or bank financing today?
- Discuss the role of self-directed IRAs in private lending, including the advantages for both lenders and borrowers.
- What are the key risks and rewards for both real estate investors and private lenders in private money deals, including considerations of personal guarantees?
Fun facts that were revealed in the episode:
- Control Over Lending Terms: Jay Conner reveals that when using private money for real estate deals, the borrower sets the interest rate and loan terms—unlike borrowing from a bank, where the institution sets the rules.
- No Limit to Private Money: There’s essentially no ceiling to the amount of private money you can raise for your real estate projects; Jay Conner currently works with 44 private lenders and moves about $8.5 million from project to project.
- Education First, Sales Second: Instead of pitching deals, Jay Conner wears his “teacher hat” to educate potential private lenders about the benefits and security of private lending—a strategy that naturally attracts funds without any hard selling.
Timestamps:
00:00 Why choose private money
04:58 Using private lenders for deals
08:44 Difference between single-family and commercial deals
13:01 Explaining private lending strategy
13:35 Finding Private Lenders with IRAs
18:51 Free Private Money Guide Download
20:42 Download your free money guide
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https://www.jayconner.com/MoneyReport
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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 money or credit.
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