***Guest Appearance
Credits to:
https://www.youtube.com/@EggsThePodcast
“Eggs 420: Unlocking Unlimited Funding in Real Estate with Jay Conner”
https://www.youtube.com/watch?v=zWaAtliaWWQ&t=34s
When it comes to real estate investing, one of the most common hurdles is securing funding. Many aspiring investors are intimidated by the strict requirements and drawn-out processes of traditional lenders. On a recent episode of “Raising Private Money,” Jay Conner sat down with Michael Smith to share game-changing insights on how private money can propel your investing career—and how you can secure it without ever asking for a loan.
The Turning Point: From Banks to Private Funding
Jay Conner recounts his early days navigating the world of real estate investment. Initially relying on banks and mortgage companies, he faced a major setback in January 2009—the global financial crisis shut down his line of credit overnight.
Instead of giving up, Jay asked himself a powerful question: “Who do you know that can help fix your problem?” This shift in mindset led him to discover private money, an approach that forever changed his career trajectory.
Through education and networking, Jay was able to raise over $2 million in new funding—without asking anyone for money outright. As he puts it, “In fact, I don’t ask anybody for money. Today, I’ve got 47 private lenders that are funding our deals without ever asking for money. I never pitch a deal.” The secret? He became a teacher, educating potential lenders about the opportunity instead of selling or persuading.
Teaching the Opportunity: The “Private Money Teacher” Approach
Rather than chase investors or beg for funds, Jay Conner recommends a teaching approach. In this world, the investor defines the terms—interest rates, loan-to-value ratios, note length, and frequency of payments—in advance. For Jay, that means paying an attractive 8% interest to his private lenders and limiting borrowing to 75% of the after-repaired value of a property.
He stresses the importance of separating two conversations: first, teach the opportunity and program; second, once a potential lender is educated and interested, bring them a deal that fits the criteria. Jay’s exact script for putting a lender’s money to work is simple: “Mike, I’ve got great news for you. I can now put your money to work. I’ve got a house under contract… with an after-repaired value of $200,000. The funding required for the deal is $150,000…”
The key here is that his lenders have already been educated. There’s no selling, no chasing—just fulfillment of a promise.
Protecting Lenders and Structuring Deals
A major concern for both sides is risk. What happens if a deal falls through? Jay Conner explains that his private lenders are protected similarly to banks, with asset-backed debt secured by a mortgage or a deed of trust. They’re named on the insurance policy and title, ensuring recourse if the borrower fails to perform.
This approach distinguishes “one-off” deals from larger projects requiring SEC compliance. In single-family home investments, which are Jay’s specialty, the deals are asset-secured and private lenders receive steady, predictable returns—rather than a share of potentially fluctuating profits. The conservative borrowing limit of 75% of the after-repaired value means lenders have a substantial equity cushion.
Where to Find Private Lenders
Jay categorizes sources of private lenders into three groups:
- Your warm market: friends, family, and personal connections.
- Expanded warm market: networking groups like BNI (Business Networking International) and community organizations.
- Existing private lenders: people already investing in real estate, often identified through self-directed IRA companies or public records.
He advocates growing your network and volunteering for roles that allow you to educate others.
Jay’s Formula for Deciding Your Maximum Purchase Price
Don’t let emotions cloud your buying decisions. Jay shares a simple math-based approach: multiply the after-repaired value by 70%, subtract estimated repairs, and if that value is below $300k, subtract an extra $10,000 to safeguard against the unexpected. This math-based formula protects both the investor and lender.
Final Thoughts
Jay Conner’s experience proves that private money can be a reliable, flexible, and abundant source of funding for real estate deals. By owning the “real estate between your ears,” educating your network, and structuring deals to protect all parties, you can invest confidently—without relying on banks or sacrificing time to red tape.
Ready to learn more? Jay Conner encourages investors to grab his free book at www.JayConner.com/Book or tune into his podcast, “Raising Private Money,” for further education and inspiration.
10 Discussion Questions from this Episode:
- The episode emphasizes letting “the math, not your emotions,” guide real estate investing decisions. Can you share examples from your own life—or imagined scenarios—where emotions could lead you astray in investing?
- What are the key differences between raising private money and relying on traditional institutional lenders? How did this shift impact the business after the 2009 financial crisis?
- There is an emphasis on asking “who” rather than “how” when solving funding challenges. How does this approach change the way you think about building your network and seeking resources?
- The episode introduces the concept of self-directed IRAs for real estate investing. What risks and benefits do you see in using retirement funds in this manner?
- Why is it important to wear a “teacher hat” instead of a “salesperson hat” when approaching potential private lenders? How might this philosophy create better relationships?
- The podcast discusses the need to keep the “initial conversation” with a private lender separate from discussing specific deals. Why is this separation so critical, and how could mixing them jeopardize the transaction?
- Protections for private lenders, such as deeds of trust and insurance policies, are outlined. How do these mechanisms safeguard lenders, and what additional assurances might you want if you were in their shoes?
- For someone without an immediate network of friends or family with capital, what three categories of private lenders are suggested? Which do you think might be most accessible or effective for a beginner?
- How does joining organizations like BNI (Business Networking International) help scale and expand one’s network of potential private lenders?
- The episode provides a detailed formula for calculating the maximum allowable offer on a property. How might this formula protect investors and lenders, and could you foresee any limitations or challenges if the market shifts?
Fun facts that were revealed in the episode:
- Jay Conner raised over $2,150,000 in private money after being cut off by his bank in 2009—more than doubling the funding he previously had access to with traditional loans.
- Jay Conner has flipped over 500 houses in a small market with a population of only 40,000, consistently averaging two to three deals per month with average profits of $86,000 per deal.
- Jay Conner never asks anyone directly for money when funding real estate deals; instead, he puts on his “teacher hat” and educates potential lenders about the opportunity, leading to 47 private lenders funding his deals without pitching or begging.
Timestamps:
00:01 Unlimited Real Estate Funding
03:33 Big Fish, Small Pond Strategy
08:05 Discovering Private Money Lending
10:33 Teaching Private Money Opportunities
16:01 Private Lending via Self-Directed IRA
18:01 Fund My Deal Next Week
21:18 Private Money for Real Estate
24:31 Passive Lending Success Overview
28:06 Three Categories of Private Lenders
30:47 Networking for Private Lenders
34:07 Private Money Loan Expectations
38:26 Property Renovation Costs Explained
41:20 Calculating Maximum Property Offer
43:46 Entry-Level Housing Market Insights
Connect With Jay Conner:
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
http://www.JayConner.com/MoneyPodcast
Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal.
#RealEstate #RealEstateInvesting #RealEstateInvestingForBeginners #Foreclosures #FlippingHouses #PrivateMoney #RaisingPrivateMoney #JayConner
YouTube Channel
https://www.youtube.com/c/RealEstateInvestingWithJayConner
Apple Podcast:
Facebook:
https://www.facebook.com/jay.conner.marketing
Twitter:
https://twitter.com/JayConner01
Pinterest:
https://www.pinterest.com/JConner_PrivateMoneyAuthority
The Secret to Never Missing a Deal: Jay Conner’s Private Money Method
Jay Conner [00:00:00]:
I’m glad to share my formula that I use to determine what’s the maximum that I will pay for any property. And that brings up a good point, Mike. The math makes the decision as to your maximum purchase price. The math, not your emotions, because your emotions are going to mess you up every time. It’s the math. It’s the formula. Let the formula decide what the most you’re going to pay. And when you follow this formula, it protects you.
Jay Conner [00:00:32]:
It protects your private lenders. It protects everybody involved.
Narrator [00:00:37]:
If you’re a real estate investor and are wondering how to raise and leverage private money to make more profit on every deal, then you’re in the right place to raise 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. Because the money comes first. Now here’s your host, Jay Connor.
Michael Smith [00:01:18]:
Hey, everybody, welcome back to the show. Today, we have Jay Connor. He is an author, he’s a real estate investor, and his company is called the Private Money Authority. Ryan isn’t with us today. He had an emergency come up. So it’s going to be just me and Jay. How are you doing, Jay? Welcome to the show.
Jay Conner [00:01:36]:
Mike, thank you so much for inviting me to come along. I’m so excited to be here because we get to talk about my favorite topic, which is private money. How to get unlimited funding for your deals without ever having to ask for money. I love talking about that. How in the world do you get money for your real estate deals without ever having to ask? And you know, one reason I’m so excited, Mike, is because ever since my wife, Carol Joy, and I started investing in single-family houses all the way back in 2003, I’ve been using private money since 2009. I’ve never missed out on a deal for not having the money. And private money’s had the biggest impact on our real estate investing business than any other strategy that we have employed.
Michael Smith [00:02:24]:
So before we dive into the topic and actually, how it works, can you give us just a brief overview of your career, how you got into real estate, you know, very first deal to, you know, what you’re doing now?
Jay Conner [00:02:42]:
Sure. Well, I was raised in the mobile home business. Manufactured housing and the financing for those products went away in the early 2000s. So Carol, Joy, my wife, and I started investing in single-family houses here in eastern North Carolina all the way back in 2003, and we flipped over 500 houses. Now, in our career, we started flipping houses before HGTV even existed, before it was a sexy thing, you know, to do. And so we’ve done a lot of deals. We’re in a small market, Mike. Our target market’s only 40,000 people, but we do, on average, two to three deals a month, with average profits at $86,000 per deal.
Jay Conner [00:03:33]:
Now, I don’t say that to brag. I don’t say that at all, coming from a space of ego. The reason I share that is because there’s a point to be made. And that is when it comes to real estate investing, particularly in single-family houses, there’s an argument to be made to focus on smaller markets instead of competing in the big cities and all that. I’d rather be, you know, a big fish in a small pond. So from 2003 until January of 2009, Mike, the only thing I knew to do to get my real estate deals funded was go to the local bank or the mortgage company, get on my hands and knees, and say, Please fund my deal. And, you know, I had to pull up my skirt for the banker to look at all my personal assets and had to get my credit score pulled and financial statements, and all that stuff. That was all traditional institutional money.
Jay Conner [00:04:34]:
And, you know, Mike, that worked okay the first six years, from 2003 to January 2009. But then everything changed.
Michael Smith [00:04:44]:
I remember that time. I was a loan officer at that time.
Jay Conner [00:04:49]:
Oh, were you? I was, yeah. I have had my active mortgage broker license for decades. And so, yeah, January 2009. I tell you, Mike, exactly what happened. I was sitting right here at my desk, and I called up my banker. Now, my banker’s name was Steve. And Steve had been funding my real estate deals for six years from the same bank. Back then, it was called BB&T.
Jay Conner [00:05:17]:
So he was with Branch Bank and Trust, and he funded a bunch of deals. Well, here’s what happened, and here’s where everything changed. I called up Steve, and I told him about two houses that I had under contract that I needed funding for. And I wasn’t calling anybody else. I mean, he was the. He was the guy. So, Mike, I told him. I told Steve about these two houses I had under contract to purchase.
Jay Conner [00:05:43]:
And like that, I learned that my line of credit had been closed with no notice to me. And I said, Steve, what in the world are you talking about? Why in the world are you telling me that my line of credit’s closed? I said, for goodness’s sake, we’ve done a ton of deals in six years. We. We have a great business Relationship. I got an 800 credit score. I’ve never been late on my payments. What is the problem? He said, Jay, don’t you know there’s a global financial crisis going on right now? I said, No, Steve, I don’t know anything about that. I said, but I do one thing now.
Jay Conner [00:06:21]:
You just gave me a financial crisis. I don’t have a way to fund my deals. And so he says, Sorry, Jay, we’re just not loaning money out to real estate investors anymore. So, Mike, I hung up the phone. I sat here at my desk for a moment, and I asked myself a very, very powerful question. In fact, the answer to this question totally changed the trajectory of our investment company. So I sat here for a moment, and I thought to myself, By the way, this question will help, or the answer to this question will. It will help fix any problem that anybody’s got going on.
Jay Conner [00:07:01]:
I don’t care if it’s health, relationships, financial, or career. It doesn’t matter. The power in asking the right questions. And by the way, Mike, these people run around saying, Oh, every problem’s an opportunity. I want to throw up. I didn’t have. For goodness’s sake, let’s face the facts. I had a problem.
Jay Conner [00:07:19]:
Now, granted, the problem became an opportunity, because without that problem, you and I wouldn’t be visiting here on the Eggs show, for goodness’s sakes. But here’s the question I want to share with you and your audience that I asked myself when I was cut off from the bank. And the question I asked myself, I said, Jay, who do you know? You see, there’s the key right there. It’s not how, it’s who. I said, Who do you know that can help fix your problem? And you know, Mike, when I asked myself that question, I immediately thought of a dear friend. His name is Jeff Blankenship. He was living in Greensboro, North Carolina, at the time, and he was investing in single-family houses. And I called up Jeff. I thought to myself, maybe Jeff can help me out here.
Jay Conner [00:08:05]:
I called up Jeff, I said, and I told Jeff what had just happened with the bank shutting me down. And he said, Well, Jay, welcome to the club. I said, Well, Jeff, what club is that? He said, That’s the club of having the bank shut down your line of credit. He said, My bank shut me down last week. I said, How are you going to fund your real estate deals? And just by asking that question, he said, Well, Jay, have you ever heard of private money and how you can get money from individuals just like ordinary people like you and me? I said, No, I’ve never heard of private money. He said, have you ever heard of self directed IRA companies and how individuals, ordinary people, can take retirement funds they have that they’re not happy with and move them over with no tax penalty to a self directed IRA company and then loan that money out to us on our deals and then the interest we pay them, they earn either tax free or tax deferred. I said, Jeff, I don’t have a clue what in the world you’re talking about? I said, What is private money? He said, well, he says, there’s this gentleman down in Jacksonville, Florida, by the name of Ron Legrand. And Jeff said, Ron Legrand can teach us what private money is.
Jay Conner [00:09:27]:
I said, Well, what is it, Jeff? He says, I don’t know. But Ron says, we can get a lot of it really, really fast. I said, okay, so Jeff and I went to our very first real estate investing seminar to learn about private money. Now let me tell you something. I learned about private money, and I came back home, and you know what I did, Mike? I was able to raise $2,150,000 in new funding that I didn’t have. So really, when the banker cut me off, when Steve cut me off, he actually gave me a raise because all I had was a million-dollar line of credit at the time. And I was able to raise over $2 million. And you know, I didn’t ask anybody for money whatsoever.
Jay Conner [00:10:11]:
In fact, I don’t ask anybody for money. Today, I have 47 private lenders that are funding our deals without ever asking for money. I never pitch a deal. And what in the world is the secret? Here’s the secret. I put on my teacher hat.
Michael Smith [00:10:29]:
Oh my gosh.
Jay Conner [00:10:33]:
My teacher hat says, Private money teacher, private money, teacher. So instead of asking for mortgages or asking people to, you know, loan money or fund deals, what I did was I started teaching them the opportunity. Now, before I could start teaching anybody the opportunity and what it is, I had to figure out, what in the world am I going to teach, right? I mean, what is the opportunity? So here’s something very, very important to understand. In this world of private money, we are our own underwriter, which means we make the rules. The traditional way of borrowing money for real estate or anything is the conception that he or she who has the money makes the rules. That’s traditional thinking. They set the interest rate, they set the length of the note, the frequency of payments, the maximum loan-to-value, and all that. So instead, in this world, instead of going and getting on your hands and Knees and having to fill out applications.
Jay Conner [00:11:37]:
In this world, you put together what you want to offer. I say just sort of duplicate what I’ve been doing. It’s been working pretty good since 2009. So I decided what I was going to pay my investors, my private lenders. Well, I decided I was going to pay them 8%, Mike. I’ve been paying them 8% ever since February of 2009. And I haven’t changed.
Michael Smith [00:12:00]:
And that’s like in 2009, 8% was high.
Jay Conner [00:12:04]:
Oh, yeah, yeah.
Michael Smith [00:12:05]:
But you’re not dealing with the crap with the bank, so that’s probably like, okay for you because you’re not. You’re not jumping through the hoops. So it’s kind of like a. Yeah.
Jay Conner [00:12:16]:
There are no hoops to jump through. Right. Because we make the rules. So I decided I was going to pay everybody 8%. I was going to not borrow more than 75% of the after-repaired value. I didn’t say 75% of the purchase price. 75% of the after-repair. That allows me to bring home a big check every time I purchase a house.
Jay Conner [00:12:39]:
I mean, who wants to get paid to buy houses without taking anything to the closing table? So I just put together what I was going to teach. So I went about sharing with people in my own market. You know, people that I go to church with, people in the Rotary club, et cetera. And I gave them the opportunity. And what I’m getting ready to say right now, Mike, is super critical for everybody to understand. Hey, in fact, Mike, I’m going to take. I’m going to take a little risk right now. I’m going to ask you a question.
Jay Conner [00:13:09]:
I’m not sure of your answer, but I’m going to take a risk. Have you ever heard the guru on stage teaching real estate to say something like, Oh, just get the deal under contract. The money shows up.
Michael Smith [00:13:24]:
Yeah, I’ve heard that a few times.
Jay Conner [00:13:26]:
Goodness sakes, I want to throw up. Or have you heard them say, Oh, just get the deal under contract. Money finds good deals. Right? I know you’ve heard that. And let me look, I want to be like the Kool-Aid cartoon character and run into the brick wall like you see on TV. That drives me crazy. I was like, come on, come on now, where’s the money going to come from? Is it just going to like rain out of clouds or something, you know? Now look, if you’re a wholesaler, you’re getting the money lined up first. That’s called your buyer’s list, right? That’s what they teach you when you first start wholesaling.
Jay Conner [00:14:03]:
Well, if you want to stay in deals like I do, we want to get the money lined up first. So, back to what I was saying. It’s so critical to understand what I’m getting ready to say. You see, right here’s the thing. Never talk about a deal you need funded in the initial conversation with a new potential private lender. You see, my 47 private lenders, Mike, they never heard of private money, private lending. They never heard of self-directed IRAs. I got 47 private lenders right now, and not one of them ever heard about this world until I put on my teacher hat and I exposed them to it.
Jay Conner [00:14:42]:
So here’s the point I’m wanting to make, and then I’m going to turn it back over to you. The point I want to make is to separate the conversations between teaching the opportunity and what the program is, and how they can be involved as an investor or private lender. And then after they’ve told you what they got to work with and they told you they liked the program, then you talk about a deal. The worst time to be raising private money for real estate is when you need it for a deal. There’s always going to be deals. And so I’m going to share right now, Mike, and then I’ll turn it back to you. I’m going to share right now. The exact script.
Jay Conner [00:15:22]:
Here it is, the exact script. Exactly what I say over the telephone to my private lenders when I get a deal for them to fund without asking for money. So, Mike, I need your help to explain this. Let’s do a little role play here, a little hypothetical assumption. So this is leading up to how to get your deals funded over the phone without ever asking for money. So, Mike, first of all, let’s assume that you and I have known each other for a while. We’re friends, maybe we can go to church together. We got the trust, we got the, you know, we got the friendship in place, so we got that.
Jay Conner [00:16:01]:
Now, let’s secondly assume that I have put on my teacher hat and I’ve taught you the program. I’ve told you about this opportunity. In all likelihood, you have never heard of private lending. In all likelihood, you’ve never heard of self-directed IRAs in this example. And so let’s assume you like it. And let’s say you’ve told me that you’ve got $150,000 in a 401 (k) with a previous employer, and you still have that money sitting over there in a 401 (k) at the previous employer, and it’s in the stock market, and you’re not liking the volatility of the value going up and down. And I’ve taught you in the program that it’s just like putting your money in the local bank in a CD, except you make a whole lot more money on interest. And so let’s also assume that I’ve introduced you to a self-directed IRA company representative and they’ve moved your money over at your request because you want to invest in my program.
Jay Conner [00:17:00]:
So they’ve moved the money over. The money is sitting there in that self-directed IRA account that you set up with the current retirement funds that you had. And so now there’s the setup. Here comes the phone call. And maybe I’m calling you a week or two weeks after you got your self-directed IRA account set up from that old 401. And here’s what I do. I call you up, you answer the phone, and we have a little chat. And this, Mike, is what I call the good news phone call.
Jay Conner [00:17:31]:
All right, here’s the script. I call you up, you answer the phone, and we have a little chat. And then here’s exactly what I say. I say, Mike, I’ve got great news for you. I can now put your money to work. I’ve got a house under contract here in Newport, North Carolina, with an after-repaired value of $200,000. Now the funding required for the deal is $150,000. That matches up to what you’ve got at your self-directed IRA.
Jay Conner [00:18:01]:
Now, closing is going to be next Tuesday. I’ll need you to have your money wired to my real estate attorney’s trust account by next Monday. I’m going to have my real estate attorney email you the wiring instructions. That’s the end of the conversation. The most stupid thing I could do is ask you, Do you want to fund the deal? Of course, you want to fund the deal. And here are three big reasons why Mike wants to fund my deal in this example. Number one, Mike trusted me to move his retirement funds over to the self-directed IRA company that I introduced him to. Number two, Mike knows I’m not going to bring a deal for him to fund unless it matches the criteria of the program I already taught him.
Jay Conner [00:18:52]:
Listen, what I told him in the example, I told him the after-repaired value is $200,000, and the funding required is 150,000. See, that’s 75% of the after-repaired value. So he knows I’m not going to bring a deal for him to fund unless it matches the criteria of what he’s already expecting. He already knows what the interest rate is going to be. The third reason Mike is ecstatic to fund my deal is that he’s not making any money until I put his money to work for him. I promised him I was going to invest his money for him and put his money to work. So here I am, fulfilling my promise. So I’m ethically bound to use Mike’s money because I expose this whole world to him.
Jay Conner [00:19:39]:
So, understand what I just went over. There’s no begging, no chasing, no selling, no persuading, no trying to talk anybody into doing anything. You’re leading from a servant’s heart. You’re serving people and exposing them to this opportunity. What I found out over the years is my private lenders actually need me more than I need them because there’s a whole lot more money available than there actually are deals. So when people ask me, Jay, what’s the very first thing I need to do to start raising private money? Here’s the answer. Own the real estate between your ears first. No chasing, no begging, no selling.
Jay Conner [00:20:17]:
You’re serving, you’re, you know, making people aware of what this opportunity is all about. And then you deliver and get them deals to fund.
Michael Smith [00:20:27]:
So, a couple of questions for me. If I’m the guy with 150 grand and I’m putting this out there, what is my recourse if your deal falls through? If the house doesn’t perform as intended, am I now just the owner of a piece of garbage house that didn’t get fixed? Right now, I have to deal with it myself. How?
Jay Conner [00:20:52]:
How?
Michael Smith [00:20:53]:
Obviously, it’s like you’ve got to. You’ve built a rapport with the person. You know the person beforehand. If you’re trying to get them to invest their 401k into this property, is this isn’t something that you’re going to go and just put your money into this fund, and Joe Schmo is going to come and have access to my money and buy a piece of property that’s not really going to perform as expected? Is there any recourse for that?
Jay Conner [00:21:18]:
Yeah, I’m so glad you asked that question, Mike, because there’s a difference. So, you know, one question I get all the time is, well, can you use private money for any kind of real estate? The answer is yes, you can use private money for single-family houses, self-storage, land, apartments, et cetera. But here’s the big difference, and that is, how it is structured, so let me explain the structure of this and how the private lenders are protected. So you just mentioned the word fund. So, typically on large projects such as a larger self-storage facility or an apartment complex that someone’s going to buy and you know, increase value for three or five years and then turn around and flip it, those opportunities, there’s going to be a fund, as you just said, there’s going to be a fund. And so that’s where you have the SEC come into play, the Securities Exchange Commission. That’s where the operator of that investment opportunity is going to have a SEC attorney draw up a private placement memorandum. And so then investors will invest in the fund on those types of projects.
Jay Conner [00:22:40]:
What I’m talking about here is a whole different world. In this world that I’m talking about, the SEC is not involved. The SEC is not regulating what we do. Because everything we do in this world with single-family houses, which also includes duplexes, triplexes, and quadplexes, those individual properties, everything that we do is called a one-off. That’s slang. Slang. A one-off is slang for asset-backed debt. Asset-backed debt.
Jay Conner [00:23:13]:
So, in this world of private money with single-family houses, think of the private lender as the bank. Think of the private lenders, the bank, which means we’re not borrowing unsecured money. So they, the private lender is going to get a, in North Carolina, a deed of trust. Most states call it a mortgage. So they’re going to get. So we’re going to give our private lenders all the same protection as the bank would require. So we’re going to give them a deed of trust. We’re going to give them the promissory note.
Jay Conner [00:23:49]:
They’re going to be named on the insurance policy as the mortgagee, which gives them another layer of protection. If there’s ever a claim on that insurance policy, then the private lender is named on that check from the insurance company. We’re going to name the private lender on the title policy as additionally insured. So yes, here’s the bottom line answer. If you, as the borrower, do not pay Mike, your lender, in our example, the private lender, then the property does, which means they get the property. And now that status security, they’re back. And of course, none of the private lenders want the property. That’s why they are a private lender.
Jay Conner [00:24:31]:
They want to be totally passive. All they want to do is sit back and collect checks and you take, and you take care of them. I mean, you perform as you promised them that you would perform. So the reason this program has worked so well, for my private lenders, all 47 of them since 2009, is because every one of our private lenders has been paid 100% of every penny coming to them. You see, they’re not taking the risk of sharing in the percentage of the profit. It doesn’t matter what the problem ends up being. And by the way, the profit never ends up being what you intended. I flipped over 500 houses.
Jay Conner [00:25:11]:
I’ve never had a repair budget come in on budget. Exactly. Why is that? Because Murphy lives in every house. And sometimes Murphy’s cousins and aunts, and uncles show up. And y’all know what I’m talking about. If the unexpected can happen, it’s going to happen. So the reason that the private lender always ends up being taken care of is because of the conservative loan-to-value; we’re not going to borrow more than 75% of the after-repaired value. Now, as you mentioned, Mike, your private lender is counting on you to perform.
Jay Conner [00:25:50]:
They are secured by that property. But as I said, they don’t want that property. They want you to perform. So that’s a very, very important part of the equation is performing and making sure that the rehab gets done and all that. Now, by the way, I do want to make this point, and I’ll turn it back to you, Mike. Private money is not just for ugly houses. Private money is just not for houses that need renovation. Here’s the bottom line.
Jay Conner [00:26:21]:
Use private money. I mean, here’s a writer downer. Use private money. When the seller of the property requires all cash. They don’t matter what condition the property’s in. Now, you’re not going to borrow private money unless there’s some equity. Let’s say you buy, let’s say you buy a house and there and there’s no renovation needed. Well, you still have to borrow no more so that you protect your private lender, and they’ve got an equity cushion.
Jay Conner [00:26:53]:
But I did want to make that important point. I mean, you know, I use private money to buy houses that don’t need any renovation when they won’t sell to me on terms of they won’t sell to me subject to the existing note or won’t sell to me Seller financing, which after reviewing thousands of property lead sheets over the years, I’ve discovered only 13% of for sale by owners will sell to me creatively. With them being the bank or them selling to me, subject to the existing note. The majority of them are going to require the cash, and when you have the private money, then you don’t have to worry about ever missing out on any deals.
Michael Smith [00:27:32]:
So let’s flip the script a little bit. Say, for example, I have no money, but I want a piece of property, and I don’t have a grandma or a friend with the 401k that I can sweet-talk into being a private lender. Is there an option to reach out to people you don’t know? A company that has a collective fund that you can contact and be like, Hey, here’s the deal, this is what I’m looking for. Or do you have to have that friend that you’re, you’re rolling their 401k into to make this work?
Jay Conner [00:28:06]:
I’m so glad you asked that question because there are three categories of where you find private lenders. And here they are. The three categories are, number one, the example I just gave, your own warm mortgage, your own connections, people that are in your cell phone, you go to church with them, who do you see regularly, you play golf with them and etc. Right? So that’s category number one. Category number two is what I call your expanded war market. Because if you want to scale your business, you’re going to run out of your own connections sooner or later, right? So how in the world do you grow your network so quickly? And we all know there’s a direct correlation between your network and your net worth, and the quality of your network. So, how do you grow your network so quickly? Well, in my book, my best-selling book, where to get the Money. Now I’ve got a whole section in the book on how to grow your network very, very quickly.
Jay Conner [00:29:10]:
Let me go ahead and give you one example that I have gotten millions of dollars in private money by using this one strategy. And here it is. Join your local or one of your local BNI chapters, which stands for Business Networking International. Ivan Meisner founded Business Networking International decades ago, and I have been very, very involved. Started being very involved in our local BNI chapter years ago when I started raising private money, even let alone Morehead City, North Carolina, population 8,000 people. We started a BNI years and years ago. The way BNI works is that they truly only let one person per profession have a seat. There’s only one realtor, who has a very coveted seat in a B and I chapter. There’s only one attorney, only one cpa, only one general contractor, only one essential oil lady salesperson, if you know what I’m saying.
Michael Smith [00:30:14]:
Yeah.
Jay Conner [00:30:14]:
So only one profession. Well, I joined BNI as a real estate investor. Odds are, in your local B and I, there’s not going to be anybody in the local B and I as a real estate investor. So I joined as a real estate investor, and then I volunteered to be the education coordinator. And that’s a secret sauce right there. Whenever you’re involved in these types of organizations or chambers of commerce, or et cetera. Volunteer, Volunteer, right. Serve, serve, serve.
Jay Conner [00:30:47]:
So every meeting, every week on Tuesday mornings, I was able to present a five-minute educational moment on how to be a better networker. So I had a lot of one-on-one meetings with our local B and I members. And in the one-on-one meetings, going to lunch or whatever, I tell them about the private money opportunity. I got millions of dollars by expanding my network, getting involved in the local B and I. The third category of where you find private lenders is existing private lenders. Existing private lenders, these are individuals, ordinary people just like you and me, who are already loaning their money out to real estate investors because they want to be involved in real estate, but they don’t want to go negotiate deals, find deals, spend money on marketing, oversee renovation projects, and that type of stuff. They just want to sit back and get high rates of return safely and securely. So the question is, where do you find these existing private lenders? Well, don’t do what I did when we started years ago.
Jay Conner [00:31:53]:
I hired my real estate attorney to look for public record deeds of trust here in my local county of individuals loaning money out on real estate, but that didn’t go too well because there weren’t that many on record. So I actually started the software called the Private Money, the Private Lender data Feed years ago. We update that every month. We get every private lender closing information in the nation in the software, get the contact information of the private lenders, and you see the interest rate they’re earning. I’ll tell you another place to find existing private lenders, and that is in self-directed IRA companies. Did you know 70% over 70% of Self-Directed IRA account holders want to be your private lender? They want to be in real estate, but they don’t want to do deals. They just want to loan money out on real estate. And so self-directed IRA companies have monthly networking events, even on Zoom these days.
Jay Conner [00:33:02]:
And you don’t have to be an account holder to network at these monthly networking events. But there’s one caveat that’s very, very important to point out. If you’re doing business with an existing private Lender, guess what? You don’t get to make the rules. You’re not teaching somebody that never heard of this opportunity. They already know. They already know the game, right? So now, when you’re talking with an existing private lender, it’s a negotiation conversation and not a teaching opportunity. However, there’s a bunch of private lenders out there right now, I know that are happy to be getting 7% and 8%. There are a bunch of them that won’t talk to you unless you’re going to pay 12%.
Jay Conner [00:33:47]:
So you get to pick and choose who you want to do business with. I prefer the warm market and the expanded warm market because you’re exposing this opportunity to people who have never heard about it. And therefore, you, as the borrower, get to make the rules.
Michael Smith [00:34:07]:
So if I were to go to someone who’s doing this already, are they looking for a down payment? Are they looking for, you know, say you’re just wanting to buy your personal residence? It’s not a property that you’re going to flip. Are they just looking for that 8% consistency? Are they looking to get their money in and out real quick? I, I, I did a property up in Nome, Alaska. I wasn’t the one who funded it or negotiated the terms, but I was up there helping do the re, the rehab on it. And from what I gleaned out of the deal, I think, the private money guy was wanting to get his money in and out real quick and get a percentage of the actual flip. And so is that mainly what they’re looking for if you’re going that route versus the I just need a loan and I can’t qualify kind of thing?
Jay Conner [00:34:59]:
As far as existing private lenders go, it’s all over the board. Most of them are not going to want to tie their money up for more than maybe, maybe up to two years. Right. Typically, now some of them don’t care. They’ll push it out on, you know, five years or so. Now, all the notes that I do with my private lenders are either two years if they’re using investment capital or five years if they’re using retirement funds. But since I’m flipping most of the properties these days, I’m typically in and out of a property in less than a year, typically. But in answer to your question, it all comes down to what those, you know, existing private lenders are interested in.
Jay Conner [00:35:46]:
Are most of them going to want a down payment, or going to want to see a down payment? Yes, most existing private lenders are already in the game. They’re depending on your experience; they’re not going to want to loan typically more than 80%. Maybe, depending on your experience, 90% of the after-repaired value or sometimes even the purchase price. Right. Excuse me. Excuse. Ignore what I just said on the after-repaired value. With the existing private lenders, it’s going to be no more than 80 or 90% of the purchase price, which means you, as the borrower, you’re going to need 10% or 20% to put down.
Jay Conner [00:36:26]:
That’s another reason I much prefer the warm market where I’m teaching people the opportunity, because I’m not going to borrow more than 75% of the after-repaired value, not the purchase price. And since I’m able to buy these properties at a discount, that’s why I’m able to bring home a big check when I buy and use that money for the renovation. Or I might be pulling out some equity as well.
Michael Smith [00:36:53]:
Yeah. So I haven’t done a lot in the real estate world as far as flipping homes and doing it myself. I. Most of what we’ve done over the years is we live in a property and just fix it up and do sweat equity on it, just kind of make it that way. I haven’t done it as an actual hiring of a contractor, fix it up real quick, flip it, make, you know, 50k, move on to the next one. I assume if you’re going down that route, getting the funding for the repairs built into the loan is critical because you don’t want to be running up a Home Depot credit card every time you go to flip a home.
Jay Conner [00:37:43]:
Mike. Yeah, I mean we, we get, we get the funding up front for the purchase and the renovation as well, all up front. And I mean again to make the point that if a renovation is involved and most of the properties we buy, there is a renovation involved because that’s why we’re able to buy them at a discount.
Michael Smith [00:38:06]:
Yeah. Is there a formula you use to figure out the average expense to renovate or flip, or have you just done it enough where you can kind of look at it and say, Hey, this kitchen’s going to cost six grand. It’ll add twenty grand to the value. That’s a fourteen-thousand-dollar profit by doing it? Yeah, yeah.
Jay Conner [00:38:26]:
There’s no form, there’s no formula other than knowing what line items should cost. And so, I mean, I can have a 2,000 square foot house that in fact we just finished one in the last week, and it’s being staged Today, ready to put in the multiple listing service this week to sell. Well, that 2,000 square foot home was on the lower end; that was only a $31,000 renovation. I mean literally, you know, you’re talking floor coverings and paint and some exterior paint, landscaping, and just you know, lipstick and nothing of any real substance. 31,000. That same 2,000 square foot house, if it needed a roof, if it had needed windows, if it had needed some foundation work, if it had needed a new H Vac heating and cooling system, that $31,000 can very, very quickly become 60 or 70, or 80,000. Right. So every property, of course, is different.
Jay Conner [00:39:38]:
So I don’t make any offers on any properties until we’ve actually looked at the property. And of course, for years, I did it myself. For the past 15 years, I’ve had the same project manager who goes out and estimates the budget by line item and submits that to me for me to review. So it really all comes down to the property. Now you ask about formulas, Mike. I’m glad to share my formula that I use to determine the maximum that I will pay for any property. And that brings up a good point, Mike. The math makes the decision as to your maximum purchase price. The math, not your emotions, because your emotions are going to mess you up every time.
Jay Conner [00:40:28]:
It’s the math, it’s the formula. Let the formula decide what the most you’re going to pay. And when you follow this formula, it protects you, it protects your private lenders, it protects everybody involved. And so the formula that I use when I’m paying all cash, and this formula has nothing to do with when I’m paying or purchasing a property using creative financing, such as subject to the existing note or seller financing, and those types of things. Here’s the formula. When paying all cash, whether it’s your own cash or whether you’re using a private lender’s cash, we start with the after-repaired value. Now the definition of the after-repaired value is that the property is going to be in an absolutely like-new condition. Ready for Southern Living magazine pictures.
Jay Conner [00:41:20]:
That’s my definition of after-repair value. Top retail for this property. Everything looks and smells brand new. So we take the after-repaired value, and then we’ll multiply the after-repaired value times 70% and then take that figure that accounts for your profit carrying cost. Then subtract from that the estimated repairs, and that equals the maximum allowable offer. Now, if the after-repaired value is less than $300,000, I subtract an extra $10,000 from that bottom line figure just to account for the unexpected. Another difference is if the after-repaired value is more than $300,000, then I’ll just multiply times 80% instead of 70% because now you’re talking bigger dollar amounts. And if the after-period value is more than 300,000, I’ll subtract an additional $20,000 from my maximum offer to account for the unexpected.
Jay Conner [00:42:25]:
Again, we only use that formula when the seller is getting all cash. So.
Michael Smith [00:42:36]:
Do you want to stay under, like as an investor, as someone who’s doing these properties, you don’t want to go after the $500,000 $600,000 loans. You’re looking for the $200,000 $150,000 properties that you can get those or are you, or are you looking for those? Do you take on the million-dollar properties and rehab those and flip those, or is that kind of more?
Jay Conner [00:43:00]:
Yeah, I haven’t done a million-dollar property, but I’ve done a $900,000 property on the beach down here at Emerald Isle. Did that a couple of years ago. The after-parent value was $895,000. Bought the property for, I think it was right at 600,000. But your question, Mike, brings up a really, really good point for me to make. And that is, first of all, if you’re just starting and investing in single-family houses, they don’t take on those big projects. You know, you want to start getting experience with the lower-priced homes for what I call first-time home buyer price points. So that’s one thing you want to know.
Jay Conner [00:43:46]:
If you don’t already know it, find out what your first-time entry-level price point is in the market where you are going to invest. Now, one big reason for that is that what I’m getting ready to say, your largest pool of potential buyers for that house are first-time home buyers. That’s where most of the buyers are, people that’s never bought a home before. So that’s the entry-level price point. Case in point, I just put a house on the market this past week, and here’s a little secret. I listed the property with my realtor. I’ve had the Same realtor for 20 years, his name’s Chris. I list the property after it’s all renovated and absolutely beautiful.
Jay Conner [00:44:35]:
He puts it in the Multiple Listing Service on Monday under a category called coming soon. Now what’s that mean? Coming soon means you can look at the music video. We get a music video, a professional video for every property that we sell that’s in the Multiple Listing Service. They can see all the pictures, they can see the price, and they can see the description. But nobody can get into the house until the listing goes active. So we will be coming soon from Monday to Tuesday, Wednesday, and Thursday. Then we go active on Friday. Well, this property at 5012 Highway 101 just went active this past Friday.
Jay Conner [00:45:18]:
I listed it for $229,000. Boy, is that a low price in our area. Talk about the first time entry price, right? Well, we had five showings from Friday afternoon to Saturday. We went under contract Saturday evening for more than the list price. So there’s my point. By that house being at a first-time buyer entry point, it’s going to move very, very quickly, and it’s going to lower your carrying cost and increase your profit.
Michael Smith [00:45:54]:
Yeah, very interesting conversation. Like it. You’ve opened a lot of kinds of turned on a lot of light switches in my head here, where I’m thinking of different alternatives for funding and things you can do. We’re kind of almost at that point. Do you want to tell people how they can reach out, get in contact with you if they want to, A work with you, or B just get your book?
Jay Conner [00:46:20]:
Sure. Yeah. A great way to really get a great foundation as to what we’re talking about is my best-selling book, Where to Get the Money Now. And the subtitle is how and where to get money for your real estate deals without relying on traditional lenders or hard money lenders. And I’ll autograph the book. I’ll three day express it to you. The book is free; it just covers shipping. You can pick up the book at www.JayConner.com/Book.
Jay Conner [00:46:56]:
Again, that is www.JayConner.com/Book, and I’ll rush it right out to you. In addition. Oh, I’m also going to include two tickets to my live event, which is called the Private Money Conference. I put it on twice a year here in eastern North Carolina. These tickets are valued at $3,000 for two people. I’m going to include two tickets. You can come for free. Free.
Jay Conner [00:47:24]:
And another way to connect with me is to come over and check out my podcast. Obviously, you like podcasts. You’re listening to Mike and Ryan’s podcast here, Eggs, My podcast. I’m now in my eighth year of podcasting. The name of my podcast is Raising Private Money with Jay Connor. Raising Private Money with Jay Connor. I have two shows a week. We release them on Monday mornings and Thursday mornings now.
Jay Conner [00:47:52]:
Almost got 800 episodes now. I’m always interviewing other real estate investors who have already raised private money. And so I interview them on how they go about what their secrets are, how they go about raising private money for their real estate deals. And I guarantee you, you’re going to learn more ways to raise private money for your real estate deals. And we always have a lot of fun raising private money with Jay Conraitz on all the podcast platforms.
Michael Smith [00:48:22]:
That’s awesome. Well, thank you, Jay, so much. I really enjoyed this conversation. And thanks to everyone who tunes in every week. And we’ll catch you next time.
Narrator [00:48:43]:
Are you feeling inspired by the knowledge you gained in this episode? Then head over to www.JayConner.com/MoneyGuide, that’swww.JayConner.com/MoneyGuide, and download your free guide that shares seven reasons why private money will skyrocket your real estate investing business right now. Again, that’s www.JayConner.com/MoneyGuide to get your free guide. We’ll see you next time on Raising Private Money with Jay Conner.