Guest Appearance
Credits to:
https://www.youtube.com/@JohnCasmonMultifamily
“5 Steps to Raise Private Money with Jay Conner, Ep. 419”
https://www.youtube.com/watch?v=wkFic8doqB4
Securing funding is one of the greatest challenges real estate investors encounter, especially when traditional sources suddenly dry up. This was the reality for Jay Conner, who experienced a dramatic turning point in 2009. For years, he relied on conventional bank loans to fund his deals, but with the onset of the global financial crisis, his dependable stream of capital was abruptly shut off. Faced with the sudden closure of his line of credit, Jay Conner was forced to seek alternative ways to fund his investments—and what started as a setback soon became a catalyst for unprecedented growth.
The pivotal moment came with a simple phone call. Jay Conner reached out to fellow investor Jeff, who introduced him to private money—a different way to fund deals that doesn’t rely on institutional lenders or hard money brokers. This revelation inspired Jay Conner to quickly educate himself about private lending, particularly how individuals, rather than companies or funds, could serve as lenders using both personal and retirement capital.
The crucial difference between hard money and private money was a game-changer. Hard money typically comes from companies that raise funds from individuals, then lend at double-digit interest rates, often with origination fees and rigid terms. In contrast, private money involves direct relationships with individuals—people in your network who may have funds in savings or retirement accounts yielding low returns. With private lenders, the real estate investor has much more flexibility and often gets better terms, such as lower interest rates, no points or fees, and even the potential to borrow the entire purchase price and rehab costs with minimal upfront payments.
Recognizing these advantages, Jay Conner shifted his approach. Instead of desperately chasing down money, he adopted a teaching mindset, educating people in his network about the benefits of private lending. He never positioned himself as a salesman or beggar. Instead, he focused on value—demystifying the process for others and showing them how they could earn strong, safe returns secured by real estate.
His process began with identifying connections within his existing network, particularly focusing on retirees or people likely to have investible capital. He’d reach out to them casually, establishing rapport, and asking one powerful question to prequalify interest: whether they had investment capital or retirement funds that weren’t achieving attractive, secure returns. If the contact expressed interest, Jay Conner would share educational material—a concise audio overview explaining private lending’s key concepts and advantages, deliberately crafted to inform rather than persuade. The goal was to make people curious, not pressured, allowing them to self-select into learning more.
When a potential lender expressed further interest, Jay Conner would walk them through the exact program, explaining rates, terms, safety protocols, and how their funds would be secured by real estate with documentation like promissory notes, mortgages, or deeds of trust, and proper insurance and title protection. Only after all questions were answered and the lender verbally pledged funds would Jay Conner match those funds with a specific deal. He’d call with the key facts: location, after-repair value, required funding amount, and closing timeline—never asking if they wanted to participate, but instead simply informing them how and when their money would go to work.
This education-centric approach proved transformative. In less than ninety days, Jay Conner attracted over $2.1 million in new funding, surpassing what he had ever had from banks. Private funding enabled him to seize deals traditional investors couldn’t access during the foreclosure wave, tripling his business in a down market.
For real estate investors, Jay Conner’s journey underscores the power of education, mindset, and structured processes when raising private money. By focusing on teaching rather than asking, and by protecting his lenders’ interests at every step, he built a self-sustaining framework where the right people pursue him with investment capital. The key takeaway: Never chase, beg, or sell—instead, serve and educate. When you put others first and provide real opportunities, the money chases you.
10 Discussion Questions from this Episode:
- Jay Conner emphasizes the distinction between private money and hard money. How do these differences impact a real estate investor’s flexibility and control over their deals?
- In the episode, Jay Conner describes being unexpectedly cut off from traditional bank funding in 2009. How might today’s investors prepare themselves for similar disruptions in the lending environment?
- Jay Conner introduces a “magic question” when approaching potential lenders. What do you think makes this question so effective, and how could it be adapted for other investment opportunities?
- Discuss Jay Conner’s five-step process for raising private money. Which step do you think is most critical, and why?
- Why does Jay Conner advise never to ask potential lenders if they want to fund a deal? How does this approach change the dynamic between investor and lender?
- The episode stresses the importance of educating your potential lenders rather than pitching or selling to them. What are some effective educational approaches you would use?
- Jay Conner talks about only accepting funds via third-party entities or attorneys, rather than personal checks. What legal and practical risks does this precaution mitigate?
- How does Jay Conner structure legal protections for his lenders, and why is this essential to building trust with private investors?
- The mindset shift from chasing money to attracting it is a recurring theme. How can real estate investors develop this “teacher” mindset in their own networking efforts?
- Jay Conner shares a failure from early in his career—investing in a property without ensuring the rental income would cover carrying costs. What lessons can be drawn from this story for both new and experienced investors?
Fun facts that were revealed in the episode:
- Jay Conner was able to attract over $2.1 million in private money within just 90 days after learning about the concept, which helped him triple his business during a period when banks were not lending to real estate investors.
- Instead of asking for money directly, Jay Conner focuses on educating his network about private lending opportunities and uses a 16-minute audio, “Stress-Free Investing,” as a key part of his approach.
- Jay Conner never accepts personal checks from private lenders; all funds go through the appropriate entity to the attorney or closing agent, ensuring both parties are protected and minimizing risk.
Timestamps:
00:01 Private Money vs. Hard Money
05:45 Bank Cuts Credit Amid Crisis
08:02 Attracting Private Funding Quickly
12:25 Leveraging Self-Directed IRA Insights
16:01 5-Step Process for Deal-Making
18:42 Educate, Empower, and Streamline Decisions
21:43 How to Start Real Estate Funding
27:11 Retirement Account Best Practices
34:32 Lesson from a Real Estate Mistake
37:47 StairMaster for Focus and Productivity
39:30 Private Money Insights with Jay
Connect With Jay Conner:
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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
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Educate, Don’t Chase: The Stress-Free Guide to Attracting Private Investors
Jay Conner [00:00:00]:
Yeah, well, that’s what it was all about, being flexible enough to pivot with what was going on in the marketplace. And, you know, John, this was an experience, and I know you can relate to this, and, you know, your entire audience can as well. What happened was a blessing in disguise, and I didn’t know it was a blessing when this experience was going on. So by the way, when we say private money, I’m not talking about hard money or any kind of institutional money.
Narrator [00:00:32]:
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. 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, because the money comes first. Now here’s your host, Jay Conner.
Jay Conner [00:01:08]:
So here’s what happened. I tell you how I didn’t, how it didn’t happen. I just didn’t wake up one morning and say, ” Hey, I think I’m going to go raise some private money. No, it didn’t work that way. In fact, I didn’t even know what private money was prior to needing it.
John Casmon [00:01:23]:
And Jay, with that said, I mean, you made the distinction between hard and private. And to your point, I think a lot of people may not know that. Can you actually just define the differences between private money and hard money for all of our listeners?
Jay Conner [00:01:36]:
Sure. So first of all, hard money is typically a source of money. A hard money lender is typically a person or a company that goes out and raises private capital from individuals, human beings, and they have those individuals invest in their hard money fund. Okay. And then they will loan that money out to real estate investors, and they make their money by charging higher interest rates than they’re borrowing from the private lenders. They make money by origination fees or points. And so here’s the big differences. A private lender is an individual, a human being who loans money to real estate investors, either from their investment capital or from their retirement accounts, as opposed to a hard money broker or hard money lender.
Jay Conner [00:02:28]:
A hard money broker is typically a middle person. They’re charging much higher interest rates. You know, right now, the average interest rate, uh, where we are today,y is between 12% and 14% from a hard money lender. Some are lower, 10%, some are higher, but 12% to 14% is your average. Private money from individuals is 8%, right? Um, hard money lenders charge points and origination fees. Private lenders don’t. There are no points or origination fees. So it just puts us so much more in control.
Jay Conner [00:02:58]:
You know, for example, a big other distinction is a hard money lender is going to only advance you a percentage of your purchase price. Whereas private lenders loan me all the time, 100% of the purchase price. And if there’s going to be renovations or rehabbing involved, I get all that money up front. So your credit score has nothing to do with it in the world of private money. Hard money lenders are going to always pull your credit. There’s no verification of income because they are collateral loans. So the bottom line, as you know, John, the bottom line is private lenders, we’re doing business with individuals, whereas with hard money, hard money lenders make the rules, and we are doing business by their rules. You know, like in this world of private money, we structure deals so that there are no monthly payments or semiannual payments.
Jay Conner [00:03:49]:
Of course, in the world of hard money, they determine how often your payment’s gonna be. And then finally, at least for this segment, the hard money lender is going to set the length of the term on the note, right? In this world of private money, we set the term. Is it gonna be 12 months? Is it gonna be 2 years? Is it gonna be 5 years? So it puts us as the borrower and real estate investor in the driver’s seat.
John Casmon [00:04:15]:
I love it. Great insights right there, and I appreciate you breaking down the differences between hard money and private money. And just to recap that real quick, hard money is going to come from a fund or an institution, right? These are professionals who are lending money to make money. This is their business versus private money. An individual is a person that you’re working with, who is not necessarily in the business of loaning money, but they will certainly be interested in an investment opportunity. And that’s the reason they’re doing it. With the private money, you get to set all the terms. With the hard money, they’re setting those terms.
John Casmon [00:04:50]:
So you have a lot more flexibility when it comes to the private money. Now, you were starting to talk to us about how you actually uncovered this private money opportunity. Maybe you can tell us more there.
Jay Conner [00:05:01]:
Sure. So I remember it like it was yesterday, John. From 2003 to 2009, I relied on local banks, institutions, you know, regular conventional loans to fund my deals. And I remember it so clearly. It was in January of 200 that I called up my banker. I had 2 deals under contract at the time. And I had had this conversation with my banker many, many times for 6 years. I was going to tell him, in fact, I did tell him where the properties were located, the amount needed for the funding, the after-repaired values, and, you know, and I wanted to close.
Jay Conner [00:05:45]:
Well, my banker, whose name at the time was Steve, held silent on me, which is never a good sign when your banker or your significant other goes quiet, right? So finally Steve cleared his throat, and he said, “Jay, I’m sorry, but the bank has closed your line of credit.” And I said, “What do you mean, Steve, they closed my line of credit?” I mean, bear in mind, we’ve had this relationship for 6 years. I’ve never been late on a payment. I mean, it’s been beautiful. I’ve made the bank money, they’ve made me money, blah, blah, blah. And now I’m being cut off from the bank with no notice. He went on to say, Jay, he says, we’re just not loaning— the bank is not loaning money out to real estate investors anymore these days. Bearing in mind that it was in 2009. And as you alluded to, John, we all know what was going on between 2008 and 2009 with the global financial crisis.
Jay Conner [00:06:40]:
I just didn’t know I was part of that crisis until Steve told me I no longer had funding for my deals. So, we actually still have landlines in North Carolina. I was talking to Steve, I hung up the phone, and I thought to myself, what in the world am I going to do? Because I had these two deals that represented over $100,000 in profit. So, I hung up the phone, I sat here for a moment, and I tell you what, the mantra that I developed and created and started repeating in my mind when I hung up the phone was, Jay, it’s impossible to fail unless I choose to quit. Until you choose to quit. And that goes for everybody. You can’t fail until you choose to quit. So I called, I picked my phone back up, and I called my buddy Jeff, who lived in Greensboro, North Carolina, at the time.
Jay Conner [00:07:28]:
He was a fellow investor, a real estate investor, a good friend of mine. I called up Jeff. I told him what had just happened. He said, ” Well, Jay, welcome to the club. I said, ” What club? He said, the club of getting cut off from the banks and losing your lines of credit. I said, ” Well, what are we going to do? What are you doing? He says, well, there’s this thing called private money. I said, ” What’s private money? So I never heard of private money, never heard of private lending, never heard of self-directed IRAs. So let me tell you, John, I went to study private money right away.
Jay Conner [00:08:02]:
I learned about it. And in less than 90 days, I was able to attract $2,150,000 in new funding. And of course, in the world of syndication, $2,150,000 is not a lot of money, but it was a lot of money to me because I only had a million-dollar line of credit at the bank that I had just lost. And so I put my program on steroids. I started teaching people about private money. Um, there are really 3 categories of where you find private lenders: your warm market, your expanded warm market, and existing private lenders. I’ll talk more about that if you want me to. But I put on my teacher hat,t and I started teaching people that I knew and had some kind of relationship with.
Jay Conner [00:08:48]:
And very quickly, people started chasing me and trying to write me checks. By the way, don’t ever let a private lender write you a check. No, no, no. We’ll talk about how that works. But anyway, very, very quickly, John, I had more money for funding available to me than I had ever had in my life. And you know what’s interesting? This was a huge blessing in disguise. As you recall, John, back in 2008, foreclosures and 2009 foreclosures were at an all-time high. Um, and so, but here’s the deal.
Jay Conner [00:09:23]:
Real estate investors could not take advantage of those bank-owned properties unless they had the cash. The banks and mortgage companies weren’t loaning money out on them. You had to have the cash. So with this blessing in disguise, I was able to triple our business in the next 12 months by simply having the cash and the private money available.
John Casmon [00:09:47]:
It’s amazing, man. That’s amazing, Jay. So just playing that back, you talked about really getting cut off from the banks and from these lenders. And instead, do you talk to your buddy Jeff, Jeff tells you what he’s doing. Working with private lenders or private investors, right? So now you’re tapping into private money. You’re able to raise over $2.1 million in 90 days. And now you’ve got a brand new way of growing your wealth and growing these opportunities. And you triple your business during that timeframe.
John Casmon [00:10:18]:
Now, as we talked about private money, again, we’ve got everyone from single-family investors to multifamily syndicators, who we all know it’s important to be able to attract and grow with private money and private investors. How were you able to do that? Because from being introduced to this concept and 90 days later you’ve got $2.1 million raised, obviously,y you had to have either some relationships or some connections, or you had to figure out where to start. So where did you start?
Jay Conner [00:10:47]:
Yeah. So I started first of all with my mindset. So I decided right up front, I’m not going to chase. I’m not going to beg. I’m not going to try to sell. I’m not going to try to talk anybody into anything. I’m going to start by educating people that I have a relationship with. People in my cell, any kind of relationship.
Jay Conner [00:11:11]:
People in my cell phone, people on my email list, people who are on my Facebook friends list, um, etc. Any kind of social networks. People that I go to church with. People that I go to the Rotary Club with, right? And so I made a list of all my connections, right? And so my first step was making my list, making my list of people that I wanted to educate, and that I had some kind of relationship with. First, st I started making a list of retired people because you know, there are two primary categories of where people are going to get their money from to lend to us as real estate investors. They’re either going to lend to us from their retirement accounts— excuse me, their retirement money— or they’re going to lend to us from their just liquid investment capital. Well, the reason I started by making a list of people that I’ve got any kind of connection with that are retired, well, there’s a good chance they’ve got retirement money, pensions, 401(k)s from a previous employer, retirement funds in the stock market, et cetera. So I started with them.
Jay Conner [00:12:25]:
Now, I educated myself very, very quickly and very, very well on what self-directed IRAs are. The reason that was so important is that I knew over half of the private money out there that’s available is typically coming from retirement accounts when you’re talking about doing business with just individuals, right? Not institutional money, but individuals. So I made my list. And then the second thing that I did was I contacted my list of potential private lenders, and I had a simple casual conversation with them. So step 2 was a casual conversation.n They could take place over the phone or take place in person. And pretty much the outline of that conversation after a little chit-chat and, you know, pleasantry was, let’s say, John, let’s say you and I have known each other, you know, for years, you’re a friend of mine, you know, whatever. And I call you up, we have a little chat. I say, John, as you may know, I’ve been investing in real estate these days, and I’m getting ready to open up my business to people I know and trust because I’m positioning my company, my real estate investing company, to take advantage of the tidal wave of foreclosures that are going on right now and that are opening up.
Jay Conner [00:13:43]:
And I’m paying insane high rates of return, John, but unless you say yes to the following question, there’s no need for me to give you any additional information. And that question is, do you have investment capital or retirement funds not giving you a high rate of return safely and securely? That’s called the magic question. Do you have investment capital or retirement funds not giving you a high rate of return safely and securely? Now, John, if you say no, I know you’re broke because the local CD is right now only paying 0.17%. That’s less than a quarter percent in a 12-month certificate of deposit. But if you say yes, which means you do have investment capital or retirement funds that you’re not happy with the returns, then I go to step 3, and I send you my 16-minute audio titled Stress-Free Investing. That’s one of the first things I did, John, to put on my teacher hat. You see, I didn’t want to go around town chasing people, talking to people, you know, spending all that time. I just want to do a little bit of prequalification and then send them my 16-minute audio.
Jay Conner [00:14:53]:
Now, back in 2009, it was a CD. Today it’s an MP3 and also an audio and video on YouTube. So we just sent it to them. And that audio, which I titled Stress-Free Investing gives an overview of what private lending is. It doesn’t try to sell or talk anybody into what my program is. It just gets them introduced to it and gets their greed glands starting to swell up in their neck, to where they want to chase me. Step 4: I teach them what the private lending program is. If they express interest, I don’t chase anybody.
Jay Conner [00:15:28]:
And at the end of that 20-minute conversation of explaining how my private lending program works, they want to know how they can go to work. They tell me how much they have to work with, whether it’s investment capital or in retirement funds. And then, you know, step 5, they’ve given me a verbal commitment. Then I’ll go find a deal just as soon as possible. Now there’s a caveat, John, to those 5 steps. Let me give those 5 steps real quickly one more time. Number 1, now this is just for your warm market. This is just for people with whom you’ve already got some kind of connection.
Jay Conner [00:16:01]:
Step: Make your list the way I did it. Step 2: Have a short, casual conversation, which is what we call a pre-qualifying conversation, to see if they’re interested in information. Number 3, send them info. Which,h in my case, is a 16-minute audio. Step number: teach them what the program is. What’s the interest rate that you’re paying? What’s the length of the note? How are they protected in case you lose your mind and move to the Caribbean, right? How do they have virtually no risk? So number 2 is teach them, or excuse me, number 3 is send them the information. Number 4 is to teach them. And then number 5, you go find a deal.
Jay Conner [00:16:43]:
You know, you and I were talking before the show, John. I shared with you that the worst time to attract private money is when you need it for a deal, right? You already sound desperate, right? So we teach them. So they give us a verbal pledge. And step 5 is when we come back with the deal. I never pitch a deal. I never try to talk anybody into a deal. If it’s a single-family house, I call them up, and I only give them 4 pieces of information. John, if you’re my private lender, I call you up, and I say, ” Hey John, I got great news. I can now put your money to work.
Jay Conner [00:17:18]:
I already know how much you got. I already know if it’s retirement funds. If it’s retirement funds, I’ve introduced you to the IRA company that I have a relationship with. I got great news. I can now put your money to work. I’ve got a property in Newport after the repair value of $200,000. Funding required is only $150,000. You see, I know you got that because you already told me.
Jay Conner [00:17:39]:
Now, funding requires only $150,000. Closing is next Thursday. I need you to wire your funds by next Thursday to my attorney’s trust account. End of conversation. I didn’t ask them if they wanted to do the deal. Of course, they want to do the deal. They’ve been waiting for the phone call because their money ain’t making any money until you call them and put their money to work. Now that was just a lot I said right there, John.
Jay Conner [00:18:04]:
Unpack that for me a little bit.
John Casmon [00:18:05]:
Oh, it was, man. Listen, lots of great information. And you already recapped the 5 steps, so I won’t recap that a second time, but I think there are a few things that jump out to me. So first and foremost, we’re talking about having a conversation with that warm audience. These are people that you know, making that list, reaching out to people that you know to have that prequalification discussion. And the thing that jumps out to me is that you sent them something. That’s a powerful insight. I want to make sure any listener who is either attracting capital for deals or looking to work with private money, Jay just gave you a really, really great piece of insight.
John Casmon [00:18:42]:
If you can send them content that you created that educates them further on what the process is, how it works, and gets them ready. And the reason I love it, and I think this is probably one of the reasons you do it, is that it removes— it allows you to step back a little bit and let them self-select and educate themselves. Because if you’re doing all the education, right, as far as the person in front of the room, and you’re doing all the education, you don’t know if they’re really comprehending it, if they’re really understanding it, whether or not it’s truly for them or not. And you really do need to give them a moment to process that information. So if you have a piece of content that you can send them, that gives them the chance to take it all in, to process, and then they can start to formulate questions if they have questions. So I just love that little piece of information that you shared there. But then also going into that follow-up conversation, educating them, and then ultimately getting them an opportunity to say, “Hey, I’ve got great news. We’ve found a deal that looks great.
John Casmon [00:19:46]:
Here are the key things that we need, and boom, you just need to go ahead and wire your funds,s and we’re ready to move forward.” I love the fact that in there, you did not ask for money. You did not say, “Hey, do you want to invest?” Share a little bit more there because you said, “Hey, I already know how much they got.” And of course,e they want to invest because they’re not making much money anywhere else. How are you able to move forward with so much confidence in that conversation?
Jay Conner [00:20:12]:
Absolutely. Well, you know, I practice it, and I teach my students all the time. The most stupid question I could ever ask a new private lender. Now, if I’ve got a private lender, I mean, I’ve got 44 private lenders right now, 44 private lenders funding our deals, either from their investment capital or their retirement funds. And by the way, here’s an actionable item: establish a relationship with a self-directed IRA company that you can refer your new private lenders to, or potential private lenders that have retirement funds that want to learn how to transfer their funds over and earn unlimited money in returns per year, at least tax-deferred if not tax-free and penalty-free. Anyway, I digress, but that’s an important point, right? So when I say the most stupid question you can ask is if they want to do the deal. Well, first of all, they’ve already told me how much money they have ready to go. They’ve already told me they love the program.
Jay Conner [00:21:16]:
I didn’t ask them if they love the program. I teach them my program, okay? I teach them my program. And when I get to the end of it, I mean, it’s a 20-minute conversation. Like, if you can read, you can do it. So at the end of my conversation of explaining and teaching my private lending program, I finished. I shut up. Done. And now if they have any questions, they ask me or whatever.
Jay Conner [00:21:43]:
But typically at the end of that conversation, the question I get is, well, how do I start? Do I write you a check? What’s next, right? And so they’ve told me, and by the way, they don’t write me a check, right? They only send funds to the closing agent or the real estate attorney who’s handling the deal. So they’ve told me how much I got. So if I call them up and say, ” Well, here’s the deal, do you want to fund this deal? Well, you see, if I ask that question, now they’ve got doubt in their mind. Hmm. Well, should I fund this deal? Should I not fund it? Well, of course,e they should fund the deal because the deal that they’re gonna fund meets the criteria of the program that I taught them. For example, if it’s a single-family house and it needs major rehab, I typically don’t borrow more than 75% of the after-repaired value. Well, notice that little example I gave a moment ago. I got a property over here with an after-repaired value of $200,000.
Jay Conner [00:22:48]:
The funding requires $150,000. Did you hear that? That was 75% of the after-repaired value. So I’m not bringing to this private lender any kind of deal that is not going to meet what I already taught them that they’re going to be funding. So,o 4 things I tell them after I got good news. Number 1: 4 things to tell them over the phone. Number 1: Where is the property located? They couldn’t care less about the street address. What are the communities at Newport, Moorhead City, Beaufort, Havlock, whatever?. Number 2 piece of information is what the after-repaired value is.
Jay Conner [00:23:23]:
Now I’m talking here in the world of single-family houses. Obviously,y this is different in the world of syndication, but the money’s the same. It’s the same money. It’s just a matter of how you’re structuring the opportunity and how they are protected. So in this case, where’s the property located? Number 2, what’s the after-repaired value? Number 3: What’s the funding required? And number 4, when do you need to wire your funds? Boom. That’s it. And it’s like, again, that’s just another example of the mindset. I’m not chasing, I’m not begging, I’m not selling, I’m teaching. And then I— now this is in the warm market, people you have a relationship with.
Jay Conner [00:24:04]:
I’m teaching, and then I come back with good news, and they fund the deal.
John Casmon [00:24:10]:
Hey, great stuff, Jay. For my apartment investors, I think if you wanna take Jay’s second question on what’s the ARV, if you wanna flip that, the way I’m interpreting that question is, is this a good deal, right? And does this meet the criteria that you’ve been telling me about? So if that’s the case, think of another way of answering that question. Whether that is, again, based on the return projections or what you’re going in dollar value is, whatever it is that you lean on, think of it that way, because I think ultimately they’re trying to just confirm it. Okay, this is a good deal. This lines up with what you’ve been telling me up to this point. Jay, great information right there. You said something a couple of times. I want to make sure we address it directly.
John Casmon [00:24:52]:
You said you do not have investors write you a check. Why? And what is the reason behind that, and what’s the concern that could happen to someone if they do write a check?
Jay Conner [00:25:03]:
Yeah, well, there are multiple reasons as to why I would never want a private lender to write me a personal check. And by the way, these new private lenders that you’re teaching, you know how this works. They don’t know. They don’t know. They don’t, they don’t know. Right. There’s, I mean, there’s a 5-letter word that starts with T in this world that’s got a lot to do with you getting funding, and that’s called the word trust. So first, we want to know how to do it to protect them, to protect ourselves, so liability and risk are reduced to very, very minimal.
Jay Conner [00:25:42]:
So first of all, the private lender is not going to write me a check personally because,e first of all, it’s not me personally that’s borrowing the money. It’s my LLC, it’s my entity, it’s whatever entity that is actually purchasing or investing or developing the property. So first of all, their check is going to be written to the entity that they are investing in. Like, you know, in the world of single-family houses, in contrast to syndication, they would be— my LLC buys the houses, right? So the private lender is loaning money,y and it’s being secured by that property. We call these one-offs.
John Casmon [00:26:29]:
One-offs.
Jay Conner [00:26:30]:
You got a private lender or a couple of private lenders that are loaning money, ey, and it’s being backed by that real estate that you’re buying, right? So that’s, first of all, I’m not borrowing the money, my entity is. Secondly, if they write you a check personally, all kinds of things can go wrong. First of all, you’re not protecting them. And second of all, you’re putting yourself out to dry because if something goes awry, now not only is your investment company on the hook, but you personally are on the hook.
John Casmon [00:27:11]:
Yeah. And I’ll add one more thing to that. If they are using a retirement account, you want to make sure that they’re writing the checks out of the correct account as well, because if they’re using money from that retirement account and then, you know, somehow writing a check from their personal account or somehow mixing that up, it could get really, really messed up and it could jeopardize that tax haven that they have with that retirement account as well. So,o really great insight. So, you definitely want to make sure that no personal checks are used. Everything is from the entity to the entity, and just keep it clean when you’re doing that. One last point there, you talked about the investment or the loan being secured by the property. How are you doing that? Are you doing a promissory note, or what are you doing from a legal standpoint to structure and protect their investment?
Jay Conner [00:28:01]:
Great question, John, and I’m glad you asked it. So here’s how you protect your private lender when, say, doing single-family houses, or actually it could be if you’re doing small apartments, duplexes, triplexes, et cetera. So here’s the documentation. First of all, obviously, if we are investing in a property, we’re not gonna invest in a property unless we at least have either an appraisal, or if it’s a single-family house, I’m at least gonna have a comparative market analysis of an after-repaired value from my realtor or whoever’s doing my valuations. So I have that on hand in case the private lender wants to see it. Interestingly enough, since 2009, I’ve never had one of my private lenders even ask to see the appraisal or ask to see their comparative market analysis. They’re trusting me to be investing in, you know, well thought out, researched, all the vetting and due diligence has been done before I’m gonna be investing in this property. The documentation, however, is always received by the private lenders on every deal that we do with them.
Jay Conner [00:29:09]:
Number 1, the promissory note. Well, what’s the promissory note? Very simple. The promissory note lays out who the borrower is. That’s our entity. Who’s the lender? That’s the private lender. Typically, they’re lending in their individual name. They don’t have an LLC that they’re loaning from. Typically, it’s just them.
Jay Conner [00:29:27]:
We call it mom-and-pop money. So the promissory note lays out the borrower, who’s the lender, what’s the interest rate, okay? What is the, what’s the term? What’s the length of the note? What’s the frequency of payments? Now you see, we can structure,e and you can structure deals so that you don’t make any payments at all until you cash out on the deal. You see, you’re in control, you’re in the driver’s seat, you get to determine that. But what’s the frequency of payments? Now, in all of my promissory notes, I give my lenders what’s called— and this is only in the world of single-family houses, all right, not syndication, but in the world of single-family houses— I give them what’s called a 90-day call option. Okay. Which means if they have an emergency come up and they need to call their note due early, all they gotta do is give me a 90-day notice. Now I don’t even need that. I can replace their money in a week.
Jay Conner [00:30:23]:
‘But give me a 90-day notice. That gives me plenty of time to replace their loan or their investment with us, with another private lender.’ That just lets them sleep better at night. They know they can get their money back early if they need to. But remember, it’s your program. You don’t have to offer a 90-day call option. I just know I’m able to raise more money if I do. So that’s the promissory note. All right.
Jay Conner [00:30:47]:
In addition to that, they get a— depending on the state that the property is in, they’re gonna get either a deed of trust, like that’s how it is here in North Carolina, or they’re gonna get a mortgage. The same thing. It just gives your lender the legal right to foreclose in case you don’t keep up your end of the bargain, right? So people ask me all the time, well, Jay, how, you know, particularly a new student, who’s gonna loan me money if I’ve never borrowed money before from private lenders? And I’ll tell you why they’re gonna loan you money if you’ve never borrowed money before. Because, and this is a writer downer, if you don’t pay the private lender, the property does. If you don’t pay the private lender, the property does. Now that only works in the world where you’re giving a mortgage or a deed of trust to protect, you know, their loan to you. And then finally, or not finally, they’re also named on the insurance policy for the property as the mortgagee. Very important.
Jay Conner [00:31:44]:
So, you know, when you borrow money from a bank for a house, the bank is named as the mortgagee. In this case, with private lenders, they’re named as the mortgagee. The reason for that is that it protects them if there’s a claim, an insurance claim, or a total loss. Well, the insurance company is going to make the check payable to the end— to your private lender and to you. So you see, the private lender’s got to sign off on that check, so they are protected. And then finally, they’re also named on the title policy as an additional insured. In case there are any title problems down the road. Now, who prepares these documents? Not you, not your assistant.
Jay Conner [00:32:22]:
The real estate attorney prepares all these documents for every closing. And I’ve got a simple document that my students and I use, which is called the Closing Agent’s Instruction Sheet. It’s one little document. It’s got 12 lines to fill in: who’s the borrower, who’s the lender, principal loan amount, et cetera. We emailed that to our real estate attorney’s paralegal. Our closing documents are prepared within 24 hours.
John Casmon [00:32:48]:
Jay, great information right there. And I know you’ve got a lot more available on your website. As a matter of fact, you’ve got a free download, this PDF that you’ve written, great insights there. If you all want to check that out, jayConner.com/moneyguide, and that’s filled with more information, kind of walks you through that stress-free investing strategy that you just talked about there. But just for real quick on that, that money guide, tell our listeners what they’ll get when they download that.
Jay Conner [00:33:17]:
Sure. And just to make sure, um, when you’re listening, you know that I’m an ER, not an OR. That’s J-A-Y, www.jayconner.com/moneyguide. And I just finished writing it. As a matter of fact, the title is 7 Reasons Why Private Money Will Skyrocket Your Real Estate Business and Help You Build Incredible Wealth. So here’s the deal. Whether you are a brand new investor or you are a seasoned real estate investor, this guide that I just finished writing will put you on the fast track to doing private money just like I do, where people will be chasing you instead of you chasing the money. You know, John, it’s been in my experience that every time I chase money, it eludes me.
Jay Conner [00:34:07]:
It seems to escape me. It just disappears. But when I have a servant’s heart, a nd I put on my teacher hat, now the money is chasing us.
John Casmon [00:34:17]:
There you go, Jay. I appreciate you giving us that feedback and guidance and great words to live by, especially if you are looking to attract capital for your deals. Give me a failure or an apparent failure that set you up for later success.
Jay Conner [00:34:32]:
Well, one figure that comes to mind, John, is when I first started investing in real estate way back in 2003. In my first 12 months, I made one huge mistake that I’ve not made since. I invested in a property on the beach. It was, it was a resort property. I invested in a property with the intention of flipping it. Here’s the mistake I made. I did not calculate what rental income I could bring in in case I was stuck holding that property, ty tosee ife that rental income would cover my carrying cost. Oh boy, was that a big lesson, because when I invested in that, the value had started coming down, it’s very volatile in resort and luxury areas, and so it became a bloodbath,h John, a bloodbath.
Jay Conner [00:35:25]:
I had to start renting that property out to stop the bleeding, but the monthly income did not cover my carrying cost, and so I carried that property much longer than I had anticipated. So the lesson learned is and was, when investing in real estate, even if you intend to get in and get out, be sure to calculate that the property will carry itself in case you’re holding it for the long term.
John Casmon [00:35:55]:
Give me a digital or mobile resource you recommend for your business.
Jay Conner [00:36:01]:
DealMachine.com. So DealMachine.com, you’ve probably heard of it. In fact, I’m friends with the founder of that app. And the way DealMachine.com works is you download the app, and if you’re already a real estate investor, that does this strategy called driving for dollars, looking for properties that are vacant or rundown. You or your assistant or somebody on your team just takes a picture of that property, and because of the software and the app, it automatically does a skip trace and starts mailing postcards to the owner of that property.
John Casmon [00:36:36]:
All right, give me a book you’ve recommended or gifted the most in the last year?
Jay Conner [00:36:42]:
Well, that would be my book.
John Casmon [00:36:44]:
All right, besides your book.
Jay Conner [00:36:47]:
Besides my book, um, actually, I have given this book more to in the past year than any other book, and that is The Go-Giver. The Go-Giver. Have you heard of that book, John?
John Casmon [00:37:00]:
I have. I’ve read it. It’s a really, really good book. You should definitely check that one out.
Jay Conner [00:37:04]:
Yeah, and they actually have 4 in the series, but I recommend starting with the red cover. The red cover, that’s the original. It’s a parable that will— well, first of all, let me tell you who should not read this book. Here’s who should not read this book. If you do not,t at the core of your heart, have a servant’s heart, if you’re really not interested in helping other people, don’t waste your time by getting the book. But if you really are interested in helping other people and making an impact, order and get The Go-Giver.
John Casmon [00:37:43]:
Give me a daily habit that helps you stay focused on your goals.
Jay Conner [00:37:47]:
Stairmaster, 22 minutes, 300 calories. And I do it, actually not for my health, but for the blood in my brain. Brain flow. When I finish StairMaster, and in fact, it’s actually a StairMaster, John, it’s 20 years old, right? And so I get on the StairMaster, and when I don’t get on the StairMaster, I’m not on top of my game as much as I can be. It keeps me focused. I get more done, and I’m relaxed while I’m working. Makes all the difference. And if somebody’s not into StairMastering or that kind of thing, take a walk for 1 mile in the morning, a walk for 1 mile.
Jay Conner [00:38:27]:
You’ll be creative. You’ll have creative ideas come to your mind, and it will make all the difference in your day and your productivity.
John Casmon [00:38:36]:
Give me your number 1 insight for attracting private money.
Jay Conner [00:38:41]:
Never ask for money. Never chase, never beg, never sell. Put on your teacher hat, educate people. And the money will chase you.
John Casmon [00:38:50]:
There you go. All right, let’s lighten the mood. I know you are in Morehead, North Carolina, and all over in that area. Give me your favorite place to grab a bite to eat.
Jay Conner [00:39:00]:
Well, that’s going to be hard to do, John, because my wife Carol Joy and I never cook at home. We always go out to eat. So the first one that comes to my mind— oh my word, there are so many here. It’s Morehead City, by the way. Morehead City, North Carolina. I’m going to say Soundside Restaurant. Soundside Restaurant in Moorhead City. Miss Barbara and her daughter Lauren run it, and it is some mighty good food.
John Casmon [00:39:30]:
There you go. I love it. Jay, you gave us a lot of great information breaking down what private money is, how to attract it, what not to do if you are looking to attract private money, and also just understanding the differences there about how you can actually help not just yourself, but help other people get their money to work and get much better returns than they can get right now sitting in a savings account or a CD. And in many cases, even in the stock market. So,o really great insights right there. Again, for anyone who wants to download that money guide, go to jconner.com. That’s Conner, C-O-N-N-E-R, jconner.com/MoneyGuide, capital M, capital G, Money Guide. And Jay, I just want to thank you again for coming on Multifamily Insights.
John Casmon [00:40:13]:
You gave us great information, and I hope you have a great day, John.
Jay Conner [00:40:18]:
God bless you. Thank you so much for having me.
Narrator [00:40:29]:
Are you feeling inspired by the knowledge you gained in this episode? Then head over to www.JayConner.com/MoneyGuide. That’s www.JayConner.com/MoneyGuide. Download your free guide that shares 7 reasons why private money will skyrocket your real estate investing business right now. Again, that’s jayConner.com/moneyguide to get your free guide. We’ll see you next time on Raising Private Money with Jay Conner.