Investing in real estate can be an avenue toward financial freedom, yet many find it challenging to break the barrier of funding to initiate or scale their endeavors.
Enter the world of Private Money — a realm where opportunities abound for those who understand its dynamics. Jay Conner, an acclaimed real estate investor, and national speaker, sheds light on this topic as he joins Keith Borie on The Wealth Flow Podcast.
Jay, who excels in raising capital independently, brings insights into his transition from traditional bank loans to Private Money during the 2009 financial crisis. His story serves as a testament to the empowering nature of self-directed funding.
Adopting the Right Mindset
The cornerstone of success in private financing, according to Jay, is mindset. ‘You can’t own real estate until you own the real estate between your ears,’ he advises, emphasizing the importance of confidence and education in the field. For many real estate investors, the mental shift from seeking loans to offering secure, profitable opportunities to private lenders is a game-changer.
The Private Money Blueprint
In a refreshing departure from bank loans’ stringent criteria, Private Money flips the script. Investors craft their lending programs, dictating mutually beneficial terms. Interested individuals can achieve high returns with security, by tapping into investment capital or retirement funds via self-directed IRAs. This approach not only democratizes real estate investment but also fosters passive income streams for lenders.
Education and Networking: Building Your Investor Pool
Education is paramount in expanding one’s pool of private lenders. Jay practices this by conducting luncheons and informational sessions, casting himself in the role of a teacher rather than a deal-pitcher. This strategy has enabled him to develop a network of 47 private lenders, each previously unaware of the potential of Private Money.
The Mastermind Approach to Real Estate Investment
Jay Conner advocates for joining mastermind groups and seeking mentorship as essential steps toward mastering real estate investment. The collective wisdom and support from experienced members can significantly shorten the learning curve and increase the probability of success.
Commendation for ‘The Go-Giver’
Additionally, Jay looks to literature for inspiration, recommending “The Go-Giver” as an impactful book that resonates with his philosophy on providing value and building relationships in business.
Harnessing the Power of Self-Directed IRAs
One of Jay’s key strategies involves leveraging self-directed IRA companies for real estate deals. QuestTrust, a company based in Houston, Texas, earns praise for exceptional customer service and quick deal funding. Through teaching others about the use of self-directed IRAs for investment, Conner fosters a cycle of education and empowerment.
A Formula for Ongoing Success
Jay’s system does not rest solely on initial education, but on nurturing long-term relationships with private lenders. This involves protecting their interests with agreements that ensure flexibility and security, like loan modifications and collateral substitutions. Such considerations cement trust and underline the imperative of looking after one’s investors.
In the quest to harness Private Money for real estate investments, this episode provides vital cues for navigating the process successfully. Whether you’re an up-and-coming investor or seasoned in the field, considering private funding as part of your investment strategy may well be the pivot toward accelerated wealth and financial autonomy. With wisdom from industry experts like Jay Conner, stepping into the realm of real estate through the power of Private Money seems not only possible but promising.
Protecting Private Lenders in Real Estate:
“So, really, the responsibility is on us to protect and look after our private lenders, because, after all, we’re not looking for a short-term relationship. We’re looking for a very long-term relationship.” – Jay Conner
10 Questions Answered From This Episode:
- Can you provide a brief overview of the differences between investing in single-family housing versus commercial real estate, as discussed by Jay Conner?
- Jay Conner places significant emphasis on having a mentor or joining a mastermind group when starting in real estate investing. Why does he believe this is crucial for success?
- Jay Conner recommends “The Go-Giver” as an impactful book. How does its message align with Jay’s approach to real estate investing, according to the episode?
- What are some key insights Jay provides about real estate investing and private funding on his podcast “Raising Private Money”?
- Jay Conner talks about the advantages of using a self-directed IRA for real estate deals. Can you explain how this works and why it’s beneficial for private lenders?
- In the discussion, Jay mentions having 47 private lenders invested in his deals. What strategies does he use to build trust and maintain long-term relationships with his lenders?
- How does Jay Conner approach the educational aspect of private lending to ensure potential private lenders are well-informed before deciding to invest?
- In the episode, Keith Borie and Jay Conner discuss the 90-day option to call the note on private funds. What are some misconceptions about Private Money that this feature might dispel?
- How does Jay Conner tailor the payment frequency for private lenders to maximize benefits for all parties involved in a real estate deal?
- Jay talks about his method of educating people on Private Money, including private lender luncheons. How important is face-to-face interaction in raising private funds, and what are some key points he makes during these luncheons?
Fun Facts:
One fun fact is that Jay Conner automated his real estate investment business and astonishingly raised $2,150,000 in Private Money after losing his bank funding.
Another is that he has built a network of 47 private lenders who invest in his deals.
Lastly, Jay Conner teaches people about Private Money and real estate investment through unique methods like hosting private lender luncheons.
Timestamps:
00:01 – Accelerate wealth growth through passive real asset investing.
06:03 – Funding for real estate deals suddenly cut.
08:56 – Teaching private lending, not asking for it.
10:01 – Teach, share, and raise money for investments.
14:02 – Private lending offers easy, passive real estate investment.
18:31 – Build referral relationships to secure funding success.
23:06 – Private lenders have a 90-day call option.
26:45 – Key to raising private funds: mental preparation.
27:30 – Private lenders’ impact on retiring individuals discussed.
31:32 – Private lenders choose payment frequency; flexibility key.
36:21 – Finding private lenders through networks and coaching.
37:18 – Existing private lenders are individuals loaning money.
41:55 – Commercial real estate takes longer for payout.
44:27 – Commercial market shaky, property values fluctuate.
47:05 – Get a mentor or coach for success.
Connect With Jay Conner:
Connect With Jay Conner:
Private Money Academy Conference:
https://www.JaysLiveEvent.com
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 #PrivateMoney #FlipYourHouse #RealEstateInvestor
YouTube Channel
https://www.youtube.com/c/RealEstateInvestingWithJayConner
Apple Podcast:
https://podcasts.apple.com/us/podcast/private-money-academy-real-estate-investing-with-jay/id1377723034
Facebook:
https://www.facebook.com/jay.conner.marketing
Twitter:
https://twitter.com/JayConner01
Pinterest:
https://www.pinterest.com/JConner_PrivateMoneyAuthority
Transforming Real Estate Deals with Private Lending Featuring Jay Conner
Narrator [00:00:01]:
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 [00:00:30]:
How do you even start Raising Private Money? I can tell you where you start. You gotta get your head straight. I tell people all the time, that you can’t own real estate until you own the real estate between your ears. So we gotta get the mindset right.
Narrator [00:00:41]:
Are you like most sales and other professionals who want to grow their wealth faster than what they are currently doing through their company 401k, even with that company match, the stock market, or just plain saving money? Would you sleep better at night if you had the financial freedom to be job-optional in just 3 to 5 years through investing in real assets? Maybe you don’t want to stop working, but wouldn’t it be cool if you could retire a decade earlier than most and do the traveling you and your family have planned for years while you’re still young and can enjoy it? Let’s face it. Most busy professionals don’t have the time or desire to take on more work outside of their w two to grow their wealth. On the wealth flow, each week we share the stories, and the investments, and take a deep dive into the various asset classes that can deliver that accelerated growth to your portfolio passively. That’s right. No extra work for you. Instead, we’ll put your money to work. Learn what the 95% aren’t talking about, and join the top 5% of earners today on the wealth flow.
Keith Borie [00:01:51]:
Okay. Welcome to the wealth flow. My guest today is Jay Conner. Jay has been buying and selling houses since 2003 in a town of only 40,000 people with profits now averaging $78,000 per deal. He has rehabbed over 475 houses. He’s been involved in over $118,000,000 in transactions. Jay has completely automated his annual 7-figure income business to where he works in buying and selling houses, and businesses. And 2, just 10 hours a week.
Keith Borie [00:02:31]:
Can’t wait to hear about that, Jay. And then his passion is motivating and teaching other real estate investors how to raise private money without ever asking for it. As a result, Jay has consulted 1 on 1 with over 2,000 real estate investors. When he lost his line of credit back in 2,009, Jay raised 2,150,000 in less than 90 days in private money when cut off from the banks. Jay is also a commercial developer of shopping centers and condominium communities. He’s a national speaker on topics of private money, foreclosures, this side of COVID-19, automation of your business, and personal development. In addition, Jay is a 2-time national best-selling author and a past president of the Business Network International. Jay, welcome to The Wealth Flow.
Jay Conner [00:03:30]:
Hello, Keith. Thank you so much for inviting me to come along. And my lands, We’re gonna be talking today about my favorite subject I’m so passionate about, that being private money and private lending. And I’m so passionate about it because it’s made more of a difference in our real estate investing business than any other strategy or business practice that we do.
Keith Borie [00:03:51]:
That’s fantastic. I always like, Jay, to start with kind of where you grew up and what eventually got you into real estate.
Jay Conner [00:04:00]:
Sure. Well, I grew up here in Eastern North Carolina. And I grew up around my dad and his company, which was he was in mobile homes or manufactured housing. And, Keith, you’ve been out there in Texas. You’ve probably seen a few mobile homes along the hillside out there in Texas. Well, the mobile home business, manufactured housing, if you will, was very good to our family for many, many years. My dad’s company was the largest retailer of manufactured homes, that being affordable housing, for many, many years. But then, unfortunately, the financing for that product went away for the consumer.
Jay Conner [00:04:42]:
So I knew if I ever got out of manufactured housing and mobile homes, I wanted to get into single-family houses. And so it was in 2003 that my wife, Carol Joy, and I started investing in single-family houses here in Eastern North Carolina. In our 1st year in 2003, we only did three flips, and I relied on the local banks to fund our deals. That’s all I knew to do. And so from 2003 until 2009, the 1st 6 years that we were here in the business investing in single-family houses, we relied on institutional money, and local banks to fund our deals, but then something happened in January 2009 that changed everything.
Keith Borie [00:05:27]:
And what would that be, Jay?
Jay Conner [00:05:29]:
Well, I don’t know if you want me to tell that story now or not.
Keith Borie [00:05:32]:
Please do.
Jay Conner [00:05:35]:
Because that changed everything. You know, I remember it, Keith, just like it was yesterday. I was sitting here at my desk, this very desk, in January 2009. You may be hard to believe, but we still have handsets and cords attached to telephones here. A lot of people don’t even know what a landline is. But I was sitting here and I picked up the phone and I called my banker. His name was Steve. I’d called my banker many times on deals for 6 years.
Jay Conner [00:06:03]:
I called him up, and, Keith, I told him about these 2 houses that I had under contract to close on. So I told him about the deals like I’d done for 6 years and, you know, the funding required and when I wanted to close. Well, I learned very quickly in that telephone conversation that the bank had closed my line of credit with no notice. And I said, Steve, I said, what do you mean why are you closing my line of credit with no notice? He said, Jay, don’t you know there’s a global financial crisis going on right now worldwide, and everything is shutting down? I said, no, Steve. I didn’t know that. But now you just gave me a global financial crisis in my little world to where I can’t fund my deals. Right? He said, sorry, Jay. Not loaning money out to real estate investors anymore.
Jay Conner [00:06:53]:
So my first thought was, you know, I sure wish I had known my line of credit had been closed before I put earnest money down on these two properties. And then my second thought was, what am I gonna do? Now let me tell you something, Keith. I can’t stand these people running around all the time saying, oh, every problem’s an opportunity. I wanna throw up. I didn’t have an opportunity, I had a problem. Right? This was a problem. So I sat here, I sat here for a second, and I thought to myself, and here’s a rider downer for those of you that are listening. Anytime you have a problem, here’s how to fix your problem.
Jay Conner [00:07:29]:
I asked myself, who do I know that can help me with my problem? And I immediately thought of Jeff Blankenship who lived in Greensboro, Greensboro, North Carolina at the time. He and I were good friends and still are. He was investing in real estate back then. I called him up, and I told him what had just happened, losing my line of credit at the bank. And he said, well, welcome to the club, Jay. I said, what club? He said the club is being shut down by the bank. They shut me down last week. And I said, well, how are you gonna fund your deals? He said, well, have you ever heard of private money? And I said, no.
Jay Conner [00:08:06]:
He said, have you ever heard of self-directed IRAs? I said, no. So he told me a little bit about them, and I started studying private money and private lending and how people can use their investment capital to make high rates of returns safely and securely. In addition to that, how people can use their retirement funds that they’ve already got and transfer them over to a self-directed IRA and then invest in real estate passively. So I put together, Keith, what I call my private lending program. So what’s my private lending program? My program is what I teach other people how to be a private lender. You know, it’s interesting. Carol Joy and I right now have 47 private lenders. Individuals, human beings that are loaning us money, investing in our deals.
Jay Conner [00:08:56]:
And you know what, Keith? Not one of them had ever heard of private money and private lending until I put on my teacher hat and started teaching people what private money is. Here’s the interesting thing. You know, the traditional way to borrow money for real estate is you go to the bank or you go to the hard money lender or traditional lender, and you get on your hands and knees, and you put your hands underneath your chin. You say, please fund my deal. Right? Applications, credit scores, verification of income, and all that. Here’s the interesting thing, Keith. In this world of private money, the way I do it and the way so many other people do it now that I’ve been able to teach how to do it, We don’t ask for a mortgage. We offer a mortgage.
Jay Conner [00:09:43]:
You see, when I was borrowing money from the banks, they made the rules. The bank sets the interest rate. The bank sets the frequency of payments. The bank made the rules. But guess what? In this world of private money, we make the rules. It’s my program. I’m teaching it. I’m offering it.
Jay Conner [00:10:01]:
I’ve never asked for money since I lost my line of credit, and I’ll finish my sentence with this and turn it back to you, Keith. People ask me all the time. I said, Jay, how do you have 8 and a half $1,000,000 of funding for your real estate deals that you use from project to project to project, and you never ask for money? Here’s the secret sauce and the secret answer. I separate the conversation between teaching people. That’s how I raised $2,150,000 when I was cut off. I just started sharing with people in my network. People I go to church with, people in the Rotary Club, people in Business Networking International, that I had now opened up my real estate investing business to people that I know and trust, and here’s how you can make high rates of return safely and securely. So I taught them the interest rate I was paying, how they’re protected, and how they can get their money back in case of emergency.
Jay Conner [00:10:57]:
But I didn’t bring up a deal in the conversation Because you see, here’s another rider downer. Desperation’s got a smell to it. Okay? Desperation got a smell. The worst time to be raising money is when you need it for a deal. So I separate the conversations between teaching what private money is to a potential private lender, a human being just like you and me. And then when I’ve got a deal for them to fund, I then pick up the phone and I call them with what I call the good news phone call. Well, the good news phone call simply tells them 4 things about the deal. You see, they’ve already told me how much money they’ve got to work with, and they like the program, and they like the rates of return that we pay.
Jay Conner [00:11:40]:
I say, well, I’ll put your money to work for you just as soon as possible. If they’ve got retirement funds, I introduce them to the self-directed IRA company in Texas that I recommend for them to move their retirement funds over to fund my deals. So then I give them the good news phone call. I call them up. I say, I got great news. I can now put your money to work. I got a house in Newport with a after repaired value of $200,000. The funding for the deal is 150,000.
Jay Conner [00:12:09]:
They’ve already told me they got a 150, so I’m matching the deal up to them. Closing’s next Tuesday, so you’ll need to have your funds wired to my real estate attorney’s trust account by next Monday. I’m gonna have my attorney email you the wiring instructions. End of conversation. Notice I did not ask them if they want to fund the deal. Of course, they want to fund the deal. They’ve been waiting for the good news phone call for me to put their money to work. And particularly, if I have introduced them to the self-directed IRA company, and they’ve moved their funds over, they’re waiting for the phone call because they’re not making any money until I put their money to work.
Keith Borie [00:12:49]:
I love that. That’s great. And I agree with you that desperation has the smell for sure. Tell me a little bit about you know, I know talking just a little bit before the show, you’d mentioned that you’re primarily in residential. But tell me a little bit about, like, what a typical deal is, and are all these deals that you and your wife are doing together, or are you helping to raise the money for maybe outside investors that are raising for their deals?
Jay Conner [00:13:17]:
Both.
Keith Borie [00:13:18]:
Okay.
Jay Conner [00:13:19]:
So all of our deals that we invest in are here locally in Eastern North Carolina. But I’ve got an amazing mastermind family of members in that mastermind elite group that I work with, and I help them raise, you know, money for their deals as well. So I’m doing deals here, but I’m helping other people raise money as well.
Keith Borie [00:13:44]:
That’s great. What are some of the things in talking with individuals that, you know, maybe they have this nest egg that they’ve been wanting to put to work? What are maybe some of the misconceptions or things that were surprising to them when it comes to being able to invest in some of your deals?
Jay Conner [00:14:02]:
Well, one thing that was so surprising is how easy we make it for private lenders to invest with us. I don’t want them to have to do anything except just sit back, collect checks, and watch their accounts grow. So being a private lender is just a wonderful way to be passive in real estate we’re a private lender, don’t have to go negotiate deals. They don’t have to market for deals, find deals. If there’s renovations or rehab involved, they don’t have to, you know, oversee that. So probably the biggest surprise to a private lender when they come on with us is how easy it is. I mean, you know, like, if they’re gonna be using retirement funds to invest and they’re not happy with the returns or maybe they’ve got the retirement funds invested in the stock market, and they’re just sick and tired of the volatility of the stock market. You know, once we explain the program to them and how it works, what they love about it is, number 1, they make a lot of money, more so than, you know, they don’t have the volatility in the stock market or the local CD.
Jay Conner [00:15:10]:
The second thing they love about it is you see we’re not borrowing unsecured funds. Legally, we can borrow unsecured funds, but we don’t borrow unsecured funds. We back every promissory note with a deed of trust or mortgage, one of the same things that collateralizes the note. We back that note with the real estate. In addition, what they love and they get surprised about is how well they are secured and protected. We name our private lenders on the insurance policy for that property as a mortgagee. You see, the private lender is not a joint venture partner. The private lender is acting in the same capacity as the local bank, and we give our private lenders the same security, the same protection as the local bank would have.
Jay Conner [00:15:59]:
So, therefore, their name is the mortgagee on the insurance policy. If there’s ever an insurance claim on that property, the insurance company makes the check payable not only to you, the owner of the property, or your entity, but also make the check payable to the mortgagee. I mean, the private lenders gotta sign up on that check. We also give the private lender make them an additional insured on the title insurance policy in case there are any title issues down the road. So many times these private lenders 47 of our private lenders had never heard of private money or private lending until we taught them about it. And so, really, the responsibility is on us to protect and look after our private lenders, because, after all, we’re not looking for a short-term relationship. We’re looking for a very, very long-term relationship. Some of our private lenders have been with us and still are with us ever since 2009.
Keith Borie [00:16:55]:
Oh, wow. Okay. That’s pretty amazing. So most of them, they’re not familiar at all with the fact that they can be a private lender. Jay, one of the things I always find a little bit surprising, you know, I got my start in rental property, but I did everything. It was all hands-on, right? There’s a huge difference between doing that, even though that’s how most people seem to start in real estate just participating like one of these investors and not having to deal with the day-to-day, all of those additional things, have, as you mentioned, the steady return that comes in. But, yeah, tell us, I guess, maybe a little bit about some of the surprises that you’ve seen there, but also if you don’t mind talking a little bit more about the self-directed IRA piece as well.
Jay Conner [00:17:43]:
Well, that’s huge right there. So here’s another rider downer. If you’re looking to raise funds for your real estate deals, establish a relationship with a reputable self-directed IRA company. It’s also known as a third-party custodian. And here’s the reason you want a relationship with a self-directed IRA company. You see, over half of our 47 private lenders, over half are using the retirement funds that they already had in place. It was either a 401 k from a previous employer or a current employer, or they had retirement funds invested in the stock market. So over half of our private lenders already had these retirement funds in place, but they weren’t happy with the return.
Jay Conner [00:18:31]:
Well, you see, if I didn’t already have a relationship with the self-directed IRA company to refer my new potential private lender to, I’d be missing out on over half of my funding. So I’ve done business and referred more than one self-rated IRA company to my private lenders, some have great customer service, and some do not have great customer service. But the important thing is for you to have that relationship in place so that when you’re talking with a new potential private lender and what I call your warm market or your network, and you’re having a conversation, then you learn they have retirement funds that they’re not happy with. Well, unless you have that relationship in place with a self-directed IRA company, you don’t have anywhere to recommend or refer these people to, and you’ll miss out on that funding.
Keith Borie [00:19:25]:
Yeah. That makes sense. And you mentioned a company in Texas. Do you mind mentioning on the show who that is that you typically refer to?
Jay Conner [00:19:33]:
Absolutely. Let me tell you something. These people, this company, hands down, are the best. The reason I can say that is number 1, I have no financial stake in this company. And number 2, I’ve got experience with other companies that their customer service was horrible. So here’s the name of the company. I recommend you write down their website. Check them out.
Jay Conner [00:19:56]:
I’ll even give you a name to call and talk to. But the company is, www.quest, questtrust, with another t, questtrust.com. They’re based out of Houston, Texas. They have other satellite locations, but they service the whole nation. Your private lender doesn’t have to live in Texas to have an account there. I’ll even give you the name. The representative that we refer all of our new private lenders to is Colin Taylor. Colin Taylor.
Jay Conner [00:20:26]:
And I mean personal, He’s an IRA specialist. He’s been with the company now for about 4 years. And pretty much any self-directed IRA question you’ve got, Colin Taylor can answer it for you. They’re beautiful with the customer service of their account holders. But let me tell you from my side of the equation why I love them. With QuestTrust, I get my deals funded within 3 days. 3 business days. I mean, you know, you borrow traditional funds from the bank or any kind of institutional money.
Jay Conner [00:21:00]:
You’re pretty lucky if you can get that thing funded in 30 days, and that’s even if they are loaning money out. I mean, as of right now, when you and I are visiting, Keith, it’s tight out there, and the interest rates have gone crazy. But let me tell you something. I’ve got more private money chasing me today than ever before. I mean, when COVID came along in 2020, I started having even more private money chasing me. But just last week, I got a text from one of my current private lenders that said, Jay, I just came into another $500,000. How soon can you put that to work? Well, isn’t that a nice problem to have more money than you can put to work? But, again, when it comes to working with self-directed IRA companies and getting your deals funded like that, QuestTrust, hands down, best customer service I’ve experienced out there, and I’ve been watching it for a long time.
Keith Borie [00:21:55]:
Yeah. I’ve heard Quest and had them speak at some of the RIAs here in San Antonio, so familiar with them. Let’s talk maybe a little bit about the length of time that some of the investments are made for. So in a typical transaction, and I know things can vary from transaction to transaction, but in a typical one, what is the typical amount of time that the money is outlended for?
Jay Conner [00:22:19]:
Sure. And that can vary depending on how you want to use the money. Are you doing buy and hold? Are you doing a flip or whatever? But, typically, my rule of thumb, it depends on where the money’s coming from. So if the private lender is just using investment capital, liquid capital, you know, funds just laying around in a checking account or a savings account that’s earning them, like, nothing. Then we’ll make the term or the length of a note 2 years. And then if it’s a retirement fund, and particularly if you want to use it for a buy and hold, then we’ll do the term for 5 years. However, even though that’s what we set the length of the note on, there are a couple of comments I like to make. That term is very flexible, and here’s what I mean.
Jay Conner [00:23:06]:
First of all, we give our private lenders in the promissory note what’s called a 90-day call option. So let’s talk about that for a moment. What’s a 90-day call option? A 90-day call option means we give our lenders the right that if they have something come along and they need their money, their investment capital, their retirement funds back before the note is due, then we just ask for a 90-day notice, and that gives us plenty of time to replace their funds with another one of our private lenders. We don’t even need 90 days. Typically, we can do it within 2 weeks, but the paperwork says 9 a day notice. So even though we set the terms for 2 years or 5 years, there’s a way they can get their money back with no penalty. You know, in most of these programs, if the lender calls the note due early, then there’s a penalty just like putting money in a CD at the bank. But in the way we do it, there is no penalty because we wanna just make it simple and very easy for our private lenders to do business with us.
Jay Conner [00:24:11]:
On our side of the equation, even though the note is 2 years or 5 years, as the borrower, we can pay the note off early in case we cash out before the note comes due. However, we do put a caveat in the promissory note where we promise to pay at least 6 months of interest. On that note, in the unlikely event, we cash out in less than 6 months. And that’s because we wanna give an incentive to our private lenders to do business with us. After all, they don’t want us to just get in and out, you know, that type of thing.
Keith Borie [00:24:46]:
Yeah. That makes sense. So let me make sure I heard that correctly. Even though you’re going for a term of 2 years there may be an opportunity to get out before that. But if you decide to be able to do that, you’re still gonna pay them 6 months’ worth of whatever the interest was gonna be.
Jay Conner [00:25:04]:
That’s right. As an incentive. Now, however, of course, you know, the private lenders, they don’t want their money back. I mean, if we pay them off, they get their money back, what are they gonna do with the money? Right? They wanna keep that money invested, but we also have what’s called loan modifications or substitutions of collateral. So we’ve got, like, a smaller note, like, 30,000, 40,000, or $50,000, maybe in second position or whatever, then we can use that for rehab money. So we’ve got another property that we can move that money to. Then in that case, we will do just a simple substitution of collateral and keep that note open so that the private lender can keep getting their interest.
Keith Borie [00:25:49]:
Okay. Now that’s neat. And I like the option, you know, even though, as you mentioned, the majority of the lenders are not gonna want their money to not be at work. But the fact that you do have that 90-day option to call the note, you know, it seems like it would get the defenses down a little bit as far as, hey, look, my money’s not gonna be necessarily tied up if I’m not a 100% sure I want it to be for 2 years or 5 years, whatever the term ends up being. So that’s kind of a neat spin on it. I had not heard, you know, that as being an option.
Jay Conner [00:26:21]:
Sure. And again, that just keeps it simple, keeps it easy because we want our private lenders to know we’re very, very flexible to work with.
Keith Borie [00:26:29]:
Yeah. For sure. As far as I know, you worked with quite a few real estate investors. What are some of the misconceptions when it comes to private funds and how to get them that you’ve seen just in your consulting with various real estate investors?
Jay Conner [00:26:45]:
That’s a great question, Keith, because my lands I can surely answer that question because it’s very common. I mean, first of all, when a real estate entrepreneur investor has never raised private funds, People ask me all the time. I say, Jay, how do you even start Raising Private Money? I can tell you where you start. You gotta get your head straight. I tell people all the time, that you can’t own real estate until you own the real estate between your ears, so we gotta get the mindset right. So what does that mean? First of all, the common miss is rejection. So new real estate investors or seasoned real estate investors starting to raise money, have this fear of rejection. Well, let me ask a question.
Jay Conner [00:27:30]:
How can you be rejected if you’re not asking for anything? You see, this is all about leading with a servant’s heart. You see, we have over the years, received thank you notes in the mail, telephone calls, etcetera, from our private lenders, particularly our elderly private lenders, to where we have been a part of changing their retirement years. One misconception is that private lenders are sophisticated financial people. And that’s true in the world of institutional money. But we’re not talking institutional money here. We’re talking relationship money here, is what we’re talking about. And so, as I said, all 47 of our private lenders, none of them had ever heard of private money, private lending, self or diaries, until, as I said, I put on my teacher hat, and I started teaching them what it is. So one myth is, who is going to give me money? Who’s going to loan me money? And I’ve never borrowed money before, or I’ve never done a real estate deal.
Jay Conner [00:28:37]:
Who’s going to loan me money? If that’s the case, well here’s the answer, another right or downer. If you don’t pay the private lender, the property does. If you don’t pay the private lender, the property does. What do I mean by that? Well if you don’t pay them that means they get the property, And we borrow at conservative loan to values. We don’t borrow more than 75% of the after-repair value. I didn’t say 75% of the purchase price. That’s at 75% of the after-repair value. That’s why we typically bring home a check at closing when we buy a property because we always borrow more than we need to buy it, particularly if there’s gonna be a renovation.
Jay Conner [00:29:21]:
And so the deal is, here’s a nice little double-checking balance. When you’re paying all cash and you’re paying with private money. If you can’t bring home a check at closing from your title company or real estate attorney, you shouldn’t do the deal or you didn’t buy it enough of a discount. But back to the miss, fear of rejection. Well, remember, you’re leading with a servant’s heart. You’re looking to show people how they can get high rates of return safely and securely in a way that they had never seen before. And you’re gonna look out for them and you share the program with them. You know, the worst time to be Raising Private Money is when you need it for a deal.
Jay Conner [00:30:05]:
So that’s why we separate teaching if they’re interested, and they’re gonna be interested. They’re gonna tell you how much they got to work with if they’ve got retirement funds. You’re gonna introduce them to your rep at QuestTrust or whoever you’re recommending they do business with. And then, as I said, you’re gonna call them up with the good news phone call, put their money to work. So again, the misconceptions are, well how do I get approved? Well, guess what? You’re already approved. There’s no application to fill out. And they say, well how do you know a private lender has approved your deal? Well, there, first of all, there’s no applying. Did you know, Keith, since 2009, since I’ve been in this world of private money, I’ve never pitched a deal in my life?
Jay Conner [00:30:52]:
If I ask somebody if they wanna fund this deal, that’s the most stupid question in the world I gotta ask them. Of course, they want to fund the deal because they’ve been waiting for the phone call. So it’s all about creating win-win scenarios, teaching, being a servant, looking after your private lender, and showing them a way that they never heard of.
Keith Borie [00:31:12]:
That’s great. And then tell me a little bit about once the lender has borrowed the money from you, Are they getting any kind of an update on how things are going or I guess I’m sure they’re seeing you guys do some type of a payout every month, quarterly basis? What does that look like?
Jay Conner [00:31:32]:
Sure. So as far as the frequency of payments goes, we pay our private lenders either monthly, quarterly, or semiannual. I used to do annual interest-only payments, but I got tired of those big checks. So I either wanna do monthly, quarterly, or semiannual. Now you can structure your deals if you’re doing a flip, and you’re gonna buy it, renovate it, put it in the multiple listing service, and you’re gonna be in and out in 6 or 9 months. You can let the interest accrue, and you don’t make any monthly payments. But here’s the bottom line. I let the private lender decide how often they want the payments.
Jay Conner [00:32:09]:
And here’s why, different private lenders have different needs and objectives. Some of our private lenders are elderly, they’re investing their investment capital and their living, or our returns that we’re paying them are helping subsidize their income. They don’t want to touch their principal amount, but they need that monthly to live off of. If I’m borrowing the money from a private lender, and they’ve used their retirement funds and they’ve moved it over to Quest Trust, then I don’t pay monthly. I’ll pay quarterly. I’ll pay semiannually. I let them decide. I don’t care.
Jay Conner [00:32:46]:
They’re earning the same amount of money. It’s just a matter of how often we write the check because we pay or accrue interest only. We don’t pay principal and interest, particularly if we’re gonna be doing a flip because that’s a win for the private lender. If they have all their money invested, they’re gonna make more money, and interest-only payments help our cash flow. But, again, back to your question, Keith, how often do you pay? It comes down to the private lender’s objectives.
Keith Borie [00:33:15]:
That makes perfect sense. And you’re right. If they’re doing it through their retirement plan they’re not going to be utilizing the funds that you’re paying them anyway other than continue to grow that account. So that makes sense. And so outside of that, tell me a little bit about how you’re educating people. You mentioned your sphere of influence, different places that you’re going and you’re talking with people.
Keith Borie [00:33:34]:
Do you have I don’t know if Quest does this, but I know a lot of the self-directed companies are more than happy to kinda help out with any of those conversations as well. But, yeah, if you could tell us a little bit about how you’re educating the public.
Jay Conner [00:33:55]:
Sure. So how do you get the word out? Well, there’s multiple ways. So when I first started teaching people in my network what private money and private lending are, one of the first things I did was put on a private lender luncheon over at the Dunes Club Atlantic Beach. So I teach, real estate investors how to do this. You wanna have it at the nicest place that, you know, your budget will allow. You’re gonna be buying people lunch. I’ve got the whole scripting put together as to how you invite people to a private lender luncheon. It doesn’t have to be a luncheon.
Jay Conner [00:34:31]:
It could be an afternoon or an early evening event. If you’ve already been doing rehabs, you could invite them out to one of your properties. But I like the luncheons, and the way it works is you’re gonna buy their lunch, you’re gonna pay for their lunch, and you’re gonna do about a 20-minute presentation, which I’ve got a PowerPoint presentation already put together that works beautifully. And at these luncheons, I have raised as much as $969,000 at just one luncheon. And I wasn’t pitching any deals, no deals that I’m pitching at the luncheon. I’m simply teaching. I got my teacher hat on and I’m teaching about the program. And, of course, at the end of my presentation during that luncheon, I got an interest form.
Jay Conner [00:35:15]:
They can let me know if they’re interested or have any other people they wanna refer to me. But nowhere in the presentation am I asking. Right? Even in the follow-up, when we make the follow-up phone calls, we’re not asking for any money. What I’m doing in the follow-up phone call is thanking you for taking the time to come to my lunch, and please give me some feedback on how I could have made the presentation better. They give me some feedback, and if they’re interested, they’re telling me. If they’re not, they’re telling me why without me even asking. Remember, this is no chasing, no begging, no selling, no persuading, simply sharing. So that’s one way.
Jay Conner [00:35:53]:
And of course, what you wanna understand is how your program works. What interest rate do you pay? And I say just duplicate my program, which I’m going to mail you my book if you want it. For those of you who are listening, I got the whole program laid out in the book. You just duplicate mine. It seems to work pretty well. But, I mean, you can be down at Starbucks. I went down to Starbucks a few weeks ago. 1 of my current private lenders invited 2 other people to Starbucks for me to tell them about my program.
Jay Conner [00:36:21]:
Well, I just sat there and drank my coffee, and we just had a conversation about what is a private lender, how you can use investment capital, how you can use retirement funds, so just simple conversations. But, you know, Keith, your question triggers something else I wanna share, and that is, where do you find these people? Where are these people? Who can be a private lender for you? Well, there are 3 primary categories as to where you find these private lenders. The first category is what I’ve been talking about, your network. And, of course, there’s a direct correlation between how strong your network is and your net worth. So I just started sharing with people in business networking, international, Rotary Club, and people I go to church with. That’s that category. The second category is what I call your expanded network. So I coach other real estate investors on how to grow your network very very quickly.
Jay Conner [00:37:18]:
The 3rd category of private lenders is what we call existing private lenders. So existing private lenders are individuals who are already loaning money out from their personal investment capital or retirement funds to other real estate investors. Well, where do you find those people? I can tell you where you find them. You find them at self-directed IRA companies. Did you know, like QuestTrust, for example, over 70%, maybe more than that now, over 70% of their account holders want to loan real estate investors money out of their retirement accounts? Well, on the 4th Wednesday of every month at 7 PM Central Time, Quest has a Zoom networking event that’s free for their account holders, and anybody else who wants to show up. And they put you in breakout rooms, and you get to meet with each other and network and talk about deals you’re doing, and they talk about how much money they got to lend out. But here’s the difference.
Jay Conner [00:38:25]:
Don’t miss this. When you’re networking with an existing private lender, you are not putting on your teacher hat because they already know what it is. They already know what private money is. They already know what private lending is. They already know what a self-directed IRA is because, for goodness sake, they’re already an account holder. So now you’re not teaching, now you’re negotiating.
Keith Borie [00:38:51]:
There you go. There you go.
Jay Conner [00:38:52]:
And I don’t like to negotiate. I like to teach.
Keith Borie [00:38:55]:
Right. Yeah. No. That’s great. I didn’t realize that Quest does that. That’s pretty cool. And it’s neat how many companies are utilizing the breakout rooms and stuff within Zoom and some of those. So that’s neat.
Jay Conner [00:39:08]:
Exactly.
Keith Borie [00:39:10]:
Alright. And then, well, Jay, is there anything about private lending that I haven’t brought up but that you think is important for the audience to know?
Jay Conner [00:39:18]:
Yeah. Who wants to know the hardest thing about Raising Private Money? Here’s the answer. Getting started. How do you get started? First of all, know your program. Know what it is you’re teaching. Like, when I say your program, what interest rate are you offering? People on your deals. How can they get their money back early? You know, what’s the length of the note? So you wanna be confident in your conversation. Right? Who’s gonna invest with you if you’re not confident in and of yourself? So know your program and have a relationship with a self-directed IRA company that you can refer new potential private lenders to that have retirement funds.
Jay Conner [00:40:00]:
And then really the hardest part after those two things is just start flapping your lips.
Keith Borie [00:40:07]:
I love it. That’s cool. Alright. Why don’t we tell everybody where they can find out more about you? I still have a couple of other questions. I want to ask you a little bit about the development of the shopping centers and the condominiums. So I don’t want necessarily wanna go completely down that rabbit hole, but I’m just curious for myself. But before we get there, maybe we can tell them about how they can get the book and how they can find out more about you.
Jay Conner [00:40:30]:
Sure. Well, I would love to give you if if you’re listening to this show, I’d love to give you for free my book. Is called where to get the money now. Where to get the money now? Subtitle, how and where to get money for your real estate deals without relying on traditional lenders. And you can’t get this in an ebook. It’s not even available in an ebook. I will mail this to you.
Jay Conner [00:40:54]:
I’ll priority mail it to you, 3-day priority mail. Believe it or not, Keith, the United States Postal Service is still in business. Can you believe that? So I’ll ship it out, 3-day priority. I’ll autograph it for you. All I ask you to do is just cover postage. And here’s where you can get the book, At www.JayConner.com/Book. So I’m an ER, not an or. That’s www.JayConner.com/Book, and we’ll rush it right out to you.
Keith Borie [00:41:30]:
Awesome. Fantastic. This has been an eye-opener for me, and I know it has been for the audience as well. And so certainly, take Jay up on that offer for the book. That’s kind of the step one, right, of getting started. So and then, Jay, maybe if you don’t mind, I know you’re talking about the private money, but just curious as far as the commercial development and that kind of thing. Can you maybe tell us a little bit about what you’re doing in those arenas?
Jay Conner [00:41:55]:
Sure. Well, I’m doing nothing in those arenas today, but I have been in those arenas. And so when it comes to commercials, of course, the commercial is a much longer play. When I say much longer, you know, even if you’re buying an existing apartment complex and you’re gonna do a value add and you’re gonna, you know, upgrade it, you’re gonna raise rents, you know, at a bare minimum, you’re talking a 3 year to 5-year term before you’re seeing that payout on the back end. A lot of private money is raised for those types of commercial projects, but here’s the difference. In the world of single-family houses, which is what we’ve been talking about, and in the world of commercial, here’s the difference in raising money. Everything we do with single-family houses is what we call one-offs, one-offs. Everything that we do in the world of commercials is what we call syndication.
Jay Conner [00:42:52]:
So let’s talk for a second about the difference. With single-family houses, we’re not raising money for a fund. It’s a one-off. You’ve got a private lender or a couple of private lenders that are funding that one single-family house. They’re getting their promissory note, their mortgage, or a deed of trust, and that’s how their investment or their loan is being secured. When you’re raising money for a commercial, you do what’s called syndication. You’ll typically have one way to do it is you have an SEC attorney develop and write what’s called a private placement memorandum. And so that will be the fund that your private lenders will invest in.
Jay Conner [00:43:33]:
So they’ll invest in that fund. A lot of times, there’s equity share on the back ends of those projects, so it’s a longer-term play. So I have developed and built a shopping center from the ground up, from breaking ground years ago. Still own that shopping center today, free and clear. So one beautiful thing about a commercial development is because of that one development, it prints now $40,000 per month with me doing nothing. Right? $40,000 a month coming in with me doing nothing. How do I do nothing? Well, the property management company is doing all the management, and I have the check come to my checkbook. So, of course, the advantage to commercial or long-term rentals or long-term rentals, the advantage there is you’re building long-term wealth.
Jay Conner [00:44:27]:
Now I am not very excited about the world of commercials right now, and so I’m not playing in that right now. And I’ve got some friends that, unfortunately, I think are going to experience a bloodbath in the world of apartments that they got into within the past 2 years. Because coming up to 2 years ago, you didn’t have to have a brain cell in your head to make money in commercials. Well, you had to raise money. But as far as the values of properties going up was insane unless your commercial property was an office. If your commercial property was an office, god bless you because of COVID. All those things now are trying to be converted into condominiums and, you know, other repurposes and whatever. But, again, commercial is going to pay you very, very well if the market doesn’t turn against you for the long term.
Jay Conner [00:45:17]:
I had a bloodbath, bloodbath in a new condominium development that we started back in 2007. And, you know, we sold reservations to investors to invest in the deal. And because the market turned within 7 months, it was a bloodbath for 7 years following that. So the market and what the market’s doing is even more important in the world of commerce than what the market is doing with single-family houses. In single-family houses, you can get in, you can get out, and if you’re buying it for the long term, who cares what the market does? Because you’re holding it for the long term. The commercial is a bigger payday, and longer-term wealth, but comes with higher risk.
Keith Borie [00:46:06]:
Yeah. No. That’s great. Well, I was just curious about that piece of it. Just couldn’t go without asking you about those 2. And yes, I would not have wanted to be doing a condominium community deal in 2,007. I was a full-time real estate broker at that time, and for me, it was like somebody just shut my income off. It was a tough period for sure.
Jay Conner [00:46:27]:
Absolutely. I know what it’s like to feel the spigot get turned off overnight. But in this world of private money, it chases you. I’ve got more private money chasing me because people don’t know what to do with their investment capital or their retirement funds, and they’re looking for a safe place to do it. And, of course, that’s why we’ve got the ethical responsibility to relieve them of their problem.
Keith Borie [00:46:50]:
There you go. There you go. I love it. Thank you, Jay. I appreciate it. I’ve got 2 more questions for you that I ask every guest and one of them would be what advice you would give somebody who’s maybe just starting in their investment journey.
Jay Conner [00:47:05]:
Well, that’s an easy question with a very important answer. Do not do it the way I did. Do not start in this business the way I did. I went my first 6 years with no mentor and no coach. Reading books out here trying to do it on my own, and I bled 100 out of 1,000 dollars trying to figure this out. Get yourself somebody good and knows what they’re doing, like Keith that you got here, the host on the show. If not Keith, somebody locally in your area. Join him with somebody who can be your mentor and walk you through this journey.
Jay Conner [00:47:43]:
Do not start on this journey alone, and don’t stay on this journey alone. My wife and I are in 3 different mastermind groups in addition to the mastermind group that we run. It’s so important to stay around like-minded people who can help you and you can help them, and don’t be out there on an island by yourself.
Keith Borie [00:48:05]:
That’s great advice. I love it. And then one other question is just what book, if any, besides the one we just talked about, what book, if any, have you read recently that has been impactful? Doesn’t necessarily have to be real estate or investment related, but it certainly can be.
Jay Conner [00:48:21]:
Yeah. So my favorite book of recent times is The Go-Giver. Keith, you’ve probably heard of that book, The Go-Giver. I had the author on my podcast last year. Fantastic interview. It’s a short read, but it’s all about having a servant’s heart and leading first with service. And, also, if you’d like to follow me on my podcast and talk more about private money, you can follow me on my podcast on any platform you’re listening to podcast. The name of my show is Raising Private Money.
Jay Conner [00:48:56]:
Imagine that. Raising Private Money with Jay Conner. I’m on Spotify, iTunes, and all the other hundred that you could think of. Come join me on the show. We do a new show and release one every Monday morning or Thursday morning. We’re in our 7th year of Raising Private Money. I’ve interviewed amazing guests. So who knows? You might hear Keith very, very soon on my show as well.
Keith Borie [00:49:19]:
That would be great. That would be great. Alright, Jay. Well, I think we will call it a show. I appreciate you being on.
Jay Conner [00:49:26]:
Awesome. Keith, thank you so much for having me. God bless you.
Keith Borie [00:49:29]:
Yeah. God bless you as well.
Narrator [00:49:31]:
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, 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.