***Guest Appearance
Credits to:
https://www.youtube.com/@realestaterunwaypodcast
“174: Private Lending Truths Exposed!!!”
https://www.youtube.com/watch?v=sttgmeGccWE
Navigating the world of real estate investing today is no easy feat, especially with bank lending restrictions, rising interest rates, and a fiercely competitive housing market. Yet, for seasoned investor Jay Conner, these challenges are nothing new—in fact, they were the very catalyst that led him to discover the game-changer in his business: private money.
Jay recently sat down with Chad Sutton on the Real Estate Runway podcast to share the hard-won wisdom he’s gained in over two decades of investing, flipping more than 500 homes, and weathering multiple economic cycles. For anyone hoping to level up their real estate game—whether you’re wanting to raise capital or are curious about lending your money to others—Jay’s experience provides a roadmap both practical and inspiring.
The Wake-Up Call That Changed Everything
Jay’s journey into private money began with a problem: after years of funding deals through a traditional bank line of credit, his banker cut him off without warning. Two pending deals worth over $100,000 in profit were suddenly at risk of collapse. Like many, Jay initially saw this as a disaster. But a phone call to a fellow investor opened his eyes to a new world. “Have you ever heard of private money?” his friend asked.
The concept was foreign at first. But quickly, Jay dove into learning about private lenders—individuals who invest their capital into real estate deals for a fixed return, often secured by a mortgage or deed of trust. Within 90 days, Jay successfully attracted over $2.1 million in private funding, and he’s never missed out on a deal due to a lack of capital.
Why Private Money Works—For Both Sides
One of the biggest benefits Jay points to with private money is control. As a borrower, you make the rules: you offer the interest rate, set the terms, and negotiate the structure. Since 2009, Jay has paid the same 8% rate to his lenders, regardless of market swings. “We dictate the market,” Jay says. “We’re not at its mercy.”
Private lending also appeals to those tired of stock market volatility and low bank returns. Jay’s program offers better yields, with the safety of backing loans with real estate and naming lenders on both the insurance and title policies. It’s not an unsecured loan—a key point for risk-averse investors.
How to Find Your Private Lenders
Jay breaks down three primary sources for private lenders:
- Your Warm Market: Start with people you already have a relationship with—friends, family, acquaintances, social networks, club members, and more. Retirees are especially good prospects, as they often have idle funds or IRAs seeking higher returns.
- Expanded Warm Market: Grow your network quickly by joining local community groups like Rotary or Business Network International (BNI). “There’s a direct correlation between your network and your net worth,” Jay notes.
- Existing Private Lenders: Seek out individuals already funding real estate deals. County records and self-directed IRA companies can be rich sources—over 70% of people with a self-directed IRA want to loan money on real estate, according to Jay.
Protecting Lenders—and Your Reputation
For those considering becoming private lenders, Jay’s top advice is simple: Invest in the operator, not just the deal. Know the real estate investor’s track record, ensure your loan is secured by a deed of trust or mortgage, and have every term in writing. Never wire money directly to the investor—always use a closing agent or attorney to protect both parties.
Building a Business That Lasts
In the end, Jay’s approach is built on trust, education, and serving others. He doesn’t see raising private money as selling, but as a process of teaching and creating win-win scenarios. His superpower, as he shared on the podcast, is resilience. When problems arise, ask: “Who can help me with this?” and “What’s the opportunity?”
For real estate investors and aspiring private lenders alike, Jay’s experience proves that with the right knowledge and mindset, accessing capital—and building lasting wealth—is within reach.
To dive deeper into Jay’s strategies, check out his book “Where to Get the Money” and his podcast “Raising Private Money.” You’ll find links and more resources in the Real Estate Runway podcast show notes.
10 Discussion Questions from this Episode:
- Jay Conner describes his journey from relying on banks to discovering private money. What circumstances pushed him to seek alternative funding, and how did this shift change his business trajectory?
- The episode emphasizes the “know, like, and trust” triangle for raising private money. Why is this approach essential, and how can investors intentionally cultivate these three components within their networks?
- Jay talks about “offering” rather than “asking” for money when creating deals with private lenders. How does this distinction affect the mindset and method of approaching potential lenders?
- Interest rates and deal structures are discussed as things the investor can “set the rules on.” How has Jay maintained consistency in the interest rates he offers lenders despite changes in the broader economic environment?
- The guests outline three primary sources for finding private lenders: warm market, expanded network, and existing private lenders. Which approach do you think might be most effective for a new investor, and why?
- There’s a discussion around using self-directed IRAs to lend private money. What are the advantages for both the investor and the lender in using these retirement accounts for real estate deals?
- Jay shares elements of protecting private lenders, like conservative loan-to-value ratios, insurance, and written agreements. Why is protecting your lender a key to long-term success and more funding opportunities?
- The podcast highlights lessons from past failures and the importance of planning for contingencies in real estate deals. What specific backup strategies did Jay recommend for flippers, and how do they mitigate risk?
- For passive investors interested in becoming private lenders, what due diligence steps does Jay recommend to ensure their investments are secure?
- Jay and Chad both discuss the broader purpose behind growing their businesses, including philanthropy and giving back. How does having a larger “why” beyond profit influence business decisions and sustainability in real estate investing?
Fun facts that were revealed in the episode:
- Jay Conner Raised Over $2 Million in Private Money in Just 90 Days
After losing his bank line of credit in 2009, Jay Conner quickly pivoted to raising private money from individuals. In less than three months, he was able to attract $2,150,000 from people within his network—without even having to “sell” the idea to anyone! - Corded Telephones Make a Cameo
During the episode, Jay jokes about using a corded telephone to talk with his banker in North Carolina, highlighting that even in the digital age, some old-school tools are still around—and make for great stories. - Jay and His Wife Have Flipped Over 500 Homes
Jay and Carol Joy Conner have been investing in real estate since 2003, and they’ve fixed, flipped, or invested in more than 500 single-family homes in eastern North Carolina alone—a testament to their experience and longevity in the real estate game.
Timestamps:
00:01 Challenges of Securing Large Investments
06:35 Troubles with Line of Credit
07:15 Mastering Real Estate with Private Funds
12:07 Negotiating With Private Lenders
16:45 Harnessing the Warm Market
20:01 Fast Network Growth: Get Involved
21:31 Private Lender Data and Opportunities
26:43 Private Lender Protection Strategies
30:47 Evaluating Real Estate Operators
32:01 Trustworthy Real Estate Investing Tips
37:36 Solution-Oriented Mindset Shift
38:22 Real Estate Investment Failure
42:55 Finding Purpose Beyond Profit
45:54 Real Estate Insight & Resources
Connect With Jay Conner:
Private Money Academy Conference:
Free Report:
https://www.jayconner.com/MoneyReport
Join the Private Money Academy:
https://www.JayConner.com/trial/
Have you read Jay’s new book, Where to Get the Money Now?
It is available FREE (all you pay is the shipping and handling) at https://www.JayConner.com/Book
What is Private Money? Real Estate Investing with Jay Conner
http://www.JayConner.com/MoneyPodcast
Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal.
#RealEstate #RealEstateInvesting #RealEstateInvestingForBeginners #Foreclosures #FlippingHouses #PrivateMoney #RaisingPrivateMoney #JayConner
YouTube Channel
https://www.youtube.com/c/RealEstateInvestingWithJayConner
Apple Podcast:
Facebook:
https://www.facebook.com/jay.conner.marketing
Twitter:
https://twitter.com/JayConner01
Pinterest:
https://www.pinterest.com/JConner_PrivateMoneyAuthority
Lessons in Resilience: Maintaining Capital Flow When Traditional Funding Fails
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 for 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.
Chad Sutton [00:00:28]:
What I’ll tell you is that the bigger the check size, the harder the sell. Just like JJ’s saying, if it’s a bank and they’re giving you $10 million, it’s probably going to have a lot of red tape, a lot of procedure, and you’re going to be a function of the market, right? It’s a commodity. If you’re talking about a family office, maybe they’re giving you a 10 million check. Well, they’re going to have a lot of diligence there, and they may be courting four or five other investments before they say yes or no to you at the last minute. So it’s just very finicky. And then you get all the way down to, you know, varying degrees of individuals,, and it becomes a lot more of the know, like trust triangle that we talk about where first they got to know you, they got to know who you are, which goes into network equals net worth. If you don’t know anybody, you’re not going to raise money from anybody. And as they get to know you, people do business with people they like, they don’t do business with people they don’t like, right? So you develop the like.
Chad Sutton [00:01:20]:
And eventually, as Jay has mentioned, you’re teaching along the way, and then eventually you build interest, and that trust factor starts to show up.
Jay Conner [00:01:28]:
I’m asking myself, who can help me with my problem? Well, I immediately thought of Jeff Blankenshipa, a good friend of ours. He lived in Greensboro, North Carolin, at the time. I called him up, he said, Welcome to the club, Jay. I said, What club? He said, the club of having your line of credit shut down. They just shut me down last week. I said, Well, how are you funding your real estate deals? He said, you ever heard of private money? I said, no. He said, you ever heard of self-directed IRAs? I said, no. So I put on my learning cap and I studied very, very quickly what private money is.
Jay Conner [00:02:06]:
Didn’t know what it was. Learned about self-directed IRAs, and I was able to attract without selling anybody anything. I was able to attract $2,150,000 in less than 90 days from individuals with whom I have a Connection.
Narrator [00:02:24]:
You’re listening to the Real Estate Runway podcast, powered by Quattro Capital, where we are all about alternative business and investment strategies to help you amplify life and maximize wealth. Here’s your host, the recovering engineer turned multifamily investor, Chad Sutton, Foreign.
Chad Sutton [00:02:48]:
Real estate Runway family. Happy New Year. Welcome to another episode of the Real Estate Runway podcast. I think I’m wrong. I think you got one episode before this, but that’s okay. Maybe two. Anyway, I’m joining today with Jay Conner. We’re going to have a great conversation about using private money, especially with everything going on in the interest rate world today.
Chad Sutton [00:03:08]:
But folks, if you get any value out of this show or anything we produce here at Quattro Capital and Real Estate Runway, just interact with it, like it, share it, subscribe, pay it forward. We do this for free. We do this for you. Just make sure someone else who needs to see this season. Okay, now getting into the show today. Jay Conner, welcome to the air. How are you, sir?
Jay Conner [00:03:30]:
Chad? I am fantastic. Thank you so much for inviting me to come along. Talk about my most passionate topic, that being private money, particularly in this crazy market that we’re in. So I’m just excited to be here with you. Thank you for having me.
Chad Sutton [00:03:47]:
Absolutely. It’s an honor to have you here. And I always love having people who have lived through the 0809 time and are living through today because there’s, there’s great comparisons and lessons to be learned, especially for everyone who’s, you know, not been through a cycle or two yet. So glad to have you on. Let’s hear a little bit about you first, Jay. So, tell me how you got into this business in the first place. How in the world did you start using private money? Let’s walk that walk a little bit.
Jay Conner [00:04:13]:
Sure. Well, I live here in eastern North Carolina. My wife Carol Joy and I have been investing in real estate back to 2003.
Chad Sutton [00:04:24]:
I noticed you talk like me, Jay, so that makes sense. Yeah.
Jay Conner [00:04:28]:
Well, now remind me, where are you? Chan?
Chad Sutton [00:04:31]:
I’m in Nashville. So we’re not too Nashville.
Jay Conner [00:04:33]:
Well, that’s why we can understand each other.
Chad Sutton [00:04:35]:
That’s right.
Jay Conner [00:04:40]:
So anyway, we’ve been investing in real estate since 2003. We’ve done all kinds of deals. Commercial shopping centers, condominiums, and townhomes. We’ve bought and fixed, and flipped over 500 single-family houses here in eastern North Carolina. So all kinds of real estate. And the first chapter, the first six years from 2003 to 2009, all I knew to do to fund our real estate deals was go to the local bank, get on my hands and knees, put my hands underneath my chin, and say, Please fund my deal. Fill out an application, you know, keep my credit score up and all that. That’s all I knew to do.
Jay Conner [00:05:27]:
And so in January of 2009, Chad, I called up my banker. Now, I know this may be hard to believe, but we here in North Carolina still have handsets with cords attached to them. Telephone. It’s called a telephone handset. Right.
Chad Sutton [00:05:43]:
For those born after 1990 and not on the video here, he’s holding up a corded phone. Can you imagine that?
Jay Conner [00:05:51]:
I sat here at my desk, and I called up Steve. Steve was my banker. And Steve had funded tons of deals for me from 2003 to 2009. And I called him up, had a little chat, and what I’m about ready to share. I had this kind of conversation with Steve many, many times. I told him about two houses I had under contract and the, you know, profit. These two deals represented over $100,000 in profit. Anyway, I found out, Chad, very, very quickly in that conversation that I had no line of credit, that my line of credit had been shut down with no notice to me whatsoever.
Jay Conner [00:06:35]:
And I’m going, what in the world’s going on? So I hung up my telephone, and I sat here for a moment, and I thought to myself, who can help me with my problem now? By the way, Chad, these people that go around and say, every problem you’ve got is an opportunity. I want to throw up. I didn’t have any opportunity. I had a problem, right? So I’m asking myself, who can help me with my problem? Well, I immediately thought of Jeff Blankenship, a good friend of ours. He lived in Greensboro, North Carolina, at the time. I called him up, he said, Welcome to the club, Jay. I said, What club? He said, the club of having your line of credit shut down. They just shut me down last week.
Jay Conner [00:07:15]:
I said, Well, how are you funding your real estate deals? He said, you ever heard of private money? I said, no. He said, you ever heard of self-directed IRAs? I said, no. So I put on my learning cap and I studied very, very quickly what private money is. Didn’t know what it was. Learned about self-directed IRAs, and I was able to attract, without selling anybody anything, I was able to attract $2,150,000 in less than 90 days from individuals that, you know, I have a connection with. And so I closed on those two deals. I got 47 private lenders today. And you know what, Chad? Since that day in January 2009, I’ve never missed out on a real estate deal for not having the funding.
Jay Conner [00:08:07]:
I’ve had a problem since 2009. I can’t invest all the money I got, that’s, you know, pledged to me from the private lenders. So let me tell you something. Private money changed forever the perspective of our business. You know, you remember what was going on in 2009. All those foreclosures were going on. So stop and think about it. You had all these foreclosures simultaneously.
Jay Conner [00:08:34]:
The banks were not lending money. You had to have the cash, right? Well, guess what? Our business tripled, tripled in the next 12 months in 2009 because we had the cash available to, you know, buy those foreclosures. So that’s how we got into it. I didn’t wake up one morning and say, you know, I think I’ll go raise me some private money. No, it was the obstacle, it was the problem that forced me to find a better and quicker way.
Chad Sutton [00:09:07]:
You know, I love that. And Jay, in a time, I always say you don’t get in trouble in real estate unless you run out of time and money. But let’s flip that around. You know, you can profit the most in real estate when others are out of time and you have money, right? Because when, for example, in 2008, 2009, and even there’s been some recent times where you could not get a hold of money when you needed it. And if you could, you’re probably going to get a pretty good basis buy because everyone else can’t buy it right now. You’re going to be one of the few who can do it. And so I’m going to assume. Let me lead into a question here.
Chad Sutton [00:09:42]:
I’m going to assume that private, private money is going to cost more than what comes to a bank, comes from a bank. Is that. How true is that, Jay? And how do you kind of combat that problem?
Jay Conner [00:09:57]:
Well, it depends on what you’re offering. Remember, we’re not asking, we’re offering the interest rate. We’re offering the term. So in today’s market, I mean, it’s crazy, you know, as of you and me visiting here today, Chad, the feds have raised interest rates 11 times in the past 22 months, for goodness’ sake. And you know what’s interesting? Since in this world of private money, we make the rules as the borrower, I have not changed the interest rate that I pay my lenders. 1.1%, a quarter of a percent, nothing. I’m still paying them. Since 2009, I’ve been paying the same rate, which is 8%, no points, no junk fees, a straight 8%.
Jay Conner [00:10:49]:
So you know, back then. I mean, you know, you, the 12-month CD yield at the bank, you could get like 3%. Right. Before COVID came along, it got down to a quarter of a percent. Well, now today’s market, four and a half percent on a 12-month CD, I’m still paying 8%. I set the rules, I don’t have to worry about changing them all around. And so in answer to your question, because we are setting the rules and we’re offering the program, I don’t have to worry about being dependent on what the market dictates to me. I dictate to the market what we’re going to do.
Chad Sutton [00:11:36]:
Yeah, that’s helpful to know. And so I would assume it takes a little bit of time building up that investor base or that lender base, we’ll call them. They’re lenders, not investors. Right. You’re taking private debt from individuals, so you build up that investor base. You have no likes or trust. You performed for them through thick and thin. And so I guess how much does that help you being able to, you know, offer an 8% interest rate when that’s only 3% over the risk-free rate? You know, a lot of investors may turn that away.
Chad Sutton [00:12:05]:
Is that a reputation thing?
Jay Conner [00:12:07]:
Right. Well, here’s the deal. When you are negotiating with an existing private lender that’s been a private lender before, that’s a whole different conversation. I mean, if you’ve got a private lender that’s already accustomed to getting 12% and two or three points, then that’s going to be an uphill conversation. But if you’re having a conversation that’s never heard of private money and all they know is what they can get at the local bank and they’re sick and tired of the volatility of the stock market and you come along and offer this program that I’m talking about, that’s more money than they’ve ever made. And by the way, you know, we’re not borrowing unsecured money. We’re giving them a mortgage or a deed of trust, you know, to collateralize their note. We’re naming them on the insurance policy as the mortgagee to protect them.
Jay Conner [00:12:53]:
Further, we’re naming them on the title policy as an additional insured. So they’ve never had this kind of protection, even with these kinds of rates, when it’s maybe only 3.5% different from what you can get at the local bank, but 3 1/2% is still a lot. And, you know, by the way, I don’t have a crystal ball. Nobody’s got a crystal ball. But I got some very, very smart friends who are like brilliant economic guys and gals. And just last week, I got one friend who’s putting out an email to their list saying we’re going to see mortgage rates on houses down in the threes by the end of 2024. Another one says down in the fours. Right.
Jay Conner [00:13:40]:
Well, none of that matters because when you’re making the rules, you know exactly what it is you’re going to be offering.
Chad Sutton [00:13:47]:
That makes a lot of sense, Jay. And so let’s ask the, quite literally, the $2 million question here. You know, you made a very important comment that, well, look, if you’re, if you’re offering, if you’re making the rules with a lender who’s accustomed to making the rules, let’s say a very habitual private lender might be an uphill battle to get to the place you want to be. So what, what tactics can you offer the audience here on, you know, how is Jay Conner, you know, finding the people who are just sick and tired of being sick and tired? And this is a great deal for how do you find those people?
Jay Conner [00:14:21]:
Absolutely. So these people, first of all, we want to own the real estate in between our ears, right? We want to own this real estate. So we want to have the right mindset. So here’s what I mean by the right mindset. First of all, we’re not going to go out asking, begging, chasing, selling, or trying to talk anybody into anything. We are, what are we doing? We’re putting on our teacher hats. So you want to put on your teacher hat, and you want to start educating people about what private money is and how they can also use their retirement funds to, you know, loan out money to you as well. So there’s, there’s three categories of where you find private lenders.
Jay Conner [00:15:10]:
The number one category is what I call your warm market. And we’ll talk about each of these categories for a little bit. So you got your warm market. The second category is what we call your expanded warm market. We’ll talk about that. And the third category is existing private lenders, people that are already out there, you know, loaning money. Let’s come back to your warm market. First of all, I would say to you, as the borrower, as a real estate Investor, whether you’re doing commercial self-storage.
Jay Conner [00:15:41]:
I mean, I’ve got a great friend, Scott. I mean, good night. He’s done beaucoups, millions and millions and millions of self storage and all of it’s been funded from individuals or groups of individuals that would invest into his fund. Now, I will say as a side note, when you are borrowing private money for commercial, in most cases, you’re going to create a fund for people to invest in for that project because those are bigger projects, apartments, self-storage, et cetera.
Chad Sutton [00:16:10]:
Now check the size, right?
Jay Conner [00:16:12]:
Yeah, sure. When you’re borrowing private money for single-family houses, there’s no aund that they’re investing in. All those are what we call one-offs. And, what in the world is a one-off? A one-off means that if you’re investing in a single-family house, you have a private lender or maybe two. You can have more than one private lender funding a deal. So you have a private lender or a couple of private lenders that are funding that single-family house. You don’t need a fund for that. The SEC couldn’t care less about that situation.
Jay Conner [00:16:45]:
Right. But back to where do you find them? So, first category, your warm market. You know a lot more people than you know yourself. Your warm market is anybody you have any kind of association. They’re in your cell phone, they’re on your email list, it’s social media, It’s Facebook, it’s LinkedIn, it’s who you go to church with, it’s who you play poker with on Thursday night, it’s who you play golf with, it’s the Kiwanis Club, it’s the Rotary Club, et cetera. , S,o who do you have association with? And you already have some level of like trust, credibility with, right? So that’s the first category of warm market. Now, in the warm market, I teach five steps on how to go from just having a contact that you already have to having funding pledged for your deals. By the way, as another important side note, that’s how we don’t chase.
Jay Conner [00:17:44]:
We separate the conversations between teaching what private money is to people in our warm market and the program that we offer. What’s the interest rate, what’s the frequency of payments, what’s the term, how can they get their money back, you know, with an emergency or whatever. So we teach the program without pitching a deal. Then, after they’re in and they love the program, and we know how much they’ve got to loan out, now we call them up with what we call the good news phone call. The good news phone call is not asking anybody. Remember, we’re not asking, we’re not asking anybody. If they want to fund a deal, we give them the good news phone call, with, I can now put your money to work. I got a deal in Newport after the repaired value of 200,000. Funding requires 150,000.
Jay Conner [00:18:33]:
I know they got 150, they already told me. And closing is next Thursday. You need to have your funds wired next Wednesday. I’m not asking them if they want to fund the deal. Of course, they want to fund the deal. Particularly if they’ve already moved their retirement funds over to a self-directed IRA company that I recommended. They ain’t making any money until I put the money to work. Back to where you find these people.
Jay Conner [00:18:56]:
So your warm market, right? I will teach you how to make your list. I call it your top 40 potential private lenders from your warm market, right? So you make your list. By the way, who should be at the top of your list? I can tell you who should be at the top of your list. People who are retired. Hello, Hallelujah. Like retired people, there’s probably a good chance they have retirement funds.
Chad Sutton [00:19:19]:
Probably so.
Jay Conner [00:19:21]:
So you make your list, and anyway, got five steps on getting to the funding. So your warm market, where else do you find these people, by the way? These are normal people. We’re not talking about going to a family office to raise 10 million or 20 million dollars for a project. We’re not talking family offices. We’re talking about regular, ordinary people, right? So the second category is what we call your expanded market. Well, why in the world did you expand the market? Well, Chad, I know you’ll agree, and your audience and your listeners will agree. There’s a direct correlation between your network and your net worth.
Jay Conner [00:20:01]:
So, how can you grow your network very, very quickly, right? Well, it’s called getting involved in your local community if you aren’t already. Rotary, Business Networking International, for goodness’ sake. If, if, if you’re listening to this show and you don’t get anything out of this show except one thing I’m getting ready to tell you right now, Joe, if, if you want a lot of private money, join one of your local BNI groups, Business Networking International. I’ve gotten millions of dollars from my local BNI members referring me to other people they know who want to get a high rate of return safely and securely. So, your expanded market, how do you expand your network very quickly, right? Your third category is existing private lenders, which Chad, you, and I just touched on a little bit. Where do you find those Existing private lenders? Well, don’t do it the way I started. In 2009, I hired my real estate attorney’s paralegal to search local records here in our county, looking for individuals who had loaned money out secured by real estate.
Jay Conner [00:21:09]:
We found two people in 90 days. Because I’m in a tiny, tiny market. Our market’s only 40,000 people. I only do two to three deals a month, but our average profit is $78,000 per deal. I don’t say that to brag. I just say that to mean it doesn’t matter what size market you’re in, you can make a lot of money. So I hired my real estate attorney’s paralegal. Only found two in 90 days.
Jay Conner [00:21:31]:
So then what did I do? Well, we. I hired some sophisticated software developers, and we put together the private money data feed. So we get from the public record every private lender loan that’s closed in the nation every month in our data feed. Now, in addition to that, where can you find these private lenders? Oh, here’s a big nugget right here. Self-directed IRA companies. Did you know that over 70% of account holders who have a self-directed IRA account want to loan money to a real estate investor? They want to be a passive investor. And Chad, I know you got a large part of your audience are people who want to be passive, right? And so I mean, I mean, who else wants to lie in bed and sleep and make money, right? Well, that’s what you do as a passive investor, right? You’re investing or you’re loaning your money out. But anyway, those are the three main categories.
Jay Conner [00:22:34]:
Your war market, your expanded market, and then the existing private lenders.
Chad Sutton [00:22:39]:
That’s big stuff, Jay. And folks, I mean, you guys know Quattro Capital is behind this show. We actively raise money from individuals and family offices, and lenders. We’ve done it. All right, what I’ll tell you is the bigger the check size, the harder the sell. Just like Jay’s saying, if it’s a bank and they’re giving you $10 million, it’s probably going to have a lot of red tape, a lot of procedure, and you’re going to be a function of the market, right? It’s a commodity. If you’re talking about a family office, maybe they’re giving you a 10 million check. Well, they’re going to have a lot of diligence there, and they may be courting four or five other investments before they say yes or no to you at the last minute.
Chad Sutton [00:23:15]:
So it’s just very finicky. And then you get all the way down to, you know, varying degrees of individuals, and it becomes a lot more of the know, like trust triangle that we talk about, where first they got to know you, they got to know who you are, which goes into network equals net worth. If you don’t know anybody, you’re not going to raise money from anybody. And as they get to know you, people do business with people they like; they don’t do business with people they don’t like. Right. So you develop the like. And eventually, as Jay has mentioned, you’re teaching along the way, you’re not selling, you’re, you’re teaching and you’re telling. And then eventually you build interest, and that trust factor starts to show up.
Chad Sutton [00:23:55]:
And then guess where they come, you know, as they come into this world and decide, okay, I have some money, okay, I explored the moving it from Fidelity to a Roth IRA or something of that sort, that’s self-directed. Guess where they start to come. So this is all great stuff, Jay. And to go to the next step here, you know, a couple of questions I’ve got for you. Let’s talk a little bit to those wanting to find private money lenders. And then let’s also talk to some private money lenders. We’re going to talk on both sides of the coin. First, to those looking for private money lenders, talk a little bit about maybe some, we’ll just say scars and stripes, some lessons you learned along the way, with how you set up these loans with people.
Chad Sutton [00:24:41]:
What kind of trick? Like maybe, maybe the structure, maybe some terms. What are the dos and don’ts, generally, you know, of how you want to set these up to be attractive?
Jay Conner [00:24:50]:
Absolutely. So let’s talk about the underwriting that you are offering. So first of all, on a single-family house. So let me keep it simple. I’m not going to get into commercial because that’s a whole other conversation. Right. But let’s get, let’s keep it to a simple single-family house. First of all, we want to protect our private lenders.
Jay Conner [00:25:10]:
And you know, the majority of these private lenders we do business with have never done private lending before. They are, you talk, you mentioned the word trust, Chad. Boy, are they trusting you to take care of them. And so we’re going to make everything conservative. So first of all, we’re not going to borrow more than 75% of the after-repaired value of a house. Now I didn’t say 75% of the purchase price, but more than 75% of the after-repaired value. Secondly, the length of the note is typically not going to be more than two years. However, we make it very, very easy for our private lenders to do business with us.
Jay Conner [00:25:52]:
We give our private lenders what’s called a 90-day call option. A 90-day call option. We put that on the promissory note because we know live in circumstances, unknown emergencies pop up, and so somebody may need their investment capital back. And so we offer a 90-day call option with no penalty whatsoever. We’re not borrowing unsecured funds. So we give all of our lenders here in North Carolina, most people call it a mortgage, but in North Carolina, it’s a deed of trust. So that deed of trust is what collateralizes that note. And so if the borrower does not pay the private lender, then guess what? The private lender gets the property, and their investment or their loan amount is protected.
Jay Conner [00:26:43]:
I mentioned earlier, we put them on the insurance policy as a mortgagee, on the title policies as an additional insured. And so that’s, I mean, our program has got 20 points to it. Those are the main points right there. But we want people to understand how they are protected. Now, another thing here, I said own the real estate between your ears. Back to the mindset. As long as you are leading with a servant’s heart and you are taking care of your private lenders just like you would be taking care of yourself and not exposing them, then that’s going to serve you in the long run. For that reason, since 2009, 100% of our private lenders have received 100% of every penny of interest that was coming to them.
Jay Conner [00:27:40]:
But let’s be very, very clear. Have all of my deals had the anticipated repair value to them as we budgeted? Zero. Right. Has the anticipated profit come out as we anticipated? Zero. It never comes out to the penny as far as what your budget is. But because of the conservative loan-to-value ratios, that’s why our private lenders always get paid.
Chad Sutton [00:28:14]:
That’s important. So you always set it up just to be clear to where you are under promising and over delivering, giving yourself room for, I mean, what do you, what do you, what we say here we control the controllables and we learn to deal with the uncontrollables. There are going to be things that go wrong in your deal. You’re going to find something on the wall, the market’s going to change, interest rates are going to go up, and for some reason, the value of the home may be depressed a little bit. I mean, whatever happens, it’s out of your control. You try to budget that in so you’re protected.
Jay Conner [00:28:46]:
Yeah, absolutely.
Chad Sutton [00:28:48]:
All right, let’s flip the coin over a little bit and let’s talk to those who might be in anticipation on the edge of their seat, saying, you know, I think I might want to be a private lender. I’ve got some retirement funds, and I’ve got some money lying around. I think cash flow sounds pretty good, and I’m risk-averse. I want to be in the first position where, if something goes wrong, I’m getting paid back. You know, there are two classes of people in this world. One is I don’t have anything, and I’m trying to build it. And the other is, I’ve built it and I’m trying to keep it. Right.
Chad Sutton [00:29:18]:
So this is. If you’re looking at private lending, you’re probably in that bucket. Not necessarily. I mean, people grow with this as well. But you’re probably more into that. I don’t want to take a risk for a 20, 30, 40% return. I want an 8% return and keep what I have monetized. Right.
Chad Sutton [00:29:33]:
So, if that is you, what would you say to that individual? Because if, especially if they don’t know this world, they may, they may find a friend who’s doing this, but doesn’t have the level of conservatism you’ve just talked about. So, how do you protect yourself as a new private lender and make sure you’re making good lending choices?
Jay Conner [00:29:53]:
Excellent question. First of all, when you are a private lender and you’re loaning your money out on real estate, first of all, really what it comes down to, you’re not investing in the deal, you’re not loaning on the deal. That’s not what you’re doing as a private lender. You are investing in the operator is really what you’re doing. You are loaning money based on how well you believe, regardless of the protections that are in place, you’re loaning that money out based on how well you trust that the borrower is going to be able to perform? Right. So let’s drill down for a second on that question. How do you know that the operator is going to perform? First of all, let me ask you a question. How do you know the operator? Right.
Jay Conner [00:30:47]:
How do you know the operator? Right. Number two, how much experience does your operator have? Right. Is your operator doing their first deal and using your money on their first deal? Now at the end of the day, if the, and here’s a writer downer, if the real estate investor, if the operator, if the borrower does not perform, if they don’t pay you, the property does, right? If they don’t pay you, the property does, which means you get the property. Nonetheless, you don’t want the property, for goodness’ sake, you don’t want the property, or you wouldn’t be a passive investor by loaning out yourself. You buy it yourself if you want the property, right? But of course, you’ve got that protection there. So first of all, how do you know the operator? Why do you trust that operator? Now, you know, I’ve got a ton of private lenders that I had never met until a current private lender introduced me to them. So I had already performed and proved my performance over time. And now the referrals.
Jay Conner [00:32:01]:
So if you have been referred to an operator, to a real estate investor, such as myself, by another private lender that’s had a good experience, then that’s a pretty good, you know, trustworthy referral, right? If you’ve been referred, if you’re getting a piece of direct mail, or you’re getting a social media text, or you’re watching somebody on Facebook talk about the deals they’re doing, and that’s the only way you know them, beware, beware. Because the social media world is full of, you know what, right? So you want to just really answer that question. How do I know the operator? What kind of experience that they have? Number three, do not, do not pass go, do not collect $200. Never loan money unsecured. Do not loan money with a promissory note. Right. You’re either going to be investing in a fund that the SEC attorney has put together that’s, you know, raising money for a larger project, or if it’s a single family house, you’re getting a mortgage, you know, back in what you’re borrowing, you know, what you’re loaning out and the promissory note and make sure, for goodness sakes. Oh, my land.
Jay Conner [00:33:26]:
So many horror stories I’ve heard. Chad, for goodness’ sake, make sure the deal is closed by professionals, right?
Chad Sutton [00:33:35]:
Oh, goodness. Hadn’t thought about it.
Jay Conner [00:33:38]:
I mean, you would think, you would think everybody would know. I’m not writing a check directly to the borrower. You never do that. Never, never, never, never write a check or wire money directly to the borrower. No. The money that you’re investing or loaning is sent to the closing agent or whoever it is. That’s running the fund, but you send it like a single-family house. The funds are wired to the trust account, and then no monies are distributed until after closing has taken place and everybody’s protected.
Jay Conner [00:34:23]:
Right. Those are the top things that come to mind. Right. Know who you’re doing business with, closings by, professionals. Make sure you’re named on the insurance policy. Make sure that you’re named on the title policy if it’s a single-family house. And you know, I don’t care how much you trust somebody, you want it in writing. My dad, who just turned 90 years old and is in the middle of a 325 housing development and got it a third built out, learned a very, very important business real estate lesson when he was in his 20s.
Jay Conner [00:35:00]:
I’m not going to tell the story right now, but here’s what it all comes down to when it comes to real estate. Yeah, you want to trust who you’ve been doing business with, but the only thing that matters is what’s in writing.
Chad Sutton [00:35:15]:
Couldn’t have said that better. My folks and I have loaned and invested money, and people have loaned and invested money with me, my own blood family, and we put everything in writing because you know what? Two things happen two years down the road, three years, four years down the road, everyone gets amnesia in their favor. That’s usually how it works.
Jay Conner [00:35:33]:
That’s a writer downer right there. They get amnesia in their favor, they’re.
Chad Sutton [00:35:39]:
Going to remember it more in their benefit. And you just don’t want any temptation for wrongdoing. If it’s written down, you don’t have to worry if it’s consummated by a contract. All right now, folks, we’re going to take this. We could talk about this stuff all day. What I’m going to tell you is that Jay cannot teach everything he knows in a 30-minute podcast. So we’re going to talk a little bit about some of the stuff he has available for you in just a moment. But Jay, before we do, what is your superpower in life or business? And how does it serve you?
Jay Conner [00:36:09]:
Well, my superpower is resilience. So you mentioned it, Chad. I mean, problems are going to come along, you know, unexpected things are going to come along. I don’t care what you’re doing, right? And so when the problem comes along, like, I mean, it’s like the story I shared. The bank cut me off. Well, I had a choice, remember? You always have a choice. Don’t be a victim. Don’t be a victim.
Jay Conner [00:36:34]:
Be a victor. You have the choice as to how you want to respond. So what leads me to always be resilient, no matter what happens, is the following formula. And here’s the formula that will dictate your future. E +R equals O. E stands for the event, R stands for your response. O stands for the outcome. Something’s going to happen in your life.
Jay Conner [00:36:59]:
Maybe you created it, maybe you didn’t, but something happened. That was the event that happened. Guess what? Most people are walking around with E equals O. That happened to me. I can’t do anything about it. Wrong. The R is your response. You get to respond to whatever event that happens to you any way you want to because you get to respond to whatever happened.
Jay Conner [00:37:23]:
You determine the outcome. Like with me, with private money, they cut me off from the bank. What was my response? I found a better way by asking the question Who can help me with my problem?
Chad Sutton [00:37:36]:
And I’ll notice what Jay did there. I don’t know if he even realizes he did it, but he turned it to, he didn’t turn it to a close-minded question of why this is happening to me? It’s what I can do about. When you train yourself to ask a solution-oriented oriented open-ended question, you know, as your reaction, you know, I love what you said. E +R =O. When an event E happens, your reaction should not be to ask yourself Why is this happening to me? And accept the outcome. It should be to ask yourself What can I do about it? You know, and that gets your, that gets your wheels turning. It opens the doors. I love that, Jay.
Chad Sutton [00:38:13]:
So let’s, let’s flip the coin over here. Biggest failure, life or business? And feel free to tell your father’s story if it’s most appropriate here.
Jay Conner [00:38:22]:
Well, I’ll keep it to real estate. My biggest failure. First of all, that’s a hard question to answer because I’ve had a lot of big failures, right? I’ve just, I’ve discovered in my 63 years of being on this planet earth, I just got to screw it up royally before I learn how to do it. So one of my biggest failures or biggest lessons learned is, as it regards real estate. So this goes back to 2005. I invested in a luxury property on the beach here in eastern North Carolina, and I ran the math just to flip it and make money on the flip. I did not run the math with the backup plan of if I get stuck with that property, will it cash flow and cover my underlying debt? So that was a bloodbath.
Jay Conner [00:39:21]:
That was a bloodbath lesson. So what’s the lesson when you’re investing in real estate, single-family, et cetera? If you’re looking to flip, always run the math. Can you rent that real estate out and cover your underlying debt, even if that’s not your initial intention?
Chad Sutton [00:39:43]:
Control the controllables, have multiple plans. I love that. Okay, now let’s. We’ve come to the time in the show where we’re going to talk a little bit about what Jay and his team have to offer you. The listener, as we mentioned, cannot teach you all this stuff in one episode. So tell me a little bit about the books, the podcast, all the stuff you have. And folks, these links will be in the show notes. So no worries on trying to write this down.
Chad Sutton [00:40:08]:
But go ahead, Jay.
Jay Conner [00:40:09]:
Sure. Thank you, Chad. First of all, I’m so excited about my recent book that I’ve written, which is called Where to Get the Money. Where to get the Money. So in this book, and by the way, this is not an ebook. You can’t download it. You know, Chad, did you know the United States Postal Service is still in business? Right. So we will.
Jay Conner [00:40:31]:
I’ll autograph this book for you. All you have to do is ask for it, and we will ship it to you. Priority three-day mail is in the mail. And this breaks it down step by step. All the details. I’ve been talking about how to get all the private money you would want for your real estate deals. And. And here’s how you pick it up.
Jay Conner [00:40:51]:
Go to www.JayConner.com/Book and I’m an er, not an or so www.JayConner.com/Book again, that’s www.JayConner.com/Book and we’ll send it to you. Priority mail.
Chad Sutton [00:41:14]:
All right, very good. And I believe we’ve got some other links for you in the show notes as well. Jay, my podcast.
Jay Conner [00:41:20]:
Chad, you mentioned my podcast. So, you know, if you’re listening on iTunes, Spotify, and the other hundred platforms, all you have to do is search for it on your podcast. You know, your iPhone podcast app. Just search for raising private money. Raising Private Money with Jay Conner. It’ll pop right up. Come on over. And I have amazing guests to join me, talking about how they raise private money.
Chad Sutton [00:41:46]:
Very, very good. And let’s go to the last question. Then we’ll wind down the episode. Look, here at Quattro, we are operating by four pillars, i.e., people, property, profits, and philanthropy. A group of people coming together around a property to generate a profit, some of which is used for philanthropy, coming back and taking care of people. So I love to ask my guests on this show, what is it that you do with your time, talents, and treasures, or any combination of the three, to support your philanthropic ventures, to give back in the world, to do good while you do.
Jay Conner [00:42:20]:
Well, I’m glad you asked. Our motto for this year is to make more in 24. To bless more in 24. A good friend of mine asked me a couple of years ago, Chad, he says, Jay, why are you still working so hard? You don’t have to be doing all this. He said, Jay, when is enough enough? I said, That’s a great question. And here was my answer. Enough is never enough when it’s not about you. Enough is never enough when it’s not about you.
Jay Conner [00:42:55]:
And, your question, Chad, really speaks to the answer of what’s your why? I mean, stop and think about it. Why are we going about doing all this stuff that we’re doing? And if your first answer is to put money in my pocket, it ain’t going to last very long. I can tell you that over the years, when I’ve gotten involved in a venture or opportunity, and the only reason I was in it was to make money, I didn’t even get off the ground. Right. So what are mine and Carol Joy’s interests? First of all, as far as our talents go, we write spiritual songs for the church and the Lord. We’ve written over 50, and some of them have gained quite a bit of popularity. One of them is this song named I Close My Eyes. And so we write, we write songs for the church.
Jay Conner [00:43:44]:
Carol Jo and I met at church, my very first Sunday that I had moved out to Texas, at the Church of Christ. And so we’re very, very involved with the Church of Christ here in Morehead City on Barber Road. Give our talents, give our time, give our money to that. And in addition to that, our favorite cause in addition to is a little small college down in Temple Terrace, Florida, called Florida College. It’s a Christian-based college, and we pour our time and our resources into that small college as well. It’s only got fewer than 300 students down there. But that college, Florida College, their a whole base and foundation that gives all these young people the foundation. They need Christian values to last them a lifetime.
Chad Sutton [00:44:34]:
You know, I love that. And it’s just amazing to see people putting back into the world, and look, I heard someone put it this way, and then I’ll round this to a close. It is your duty as an entrepreneur and investor. Whatever you’re doing, you must get as many commas in your bank account as you can get to. Because if you have a mindset of doing good while doing well, the more money you have, the more money you can bless with. And I promise you, I don’t care how much money you make, it’s different levels for different people. But there will come a time when enough is enough. You’ve bought enough toys, you’ve taken enough vacations, you’ve bought enough this that you know.
Chad Sutton [00:45:10]:
And then you start to focus on what I can do to improve humanity with this money. So I love that you’re doing that. Jay, thank you for coming on the show today. It’s been a pleasure having you, your knowledge. Hope to do it again sometime.
Jay Conner [00:45:23]:
Chad, thank you so much, and God bless you.
Chad Sutton [00:45:26]:
God bless you. All right, everyone, this has been another episode of the Real Estate Runway podcast. If you get any value out of this or anything else we produce like it, subscribe, share it, just click any button that you see in front of you, because any interaction with the content helps us. Whether you’re on TikTok, YouTube, Facebook, whatever, podcast, just interact with it, pay it forward to someone else just like you who needs to hear this content. And with that, this is the Real Estate Runway podcast. Signing off.
Narrator [00:45:54]:
We hope this episode was insightful and brought value to your day. If so, please be awesome and leave us a five-star review. Find out how Team Quattro can help you@thequattroway.com. Until next time, this is the Real Estate Runway podcast.
Narrator [00:45:54]:
Are you feeling inspired by the knowledge you gained in this episode? Then head over to www.JayConnner.com/MoneyGuide, that’s www.JayConnner.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.JayConnner.com/MoneyGuide to get your free guide. We’ll see you next time on Raising Private Money with Jay Conner.