***Guest Appearance
Credits to:
https://www.youtube.com/@REIAgent
“Unlocking Unlimited Private Money Success with Jay Conner”
https://www.youtube.com/watch?v=yG_echRkMUU
Are you a real estate investor frustrated by the limitations of traditional financing? You’re not alone. In the latest episode of the Raising Private Money podcast, Jay Conner shares his transformative journey from relying on banks to harnessing the power of private money—a shift that reshaped his investing career and can do the same for you.
The Asset-Backed Debt Advantage
Jay emphasizes that private money deals in single-family real estate are distinct from syndications regulated by the SEC. What makes them different? They’re structured as “asset-backed debt,” meaning every loan is secured by an individual property—protected by a mortgage or deed of trust.
Jay puts it simply: “We’re not borrowing money unsecured; we’re securing that note with a deed of trust or a mortgage.” This structure opens the door to a wide range of lenders, regardless of accreditation, each with their own promissory note for each property.
There’s also flexibility. Whether you have one property or a portfolio, there’s no limit to the number of private lenders you can work with, nor do your lenders need to meet strict financial requirements. As Jay notes, “All the notes are secured by individual properties,” freeing you from the headaches and restrictions of bank lines of credit.
The Origins of a Private Money Mindset
Jay didn’t always have access to private capital. He started in mobile homes and, for years, funded his deals the traditional way: “Go to the local bank or the mortgage company and fill out applications.” That changed dramatically in 2009 when, during the financial crisis, his bank shut down his line of credit overnight.
Without options, Jay reached out to peers and discovered the world of private lending and self-directed IRAs—a revelation that allowed him to raise over $2 million in new funding, even as markets crashed.
Central to Jay’s success was a mindset shift. He advocates “owning the real estate between your ears,” urging investors to approach private money not as desperate borrowers but as educators who offer opportunities.
Jay became a “private money teacher,” sharing the mechanics and benefits of private lending with people in his network who, more often than not, had never heard of the concept.
The Good News Phone Call: How to Get Your Deals Funded
If you’re wondering how Jay gets his deals funded 100% of the time, it all hinges on transparency and preparation. Before presenting any deal, he educates potential lenders about the program: interest rates (often 8%), terms, collateral, and protections.
He separates teaching about private money from pitching individual properties, insisting, “Desperation has a smell to it. The worst time in the world to be raising private money is when you need it for a deal.”
Once a lender is onboard and prepared—sometimes moving their retirement funds to a self-directed IRA—Jay calls with the “good news”: a deal matches their criteria, here are the numbers, and here’s how to wire the funds. This process builds trust and excitement, ensuring lenders are ready and eager to participate.
Flexibility for Investors and Lenders Alike
One of the most powerful aspects of private lending is that the investor sets the terms. Payments can be monthly, quarterly, or only upon completion, depending on the lender’s objectives.
Jay highlights that elderly lenders seeking income can receive monthly payments, while those using IRA funds may prefer less frequent payouts. When buying property, Jay’s deals often generate enough “excess cash to close” to cover renovation and interest payments.
Where Can You Find Private Lenders?
Jay outlines three categories: your own network (friends, church, coworkers), your extended connections (BNI groups and local business clubs), and existing private lenders—often found via self-directed IRA custodians. Even if investors run out of immediate contacts, expanding the network is always possible.
A True Win-Win Strategy
Jay’s philosophy is clear: offer lenders attractive, secured returns while maintaining strict buying criteria to protect their interests. As he puts it, “let the math make the decision—not your emotions.”
10 Discussion Questions from this Episode:
- Jay Conner talks about the concept of “asset-backed debt” in real estate investing. What are the key differences between asset-backed debt and unsecured loans, and why is this distinction important for investors and lenders?
- Jay shares his experience of transitioning away from institutional lending after the 2008 financial crisis. How did the global financial crisis reshape options for real estate investors seeking funding, and what lessons can be learned from his story?
- The episode describes the mindset shift needed to raise private money. What are some common misconceptions about borrowing money in real estate, and how does Jay’s approach challenge them?
- Jay emphasizes the importance of teaching potential private lenders about how the process works before presenting a deal. Why might this approach be more effective than pitching deals directly, and how does it impact trust?
- Mattias and Jay discuss using self-directed IRAs for private lending. What opportunities and risks do self-directed IRAs present for individuals looking to diversify into real estate?
- Jay mentions paying private lenders differently based on their needs, such as monthly payments versus accrued interest. How can tailoring payment structures attract and retain private lenders?
- The podcast reviews the process of bringing home a “big check” when purchasing properties using private money. How does Jay’s strategy minimize personal financial exposure, and what are the implications for newer investors?
- Jay states there’s “no limit to the number of private lenders you can have” in asset-backed lending. What advantages and potential pitfalls does this present compared to syndications requiring accredited investors?
- Jay and Mattias talk about the ethical responsibility investors have when working with private lenders. Why is ethical conduct and investor protection so crucial in private lending relationships, especially when teaching novices about the process?
- Jay recommends mastermind groups and continuous learning as keys to success. How can community and peer groups specifically help real estate investors grow their business and avoid common mistakes?
Fun facts that were revealed in the episode:
- Jay Conner raised $2,150,000 in private money in just a few weeks during the 2009 financial crisis—after his bank cut off his line of credit with no notice!
(Jay shares how, after being turned away by his bank in 2009, he learned about private money lending and was able to raise over $2 million from individuals who had never lent privately before.) - Jay Conner has 47 private lenders, and most of them had never even heard of private money lending or self-directed IRAs until he introduced them to it.
(Jay explains that he puts on his “teacher hat” to share the opportunity of private lending with people in his network, and many of his private lenders didn’t know this kind of investing existed before he approached them.) - Jay’s method allows him to bring home a check when he buys a house—rather than having to bring his own money to the closing table.
(By structuring deals so the loan covers both the purchase price and renovation costs, Jay often receives excess cash at closing, which he can use for renovations and even to make interest payments to his lenders.)
Timestamps:
00:01 From Mobile Homes to Real Estate
04:36 Introduction to Private Money
08:24 Money Doesn’t Magically Appear
12:03 Investing with Self-Directed IRA
15:46 Private Lending: Fast Money Deployment
18:55 Private Lending Payment Options
19:48 Tracking Real Estate Cash Flow
24:30 Finding Private Lenders Explained
27:42 Syndication Explained for Multifamily Investments
31:01 Unlimited Private Lending Potential
33:36 Struggles in Finding Good Deals
37:58 Mastermind Groups for Growth
41:10 Free Book & Private Money Tickets
Connect With Jay Conner:
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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
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Building Wealth With Private Money: Jay Conner’s Guide to Asset-Backed Real Estate Investing
Jay Conner [00:00:00]:
Everything we’re doing here is called asset-backed debt. Right. This is not a security in the form or as it relates to syndication. So the SEC is not regulating what we’re doing with single-family houses, with this being an asset-backed out, meaning we’re not borrowing money unsecured, we’re borrowing money, and we’re securing that note with a deed of trust or a mortgage. So everything that we do with single-family houses is called one-offs. You’ve got a property that is being funded by one or two or three, whatever, private lenders. Each one of them has its own promissory note. Each one of them has its own mortgage or deed of trust.
Jay Conner [00:00:53]:
So as a result, there’s no limit to the number of private lenders we can have. They do not have to be accredited. All the notes are secured by individual properties.
Narrator [00:01:05]:
If you’re a real estate investor and are wondering how to raise and leverage private money to make more profit on every deal, then you’re in the right place to raise private money. We’ll speak with new and seasoned investors to dissect their deals and extract the best tips and tips and strategies to help you get the money. Because the money comes first. Now here’s your host, Jay Conner.
Mattias Clymer [00:01:33]:
Welcome to the REI Agent: A holistic approach to life through Real Estate. I’m Mattias, an agent and investor.
Erica [00:01:39]:
And I’m Erica, a licensed therapist.
Mattias Clymer [00:01:41]:
Join us as we interview guests who also strive to live bold and fulfilled lives through business and real estate investing.
Erica [00:01:47]:
Tune in every week for interviews with real estate agents and investors.
Jay Conner [00:01:51]:
Ready to level up?
Erica [00:01:52]:
Let’s do it foreign.
Mattias Clymer [00:01:57]:
Welcome back to the REI Agent. We are here with Jay Conner. Jay, thanks so much for joining us today.
Jay Conner [00:02:02]:
Matthias, thank you so much for inviting me to come along and talk about what I’m so passionate and excited about, and that is private money. And the reason I’m so excited about private money is that private money alone has had more of an impact on our real estate investing business ever since we started in 2003, more so than any other strategy that we’ve implemented.
Mattias Clymer [00:02:26]:
Yeah, that’s the Holy grail. That’s kind of where people want to get to often in the real estate investing space. Tell us a little bit about how you got started in real estate in 2003.
Jay Conner [00:02:37]:
Well, before single-family houses, and that’s been my focus since 2003, I was raised in the mobile home business, affordable housing, and the financing for that product virtually went away in the early 2000s. So if I knew I knew if I ever got out of mobile homes and manufactured housing, I wanted to get into single-family houses. And so that’s what I did. And from 2003, Mattias, until January of 2009, the only thing I knew to do to get my deals funded is, was to go to the local bank or the mortgage company and fill out applications, and get on my hands and knees and say, Please fund my deal. And the banker makes me pull up my skirt, and I have to show my personal assets and get my credit score pulled and all that jazz. Well, that worked okay the first six years from 2003 to January 2009. But then everything changed. Matthia, in January 2009, I called up my banker.
Jay Conner [00:03:41]:
I had two houses under contract, and I thought I still had a line of credit at the bank. But I learned like that over the telephone that my line of credit had been closed with no notice to me. And my banker’s name was Steve. And I said, Steve, I said, What in the world are you telling me? My bank, my line of credit, is closed? We’ve done a ton of deals, always made my payments on time. He said, Jayy, don’t you know there’s a global financial crisis going on right now? I said no, but you just gave me a financial crisis. I don’t have a way to fund these two deals. And so I hung up the phone with Steve the banker, and I thought for a moment, and I asked myself a very powerful question. I thought to myself and asked myselfWhoho can help me with my problem? And you know, when I asked myself that question, I immediately thought of Jeff Blankenship, a dear friend.
Jay Conner [00:04:36]:
He was living in Greensboro, North Carolina, at the time, and he was flipping houses. And I called up Jeff, and I told him what had just happened. And he said, Well, welcome to the club, Jay. And I said, I’m not sure I want to be a member of that club, but what club are you talking about? He said, Well, that’s the club of having your line of credit closed by your bank. He said they shut me down last week. I said, Well, what in the world? I said, How are you going to fund your deals, Jeff? He said, Well, have you ever heard of private money? I said, nNo He said, Have you ever heard of self-directed IRAs and how individuals can use retirement funds and move those retirement funds to a self-directed IRA company and then lend that money to us? And the money we pay them, the interest we pay them, is either tax-deferred or tax-free. I said, Jeff, I don’t have a clue what in the world you’re talking about.
Jay Conner [00:05:25]:
I said, What is private money? He says, Well, I’m not exactly sure, he said, but there’s this gentleman down in Jacksonville, Florida, by the name of Ron Legrand that says we can get private money. I said, Well, what is it? He says, I don’t know. But Ron says we can get a lot of it really, really fast. So that’s when I went to my first real estate investing seminar in February of 2009. I learned about private money, and I came back, and I was able to raise $2,150,000 in new funding that I didn’t have since being cut off from the bank. And you know, Mattia, since that time, I’ve never missed out on a deal for not having the funding.
Mattias Clymer [00:06:11]:
$2 million in 2009 when the world was crashing.
Jay Conner [00:06:17]:
Yes, yes, that’s impressive.
Mattias Clymer [00:06:19]:
That’s very impressive.
Jay Conner [00:06:20]:
Well, and I wasn’t dealing with institutional money. So you see, all these private lenders I’m talking about, there’s an interesting a few interesting things about them. Number one, they’d never heard of private money. They didn’t know what private money was. They were not already private lenders. They’d never heard of self-directed IRAs. So what did I do? Well, the first thing I did was I put my opportunity together that I was going to offer people, first of all, in my own connections, my own network. So I got my mindset right.
Jay Conner [00:06:56]:
People ask me all the time, Jay, how do you get started raising money? I said, well, the first thing you’ve got to do is own the real estate between your ears. Get your mindset right. So this whole world of private money, Mattias, that we’re talking about, it’s a 180-degree shift from the traditional way people think about borrowing money. Most people think that when you borrow money, whoever’s loaning the money makes the rules. They think that whoever’s got the money to loan is going to set the interest rate, is going to do the underwriting, is going to set the length of the note, and all that. And so this world of private money, we turn that upside down. So we are our own underwriter. Instead of asking for a mortgage, we’re offering an opportunity.
Jay Conner [00:07:43]:
So what did I do? I just went about it. I put on my teacher hat, Matthias. My teacher hat says private money. Teacher, private money, teacher. So I just went about sharing with people. I go to church with people in my own network, and at this water, private money was all about. And showing them how they can earn high rates of return safely and securely. And a big secret sauce to this, Matthias is, is separating conversations with teaching what private money is, to actually having a deal for them to fund. Here’s a writer downer.
Jay Conner [00:08:24]:
Desperation has a smell to it. The worst time in the world to be raising private money is when you need it for a deal. Hey, Matthias, I’m going to ask you a question. Have you ever heard the guru on stage teaching new real estate investors and say something to this effect? Oh, just get the deal under contract, and the money will show up. Yep, that makes me want, I want to be like the Kool-Aid guy on TV and run into a brick wall. That is the most stupid thing I have ever heard in my life. Or they’ll say something to the effect of, Oh, money finds good deals. Well, now come on, you get a deal under contract, is money going to just fall out of the sky and a big old box of money show up on your front doorstep? No.
Jay Conner [00:09:11]:
So I practice and preach, get them, get the money lined up first. There’s always going to be deals. So another big secret sauce to this, Matthias is separating conversations, as I just said, between sharing the opportunity and teaching the opportunity. What kind of rates do I pay, how are they protected, et cetera, and then having a deal for them to fund. So, Matthias, whenever you cue me up here on the show, I will share with your audience the exact script, which I call the good news phone call. The exact script is how I get my deals funded 100% of the time by my private lenders without ever asking or pitching the deal.
Mattias Clymer [00:09:59]:
I love it. I, it must be good because I’m still thinking, I’m still kind of shocked that you were able to raise that much money when the real estate world was, was crumbling. Because I know it’s not institutions, they may not have been lending, but I would imagine there was a mass amount of fear and that it would be harder to convince people into giving their savings, giving their, you know, self directed IRAs to real estate when it felt like the, you know, the world was falling in, in that world, in that realm. So kudos to you. So let’s, let’s go ahead and hear it. I, I’m, I’ve got a bunch of money in my IRA. Tell me, tell me why I should invest with you.
Jay Conner [00:10:36]:
Awesome. Well, let’s do a little setup here and have a couple of hypothetical scenarios. So first of all, Matthias, let’s pretend that you and I have known each other a while. Let’s say we know each other through church and each other one to three Times a week anyway, so we’ve already got the trust in place. You know, we know each other, we like each other, we trust each other. So we’ve known each other for some time. Secondly, let’s hypothetically suppose that you have $150,000 in a 401k. And let’s say that that’s with a previous employer, and it’s still sitting over there in their plan in the stock market.
Jay Conner [00:11:26]:
And you know, it’s volatile, it goes up and down. Let’s also hypothetically suppose that I have shared with you how this program works. You know, I’m gonna pay you 8%. You know, there’s no origination fee. You never even heard of origination fees because you’re not, you haven’t been a private lender, you haven’t been a hard money lender. And let’s also, so you know how the program works. You know I’m not going to borrow more than 75% of the after-repaired value. I didn’t say 75% of the purchase price, 75% of the after-repair value.
Jay Conner [00:12:03]:
You know, the length of note is, you know, two years, etc. So you know the program. And so you’ve told me that you’re interested, you’re interested in investing, and you tell me about this $150,000 IRA that you have or 401 (k) at a previous employer. And so let’s also hypothetically suppose I have introduced you already to a self-directed IRA company that I recommend, and you have moved that $150,000 over to the self-directed IRA company with no tax effect, no tax consequences, you just moved it over, and they helped you do that. And that took a couple of weeks. And after you did that, I told you, I said, Matthias, I’m gonna put your money to work for you just as soon as possible. So that’s the setup, that’s where we are so far. And so now I’m gonna call you with the good news, phone call, and here’s the exact script.
Jay Conner [00:13:00]:
So I call you up, we have a little chat, and then here’s exactly what I would say to Matthias. I said, Matthias, I’ve got great news for you. I can now put your money to work. I have a house under contract in Newport, North Carolina. It’s got an after-repair value of $200,000. Now the funding required for this deal matches up to what you have at the self-directed IRA company. $150,000. And closing is going to be Next Tuesday.
Jay Conner [00:13:33]:
So I’ll need you to have your funds wired to my real estate attorney’s trust account by next Monday. I’m going to have my real estate attorney email you the wiring instructions. That’s the end of the conversation. I mean, I mean for goodness’s sakes. I mean. There are three huge reasons why Matthias is excited and can’t wait to fund my deal. The first reason is that he trusted me to move his money over to the self-directed IRA company. He’d never heard of self-directed IRA companies until I told him about them.
Jay Conner [00:14:10]:
And he’d never heard of this private, this world of private money lending until I told him about it. And I told him how the program works. The interest rate, the length of the note, the frequency of payments, and how he’s protected not borrowing unsecured funds. I’m going to give him a deed of trust. Most people call it a mortgage. North Carolina. It’s a deed of trust. I’m going to name him, name him as a mortgagee on the insurance policy.
Jay Conner [00:14:32]:
So Matthias knows all that stuff already. He’s been sitting by the phone waiting for me to give him the good news phone call. So first of all, he trusted me. Secondly, Mattias knows I’m not going to bring a deal to the phone call for him to fund unless it matches the criteria of the program that I already taught him. Did you, did you hear the numbers? I told him the after-repair and value is $200,000, and the funding required for the deal is 150,000. That’s 75% of the after-repair value. And the third reason Matthias is ecstatic to fund my deal is because he’s not making any money until I put his money to work. And so now, because I’m not paying any interest until he’s actually funded a deal.
Jay Conner [00:15:23]:
So those are the three reasons that Matthias is sitting by the phone, ready to fund my deal.
Mattias Clymer [00:15:30]:
That makes sense. Yeah. I mean, is it, is it difficult? I mean, I guess you’d almost have to be able to guarantee a deal fairly quickly because I would imagine somebody wouldn’t want to have their money not earning any interest for months waiting around for something.
Jay Conner [00:15:46]:
Right, exactly. I mean that, that’s one of the first questions a new private lender is going to ask is how fast can you put my money to work? Right. And so of course I tell people, typically with my deal volume it’s, you know, with a new private lender coming in, typically it’s going to be 30 to 60 days before we’ll actually be closing and When I have a new private lender come in, I do what’s called, I move them to the top of the queue because I want to show them. When I say top of the queue, like when I pay off a private lender, then their cash is sitting there ready to go. And of course, it’s just what you said, Matthias. They want their money working, they want their money making money, earning interest. And you and when you cash out and you get ready to pay them off, they don’t want their money back. They’re going to say, can’t you just keep the money? Right, right.
Jay Conner [00:16:39]:
And the answer is no, I can’t keep the money unless I can secure it. And so I do a lot of what’s called substitutions of collateral, where I’m cashing out or selling a single-family house, and I’ve got another house I’m getting ready to close on right away, or I may have equity in another house. And so I’ll just get my attorney to do a loan modification, keep their promissory note open to where they keep earning interest, and then we just change the property that’s collateralizing that note.
Mattias Clymer [00:17:11]:
Okay, and can you put multiple private lenders on one property?
Jay Conner [00:17:17]:
Absolutely. So now what we have is what we call total loan-to-value. So total loan-to-value. So, you know, I don’t borrow more than 75%. And all of my members of my private money community and students, they do the same thing. We’re not borrowing more than 75% of the after-repaired value. So let’s use that same example of the after-repaired value of $200,000. And so in the example we went over, you were my only private lender at 150,000.
Jay Conner [00:17:50]:
Well, with a total loan to value of 75%, I can have one private lender in first position, say at $100,000, and I can have another private lender in a second lien position, say with 50,000. So I’m going to add the 100,000 to the 50,000. That’s a total of 150 divided by 200. After the repair value is still a total loan-to-value of 75% of the after-repaired value.
Mattias Clymer [00:18:19]:
Okay, yeah, that makes sense. And yeah, I was curious too. Now, one of the things that’s beautiful about what you had mentioned this, like you’re making the rules. I mean, this is you’re creating these scenarios and offering them to people. You know, one would expect if they were getting a mortgage that they’d be making monthly payments, but that doesn’t have to be the case in this circumstance. If you’re flipping the house, for example, it could be that they get their payment upon completion, with, you know, totaling up the interest. Are you in this scenario? Are you paying them monthly?
Jay Conner [00:18:55]:
It depends on the private lender and their objectives. So I have some private lenders that are elderly, and they’re not using self, they’re not using IRA funds, they’re using liquid investment capital, and they want the interest that it earns to supplement their income. So if the private lender needs monthly income to supplement their income, then I pay them monthly. That’s fine. I’ve got a lot of private lenders that are using retirement funds, and they move their funds over to the self-directed IRA company that I recommended. And so I’ll pay them either quarterly or semiannually. Some of them don’t care if I’m doing a flip and I’m going to be in and out of that, maybe in nine months or so. Then, as you just said, we can let the interest accrue and not make any payments.
Jay Conner [00:19:48]:
But let’s follow the cash flow on that. Let’s say that I have a private lender and they require and they need monthly payments to supplement their income. Well, let’s stop and think about this. You see, I’m bringing home a big check every time I buy, and it’s going to be a renovation or a rehab. So let’s go back to that scenario of an after-repaired value of $200,000. I’m borrowing up to 150,000. Well, if that home needs a renovation, say 30,000, $35,000, I’ll buy that property all day long for $100,000, 50% of the after-repaired value, because it needs renovation. Well, let’s follow the cash.
Jay Conner [00:20:33]:
$150,000 comes wired into my real estate attorney’s trust account. Most states use a title company. Here in North Carolina, we use real estate attorneys. So the 150,000 is wired to the trust account. Well, $100,000 of that 150 is going to go to the seller of that property. So now what do we have? We have this thing called excess cash to close. And for all of you, all who are real estate agents and realtors, you know what excess cash to close means. That means there’s excess cash sitting in that trust account that’s now going to come to me, the buyer of that property.
Jay Conner [00:21:15]:
So in that scenario, I’m bringing home a $50,000 check, less some closing costs. Now the majority of that check is going to go towards the Renovation. But let’s stop and ask this question. Notice, I do not take any of my own money. The buyer to the closing table. I’m picking up a check. Right? Here’s the question. Who wants to get paid to buy houses? Right.
Jay Conner [00:21:39]:
And so here’s a rider downer and a good double check if you are doing a renovation and a flip, if you can’t bring home a big check when you purchase the property. You’re paying too much for the property.
Mattias Clymer [00:21:55]:
And, you can sometimes get that with the bank. Maybe not a big check, but sometimes you can get, you can get that. I’ve had that a couple a couple times. But it’s a lot harder. And you probably can’t get 75%. They’ll probably be a lot more conservative, just depending on who you’re working with.
Jay Conner [00:22:10]:
That’s right.
Mattias Clymer [00:22:12]:
But yeah, that’s awesome. So like you were saying, $100,000 purchase 30, $35,000 in. So you still have $15,000 there that you’re making interest payments with. If you’re doing it monthly, quarterly, whatever.
Jay Conner [00:22:26]:
That was the point of the story. If I’m making monthly payments to them initially, whose money am I using to make their monthly payments? I like it. I mean, let’s stop and think about this. I buy a property, I take no money to the closing table, I bring home a check, and I use the private lender’s money to make their monthly payments. I mean, it doesn’t get any better than that.
Mattias Clymer [00:22:49]:
And if anybody’s scratching their head, it all makes sense. Thenonce the property is sold.
Jay Conner [00:22:54]:
Right.
Mattias Clymer [00:22:55]:
So then you can pay back their principal in total, like the 150, right?
Jay Conner [00:23:00]:
That’s right. That’s right.
Mattias Clymer [00:23:02]:
So, so there might have been, I don’t, I can’t do the math here quickly, but you know, you might have paid them another 5,000, 3,000, whatever in interest, and then you’ll have that additional 150 back to them. So they will, in turn, get their whole 8% back. It’s just the way the cookie crumbles. You’re able to use their funds to pay that interest until that. Yeah, that you, you realize the, the, the plan overall, I love it. Because you could also refinance. You could put it on a traditional mortgage in theory.
Jay Conner [00:23:35]:
Right.
Mattias Clymer [00:23:35]:
You could do what, called the BRRRR method if you wanted to at that point.
Jay Conner [00:23:39]:
Right.
Mattias Clymer [00:23:40]:
Let’s say the interest rates on a secondary market, you know, the product is going to be less than 8% and it’s 6. Just to throw that out there, you could, in theory, then also put it onto a regular mortgage and then pay them back, and you know, and then have a property that you keep instead of selling it.
Jay Conner [00:24:00]:
That’s correct. And that brings up a good point right there, Matthias. In this world of private money, and remember, I’m not talking about hard money. This is not an institution, this is not institutional money. And by the way, I’m not poo pooing hard money lenders. Some of my best friends are hard money lenders, and they use my techniques to raise more money from their investors to invest in their fund, which they turn around and loan out to real estate investors. So if the math makes sense, you can still do the deal. Of course, sure.
Jay Conner [00:24:30]:
But yeah, you know what’s interesting is I got 47 private lenders and not one of them, not one of them ever heard about private money or self-directed IRAs and this world until I put on my teacher hat and exposed them to them. Which reminds me, Matthias, there are three categories where you can find private lenders. Where are these people? Where are these, where are these private lenders or potential private lenders? Well, the first category is what I call people in your own warm market, your own connections. Where do you go every day, every week, and see the same people, right? So they’re in your cell phone, right? You go to church with them, you play golf, they’re your coworkers, any of those connections. The second category of private lenders is what I call your expanded warm market. Because if you want to scale your business and do multiple deals simultaneously, you’re going to run out of your own contacts sooner or later. So how do you grow your own network very, very quickly? Well, I can tell you one very, very quick way to grow your network is to join your local BNI Business Networking International. I mean, every city and small town has got a B and I, and I have raised millions of dollars by being an active B and I member.
Jay Conner [00:25:55]:
The third category of where you find private lenders is existing private lenders. These are ordinary people just like you and me who are already loaning money out to real estate investors, either using investment capital or using retirement funds. Well, did you know that over 70% of account holders in self-directed IRA companies want to loan you money? They want to be a private lender. They are already a private lender. But there’s one little caveat to that. Instead of putting on your teacher hat, you’re not going to teach those people about private money. They already know what it is. So now you’re going to have a negotiation conversation versus a teacher-student relationship.
Jay Conner [00:26:46]:
And I’d much rather be a teacher than a negotiator. Sure.
Mattias Clymer [00:26:51]:
No, that makes sense. Another thought that comes to mind is in, this is this is different, but anybe, you can help me explain the difference here. But when you get into a syndication and there are private investors in the syndication, limited partners, those all have to meet certain requirements. They typically have to be an accredited investor, and that means that they have a net worth of a million dollars outside of their personal residence, or they make, I think it’s 200,000 personally or 300,000 jointly a year for the past two years.
Jay Conner [00:27:29]:
Yeah, 250.
Mattias Clymer [00:27:31]:
So it doesn’t sound like this; this has the same requirements. It sounds like this is also not a security. And that might be one of the main differences. But can you, can you talk about that a little bit?
Sure. So a syndication, which I don’t do because I’m not in commercial. So typically, if you’re doing a larger project such as apartments, a commercial building, self-storage, any kind of multifamily, etc. Then you’re going to do, as far as raising capital goes, you’re going to do what’s called syndication, or you’re going to syndicate. And what that means is that you’re going to hire a, you’re going to hire an SEC attorney to draw what’s called a private placement memorandum, PPM. And that’s going to be the document that you disclose how your deal works and what the opportunity is. Well, all that is regulated by the SEC. The Securities Exchange Commission regulates all syndication activity in the world of single-family houses, which would also include duplexes, triplexes, and quadplexes.
Jay Conner [00:28:42]:
In this world, we’re not syndicating. So here’s a writer downer. Everything that we’re doing here is called asset-backed debt. Asset-backed debt, right. So this is not a security in the form or as relates to syndication. So the SEC is not regulating what we’re doing with single-family houses, with this being an asset-backed out. Meaning we’re not borrowing money unsecured, we’re borrowing money, and we’re securing that note with a deed of trust or a mortgage. So everything that we do with single-family houses is called one-offs.
Jay Conner [00:29:25]:
You’ve got a property that is being funded by one or two or three, whatever, private lenders. Each one of them has its own promissory note. Each one of them has its own mortgage or deed of trust. So as a result, there’s no Limit to the number of private lenders we can have. They do not have to be accredited. In fact, here’s what’s funny, Matthias. Of my 47 private lenders, I do have some that are accredited. But you know what’s funny? They don’t even know they’re accredited.
Jay Conner [00:29:57]:
They don’t even know what an accredited investor is. Right. I mean, I’ve got some private lenders that have, you know, over a million dollars with me. But, but all the notes are secured by individual properties.
Mattias Clymer [00:30:12]:
Yeah, that makes sense. That’s a key difference there between when you invest in a syndication. Yeah. You’re not going to get that. And so you said there are no limits. So, like I, you could have no limit on the number of investors in a deal if it’s secured. I mean you, I know you already mentioned that it would have to be first, second, and third mortgages. And it sounds like you go in order with how much you invest.
Mattias Clymer [00:30:35]:
So that’s that. There’s no real limit there either. How many people could you have in one deal? I know, it would be a nightmare. And you wouldn’t want 30 people on a $150,000. But.
Jay Conner [00:30:43]:
That’s right. Yeah. I mean, typically on a single-family house, on average, you’re probably not going to have more than one to three private lenders, you know, depending on, you know, depending on how what the after-repaired value is, you know, on that property.
Mattias Clymer [00:31:00]:
Right.
Jay Conner [00:31:01]:
When I said there’s no limit to the number of private lenders you can have, I mean, overall, like, you know, properties. Yeah, multiple properties, you know, I got 47. So, this means there’s no limit to the amount of private money that you can borrow at any given time. And the reason I bring that up is that it’s in contrast to doing business with the local bank or mortgage company, because I had a limit to my line of credit before it was shut down. Right. And so yeah, it was a huge blessing in disguise over time because if the bank had not shut me down, Matthias, odds are you and I would have never met. Sure, sure.
Mattias Clymer [00:31:45]:
It’s. And it is a really different world. So, I have a deal with a, you know, seller financing deal. So basically what we’re talking about, except the person used to own the house and it is just, and it was just so much fun to get creative with the whole process because it was, there were no preset rules. Like, you know, there’s no preset rules. What’s the interest rate going to be? There are no preset rules for the length of the note willre’s a balloon, it’s just all sorts of moving.
Mattias Clymer [00:32:17]:
There are no preset rules about what the down payment would be, all that kind of stuff. Now you, now you teach good principles where you’re not wanting the people to get overleveraged because they could and get their service in hot, hot water. Right. That’s where that 75% rule comes in.
Jay Conner [00:32:30]:
Right, Correct. Yeah. And I mean, you know, we are morally and ethically bound to protect these private lenders because you know, when you’re, when you’re exposing people to this world and teaching them how this works, they never heard of this. Right, right. So they’re looking to you to be the person who’s going to look after them and protect them. Right. And, so you got to do that. You’ve got to look after your private lenders.
Mattias Clymer [00:33:01]:
No, it makes sense. And obviously, that’s the best way to get repeat business. And I would imagine some of them are telling their friends as well.
Jay Conner [00:33:11]:
The opportunity and oh my lands, they can’t keep their mouth shut. I mean, I haven’t, I haven’t actually had to put my teacher hat on in a long time because the referrals just come and come and come. And you mentioned it when we started. But it is a challenge to be able to use all the money, which is a good problem.
Mattias Clymer [00:33:36]:
Yeah, yeah, yeah. To find enough deals. I mean, I think around our area right now, it has been a little bit since I found a good deal that pencils out. We finished one. Not as actively pursuing currently flips and that kind of things, but you know, if the right one comes across my plate, I’ll definitely jump. So I could I could see how that would be a challenge. And I know that in the syndication world, sometimes people get tempted to keep the lights on by, by, by, you know, lessening their standards as to what the deal is itself. Do you ever feel that gives a problem, like a pressure to, you know, get their money working? And, you might, I could see that being a trap, picking up a deal that isn’t as good because they really want their money working.
Jay Conner [00:34:26]:
Yeah. So I follow the rule of letting the math make the decision and not my emotions. So I stick to the same hard and fast formula as to what my maximum amount is that I will pay for a property when I’m using private money. And if the math doesn’t make sense, then we don’t do the deal.
Mattias Clymer [00:34:50]:
Yeah.
Jay Conner [00:34:51]:
And ultimately, I would rather pass on the deal than put my private lender’s money at risk.
Mattias Clymer [00:34:56]:
Yeah, yeah, absolutely. That makes sense. But now that’s, that’s, that’s super interesting. I think that there is definitely a big. Yeah, I think what could be cool for people, and one thing that you probably do talk to people about as well is that if they are heavily invested in stocks, want to have some diversification, want to get into real estate, they don’t want to be a flipper, they don’t want to be an active property manager, they don’t want to do all the work involved with it. This is a great way to diversify their portfolio.
Jay Conner [00:35:28]:
Oh absolutely. Being a private lender is a great way to be totally passive for someone who doesn’t want to negotiate deals, oversee deals, deal with all the different vendors, but just sit back, collect checks, or watch their account grow. This is a wonderful passive way to get involved.
Mattias Clymer [00:35:49]:
And I would imagine that, for the investors, they would not be able to capitalize on depreciation, is that correct?
Jay Conner [00:35:56]:
That’s correct, yeah. The income that a in or is to capitalize on depreciation, then it’s your company that has to own that property so they can depreciate it. So, the income that the private lender earns, if they’re using just liquid investment capital, then they get a 1099 Int at the end of each year, and that interest income they earned is taxed at their ordinary income tax rate. If they’re using retirement funds, dedicated retirement funds, a nd a self-directed IRA company, then there’s no tax, there’s no 1099 INT. There are no taxes. Because they don’t pay any taxes. They don’t pay any taxes at all. If they’re using a Roth IRA, that’s all after tax.
Jay Conner [00:36:47]:
Yeah. But if it’s, if it’s a401 (k) that they moved over or whatever, then that’s all tax deferred, and they won’t pay any taxes on that until they take any distributions.
Mattias Clymer [00:37:00]:
Yeah, yeah, that makes sense. And yeah, like you said that Roth could be the real sweet spot there.
Jay Conner [00:37:08]:
Oh yes.
Mattias Clymer [00:37:09]:
And if anybody’s out there wanting to invest themselves, they can also obviously invest their own deals with the same strategy of a self-directed IRA.
Jay Conner [00:37:19]:
Absolutely.
Mattias Clymer [00:37:21]:
I, I’ve, I’ve been tempted. I do, I’ve kind of used that as my balance because most of my net worth, most of my world is in real estate. So I have maintained some in stocks, but it has been tempting to convert to a self-directed account and go all in.
Jay Conner [00:37:40]:
Well, she will convert part of it.
Mattias Clymer [00:37:43]:
There you go. There you go. Yeah. So I gotta ask if you have any golden nuggets for our listeners that you want to pass on. It could be about this space, it could be a general mindset, etc.
Jay Conner [00:37:58]:
Well, there are lots, there are lots of golden nuggets. My most expensive lessons that I’ve learned are through my mistakes. I guess I have A golden nugget I would share with Matthias, to your audience, is that one of my favorite quotes is that your destiny is determined by the books you read and the people you meet. And so when I say the people you meet, I’m talking about who you hang around. Some of my most, most profitable money that I’ve invested is being member, is being a member of mastermind groups, hanging around people who are like-minded that you can serve each other and help each other grow. So I highly recommend getting involved in a mastermind that’s got, you know, like minded people of whatever it is that you’re, that you’re trying to work on. So that would be my golden nugget for today.
Mattias Clymer [00:38:58]:
No, I love it. That’s so true and so true and people can really pull you down, even like negative people. So it’s good to curate your friends.
Jay Conner [00:39:10]:
Absolutely, absolutely. You don’t get to pick your parents, but you do get to pick your friends.
Mattias Clymer [00:39:17]:
I love it. Now, how about a favorite book? If you’re watching this, Jay has a background of a bunch of books, and he just mentioned that reading was a recommended thing. Do you have any fundamental books you think would be helpful in the space, or just maybe one that you currently really enjoy?
Jay Conner [00:39:37]:
Well, I got a long list of that, but I’ll share one that is very, very impactful, and that is by Jack Canfield. He’s the co-author of the Chicken Soup for the Soul series, and he wrote a book called The Success Principles. The success principles. There are 65 success principles in the book, and he just came out with his, I think it was 1the 0th anniversary edition. But anyway, very impactful book. I highly recommend it. The chapters are not long, it’s easy to read and digest, and the very first principle in that book out of all 65 is foundational to all the other principles, and that is to be 100% responsible for everything that happens in your life. Until you take 100% responsibility for everything that’s happening, the rest of the principles don’t matter.
Mattias Clymer [00:40:40]:
That’s so true. That is so true. That is such a fundamental shift. When you stop blaming everybody else and everything that happens to you on outside circumstances, that’s when you can truly start growing. That’s. That’s great. I haven’t read that one, so thank you. Did that.
Jay Conner [00:40:58]:
You’re welcome.
Mattias Clymer [00:41:00]:
Jay, what about if people want to find out more about you, follow you on social media, and learn more about your private money? You have a private money program, is that correct?
Jay Conner [00:41:10]:
Actually, I would love to give your audience, Matthias, a free copy of my bestselling book, which is called Where to Get the Money Now. And the subtitle is how and where to get money for your real estate deals without relying on hard money lenders or institutional money. The book is 20 bucks on Amazon, but let me give it to you as a gift. Just cover shipping, and I’ll autograph it, and I will express mail it to you. I’m also going to include two tickets valued at $3,000 to my live and in-person private money conference that I put on three times a year. The next one coming up is in October, and so I’ll include those tickets for the book. You can pick up the book at www.jconner. www.JayConner.com/Book so I’m an ER, not A, or so that’s www.JayConner.com/Book.
Jay Conner [00:42:14]:
I’ll rush it right out to you. And if you’ve enjoyed this podcast, let me invite you to come over and check out my podcast. I’m now in my eighth year, and it’s easy to find on all the podcast platforms. All you do is search for raising private money. Imagine that. Raising Private Money with Jay Conner, and I have two shows a week. We release some early Monday mornings and Thursday mornings. So twice a week, I interview other real estate investors about how they have gone out raising private money.
Jay Conner [00:42:47]:
And so we learn from two other guests every week. I love it.
Mattias Clymer [00:42:51]:
That’s fantastic, Jay. Thank you so much. Definitely check that out, guys. And yeah, thanks so much for being a guest on the show. I really enjoyed this conversation.
Jay Conner [00:42:59]:
Matthias, thank you so much for having me, and God bless you.
Erica [00:43:03]:
Thanks for listening to the REI agent.
Mattias Clymer [00:43:05]:
If you enjoyed this episode, hit subscribe to catch new shows every week.
Erica [00:43:10]:
Reiagent.com for more content.
Mattias Clymer [00:43:12]:
Until next time, keep building the life you want.
Erica [00:43:15]:
All content in the show is not investment advice or mental health therapy. It is intended for entertainment purposes only.
Narrator [00:43:22]:
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.