Credits to:
https://www.youtube.com/watch?v=fZqb-JePR-E
“How to Raise Private Money Without Asking For It With Jay Conner- Podcast”
https://www.youtube.com/@NathanPaynelessFlipping
If you’re a new real estate investor or an experienced wholesaler, odds are you’ve heard the buzz about Private Money—but maybe you don’t really know how it works, how to get it, or why it can make all the difference for your business. In a recent discussion on the Raising Private Money podcast, we learned exactly how Private Money is the ultimate tool to turbocharge your deals and put you firmly in the driver’s seat.
What Is Private Money?
First, let’s demystify the term. Private Money is capital sourced from individuals—think friends, family, or business connections—who are willing to lend you money for your real estate deals. Unlike traditional hard money lenders or banks, Private Money lenders are regular people. They loan you investment capital or funds from retirement accounts, such as self-directed IRAs, and you secure their investment with real estate.
As explained in the episode, this isn’t about filling out mountains of paperwork or jumping through institutional hoops. You get to make the rules. There are no applications. Deals can close in less than 7 days using Private Money. The process is relationship-driven and flexible, allowing for rapid deal execution and custom terms.
Why Is Private Money Essential?
Too many real estate newbies, particularly wholesalers, overlook Private Money. They focus on getting deals under contract, then scramble to find a cash buyer. But as revealed in the podcast, Private Money gives you options. Rather than being forced to assign or wholesale every property, you can cherry-pick the best ones to keep and flip—or hold for long-term rental—maximizing your profit on each transaction.
Imagine finding a property with little needed rehab, but where the seller only wants cash—no creative financing, no terms. The only way to stay in and profit from such a deal is to have Private Money ready to fund it. In the episode, the expert shares an example where he bought a property for $141,500 with an after-repaired value of $280,000. The rehab? Less than $10K, and he could have sold the house “as is” for over $225,000.
How Do You Get Private Money?
This was the big ‘aha’ of the episode: you don’t ask for money—you teach people about the opportunity, establish trust, and let the relationship do the work. The process starts by putting on your teacher hat. Explain what Private Money is, how it’s secured, and the kind of returns your investors can expect—typically 6–8%, which far exceeds savings or CD rates at the local bank.
You never pitch a deal and ask for money in the same conversation; that comes off as desperate. Instead, you inform, educate, and learn what your contacts have available. Then, when you do have a property under contract, you simply call with the great news that you can put their money to work. No sales pitch, just an opportunity for them to earn a steady, secured return.
Terms and Benefits
Private Money comes with major investor-friendly perks:
- You make the rules: Set your own terms—interest rate, payment schedule, and maximum loan-to-value (never more than 75% of after-repaired value).
- No personal guarantees: Unlike banks and hard money, your assets (not you personally) secure the loan.
- No credit requirements: Your credit score is irrelevant; it’s about the deal and the relationship.
- Fast closing: Deals can close in a week because there’s no red tape.
Private Money works for flips, rentals, single-family, multifamily, and even commercial or self-storage projects. The flexibility and security make it the ultimate tool to scale and stabilize your business.
The Takeaway
For wholesalers and new investors, the big lesson is clear: instead of passing up juicy deals because you don’t have the cash or relying on a buyer’s whims, raise Private Money and seize opportunity for yourself. As they put it, when you have all cash available at your fingertips, you do more deals, and your deals are more profitable.
If you’re looking to take your investing to the next level, consider learning more about Private Money—not just as a funding source, but as the lever that puts you in control of your business and your financial future. And, as the guest suggested, always work with experienced mentors and check out free guides and resources to fast-track your success.
Ready to stop passing up great deals? Make Private Money part of your real estate toolkit today.
10 Discussion Questions from this Episode
- What are the primary differences between Private Money and hard money lenders as described in this episode?
- How can access to Private Money transform a wholesaler’s business model and profit potential?
- Why is it important for real estate investors to build relationships with both private lenders and hard money lenders?
- What are some advantages of using Private Money compared to traditional bank or institutional loans?
- How does the strategy of borrowing up to 75% of after-repaired value offer both security and leverage for investors?
- In what ways does teaching potential private lenders about self-directed IRAs and private lending help to build trust and attract capital?
- Why is it crucial not to discuss a funding opportunity and explain your Private Money program in the same conversation with a potential lender?
- What role do market conditions and property types play in structuring Private Money deals as discussed in the episode?
- How do first and second lien positions impact the risk and process of private lending on a single property?
- According to the conversation, how do smaller, local markets affect marketing ROI and deal acquisition for investors using Private Money?
Fun facts that were revealed in the episode:
- Quick Closings with Private Money
Deals funded with Private Money can close in less than 7 days, with no applications or lengthy approval processes required. - No Personal Guarantees Needed
Unlike traditional or hard money loans, Private Money deals typically do not require personal guarantees—a major advantage for investors looking to reduce personal risk. - Profits Without Using Your Own Cash
Investors using Private Money often borrow more than the purchase price and rehab costs (up to 75% of the after-repaired value), so they can receive a check at closing without bringing their own money to the table.
Timestamps:
00:00 Using Private Money in wholesaling
05:32 Difference Between Private and Hard Money
08:35 Negotiating a property sale loss
11:36 Using Private Money for rent-to-own deals
15:26 Using Private Money in real estate
19:54 Teaching investors about funding deals
20:48 Investing liquid capital securely
24:57 Educating private lenders on IRAs
27:35 Funding property deals with lenders
33:02 Real estate closing funds process
36:59 Analyzing deals and marketing strategies
39:07 Solving wholesaler challenges
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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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From Wholesaler to Investor: Mastering Private Money with Nathan Payne and Jay Conner
Jay Conner [00:00:00]:
By having the Private Money available, ready to close. And that’s the great thing about Private Money. You get to make the rules. There are no applications. I can close deals in less than 7 days using Private Money. And when a real estate investor has those funds available, the bottom line is you’re just going to do more deals, and your deals are going to be more profitable.
Narrator [00:00:23]:
If you’re a real estate investor and are wondering how to raise and leverage Private Money to make more profit on every deal, then you’re in the right place. On Raising Private Money, we’ll speak with new and seasoned investors to dissect their deals and extract the best tips and strategies to help you get the money because the money comes first. Now here’s your host, Jay Conner.
Nathan Payne [00:00:52]:
All right. We are live with Investor Thrive. I have Jay Conner on here. I’m very pleased and grateful to have you on, Jay. How are you?
JayConner [00:01:00]:
My lands, Nathan, I’m doing fantastic. And thank you so much for inviting me to come on and for us to talk about my favorite subject that I’m so passionate about, and that being Private Money.
Nathan Payne [00:01:12]:
You know, I’m excited to talk to you about Private Money because I think a lot of new investors don’t really even think about Private Money, at least wholesalers, right? They’re like, okay, let me just get a deal. But Private Money is huge to doing deals. I know, cuz I’ve had to get, you know, get a lot of it.
Jay Conner [00:01:28]:
Absolutely. Uh, as you say, you know, if someone’s starting out wholesaling, they’ll, they may be thinking, well, what in the world do I need Private Money for? Well, here’s the deal. As you know, like anybody, when you’re focusing on wholesaling, some deals come along rather quickly that you think to yourself, well, man, how could this change my business if I could stay in this deal?
Nathan Payne [00:01:55]:
Right.
Jay Conner [00:01:55]:
Instead of getting an assignment fee and, you know, getting all the profit, and instead of passing on that profit to somebody else.
Nathan Payne [00:02:03]:
100%. So, uh, most of the audience that I have are brand new investors,s or they’re wholesalers. So what advice would you give to wholesalers that, uh, really aren’t thinking about Private Money at the moment or even know what it is? Like, what, what would your advice be?
Jay Conner [00:02:19]:
Well, you know, we always want to begin with the end in mind on any deal that we’re doing. So when analyzing a deal, first of all, uh, I’ll just, I’ll just give an extreme example. Uh, I do know this one thing for sure, which is a fact: the biggest profits, the biggest profits that are made in real estate typically are those that have rehab involved, right?
Nathan Payne [00:02:46]:
Yeah.
Jay Conner [00:02:47]:
Um, so, so, you know, let’s say a wholesaler says, well, you know, I don’t have any relationships in place that I could even rehab. Well, there’s a downside. You’re not going to want to stay in a deal and use Private Money to fund your deal if a rehab is involved and you don’t have a relationship in place with a general contractor. Um, so that’s like number one.
Jay Conner [00:03:11]:
However, how about those deals, Nathan, that come along that hardly don’t need any rehab at all. The people won’t sell creatively. They won’t sell subject to the existing note. They won’t sell with seller financing. They require all the cash. Well, I’m thinking of a particular deal right now that I just closed on over in Havelock, North Carolina.
Nathan Payne [00:03:37]:
Okay.
Jay Conner [00:03:37]:
The after-repair value is $280,000. I just closed on it yesterday for $141,500.
Jay Conner [00:03:48]:
But the rehab on it, or the renovation, is actually less than $10,000. I could actually sell it as is and not sell it for $280,000. I could sell it as is for like $225,000 or $230,000 and not even touch it. But the only way I can do that and stay in the deal is if I’ve got Private Money to fund it. So the questions, uh, that I recommend asking are about the exit strategies. Well, if I stay in this deal, what all is involved? Am I going to need to renovate it? Um, and so here’s the deal, bottom line.
Jay Conner [00:04:31]:
It’s amazing when you’ve got all cash available at your fingertips. How many more deals you actually do.
Nathan Payne [00:04:38]:
That’s true. Yeah, it is very true. Because if you can’t find, you know, if you can’t find someone to buy it, then you would lose it, right? But right here you have this great deal.
Jay Conner [00:04:49]:
Exactly. And so by having the Private Money available, ready to close- and that’s the great thing about Private Money- you get to make the rules. There are no applications. I can close deals in less than 7 days using Private Money. And when a real estate investor has those funds available, the bottom line is you’re just going to do more deals, and your deals are going to be more profitable.
Nathan Payne [00:05:14]:
So let’s kind of talk about that. As a new investor, Private Money, uh, that might be kind of a confusing term. Is that— is that when you say Private Money, are you talking like a hard money lender? Are you talking about how that’s private? Are you talking private, where you can get that money from like family, friends, people you know? Is there a difference?
Jay Conner [00:05:32]:
There’s a big difference. There’s a big difference. So when I talk about private money, I’m not talking about hard money lenders or hard money brokers, okay, that have a fund and they have gone out and raised Private Money for their fund, and now they loan that out to real estate investors. I’m talking about doing business with human beings, doing business with individuals. And as you said, it could be family or friends; it could be existing private lenders, um, or all the above, right? So in answer to your question, we’re doing business with individuals that are loaning us real estate investors either money from their investment capital and/or their retirement funds. So that conversation of self-directed IRAs is pretty important too.
Nathan Payne [00:06:17]:
So why would someone go to a hard money lender? What’s the benefit of a hard money lender if you can raise enough of your own Private Money?
Jay Conner [00:06:26]:
So I say forge as many relationships as you can, right?
Nathan Payne [00:06:31]:
Okay.
Jay Conner [00:06:31]:
So I’ve got 47 private lenders, individuals who are lending us money on our deals.
Nathan Payne [00:06:36]:
Okay.
Jay Conner [00:06:37]:
So why would you go to a hard money lender, um, in addition to individual private lenders? Well, there’s one thing about it. If you’ve got a relationship with a hard money lender, you don’t have to worry about the money disappearing on you, right? Um, however, in my case, I’ve never had money disappear on me because I stay in contact with my private lenders. They let me know what they have available. And so it’s my job to put their money to work just as soon as possible.
Nathan Payne [00:07:06]:
Okay. And what, what is the return that you find that most, most Private Money lenders or people that are willing to lend their money are willing to do for? Is there like a percentage that you usually see?
Jay Conner [00:07:17]:
Yeah, so I pay 8%. Okay, I’ve got friends that are paying 6% and 7% because still that’s a whole lot more than you can get, or they could get at the local bank. But, um, I pay 8%, uh, no origination fees, no points, uh, if we don’t cash out within the term, no extension fees. It’s just a straight interest rate.
Nathan Payne [00:07:41]:
Okay, do you keep their money, or do you only ask for it when you need it?
Jay Conner [00:07:47]:
So I’m only using their money and paying them a return on that money while that funding is, uh, invested into a property, right? So I’m not keeping their money unless we’re using it on real estate. So I don’t borrow any unsecured funds. We secure every note with the real estate. That we are purchasing.
Nathan Payne [00:08:12]:
Is there a personal guarantee that you’re signing with them as well? Or is it just, hey, it’s secured by the asset?
Jay Conner [00:08:19]:
No personal guarantees. That’s another big benefit to using Private Money, as opposed to when you borrow hard money, or you’re borrowing any kind of commercial or institutional money, there’s always a personal guarantee. But in this world of Private Money, no personal guarantees.
Nathan Payne [00:08:35]:
Yeah, I’ll be open and honest because that’s how I am with everything. I have a property in Provo, Utah that we bought, and the market, as we know, is hot. Utah’s taken a big hit on prices because we went up super high in values, but now it’s gone down pretty, pretty hard, pretty fast. So we have a hard money lender that we’re in negotiations with because the property that we bought and fixed up was going to sell; we were going to make a profit. Right now we’re at a loss, so we’re having to negotiate. We’re in the talks, and he’s telling us,s like, hey, there’s a personal guarantee. So if you sell this and I’m at a loss or you’re at a loss, you still got to make me whole because of the personal guarantee. So it is very interesting, but it happens, right? And you’ve got to go with the blows. But Private Money, you’d still want to make that Private Money lender whole as well if you were at a loss.
Jay Conner [00:09:24]:
Of course.
Nathan Payne [00:09:25]:
But that’s, I guess, the hard money lenders really have, you know, everything locked and loaded, right? Locked down.
Jay Conner [00:09:30]:
Yeah, the biggest difference between borrowing institutional money, hard money, banks, whatever, and working with private lenders, individuals, is we make the rules. You know, when I was borrowing money from the banks, they made the rules. They set the interest rate, they set the loan-to-value, they set the length of the note, they set how often you have to make payments. In this world of Private Money, we make the rules, right?
Nathan Payne [00:09:57]:
Yeah.
Jay Conner [00:09:58]:
For example, I set the rule that I will not allow my private lenders to loan or invest more than 75% of the after-repaired value. I didn’t say 75% of the purchase price; 75% of the after-repaired value. What I bought— what I buy it for— doesn’t make any difference. So let’s say, for example, uh, for easy figuring, there’s a house I’m going to buy with an after-repaired value of $200,000. Well, after-repair value, $200,000. Well, let’s say it’s got a $30,000 rehab. Well, I buy houses that need rehabs all the time at 50% or less of after-repaired value. So I might buy that house for $100,000.
Jay Conner [00:10:44]:
Well, here’s another big reason I love Private Money. I never, never, with a capital N, ever take any of my own money to the closing table when I’m buying.
Jay Conner [00:10:57]:
I always get a big check because I always borrow more than I need to buy. Okay, well, the only way that formula works is if you are buying at a discount, right? So I’m— I never bring any of my— using Private Money; I never take any of my own money to closing. I get a big check when I buy, and then we actually structure deals so that if we’re going to do a flip, I don’t even make any monthly payments. You don’t have to make monthly payments. You can structure it so that the interest just accrues until you’re ready to cash out. And that, that’s only going to work if you’re in it for like 6 months or 9 months, something like that.
Nathan Payne [00:11:35]:
Yeah.
Jay Conner [00:11:36]:
And then when you sell it, you pay off the private lender note along with the accrued interest. But another great thing about Private Money is there’s no hurry to pay it back. If you can sell that house and have a positive cash flow, you could sell it on rent-to-own as long as you’ve got a positive cash flow on what you can rent it out for, um, over and beyond your underlying debt on the private lender note. And so, depending on how cheap you buy that house, I’ve sold a lot of houses on rent-to-own while I had used Private Money to fund it. But here’s a big lesson learned. Don’t go do— don’t go do a major rehab on a house and sell it on rent-to-own. Even though I require people to get in our credit repair program, I got tired of rehabbing them more than once.
Nathan Payne [00:12:25]:
Yeah, right. They don’t take care of them, right?
Jay Conner [00:12:28]:
So, you know, I— my definition is I’ll sell a house on rent-to-own if I’m not having to put more than $10,000 of renovations into it. Yeah, but I may— but a major rehab, I’m going to want to get that money back out of it.
Nathan Payne [00:12:43]:
And I’m assuming rent-to-own is the same thing as a lease option, correct?
Jay Conner [00:12:47]:
Same thing.
Nathan Payne [00:12:48]:
Same thing. Okay. And I’m assuming you require a down payment from whoever you’re, uh, doing a lease-option rent-to-own from, or not? Not always?
Jay Conner [00:12:56]:
Well, the legal term, I would require a down payment if I’m selling it with owner financing and transferring title. If I’m selling it on a lease-option, lease-purchase, rent-to-own, all the same thing. I’m gonna get a large— the legal term is a large non-refundable option fee.
Narrator [00:13:12]:
Option fee.
Jay Conner [00:13:12]:
Most people, most people call it a non-refundable lease option deposit.
Nathan Payne [00:13:16]:
Okay.
Jay Conner [00:13:17]:
Well, I don’t say deposit because deposit implies that they don’t get it back.
Jay Conner [00:13:23]:
However, when they’re ready for a mortgage, the option fee that’s non-refundable that they paid when they moved in, 100% of that option fee is applied to the purchase price.
Nathan Payne [00:13:36]:
Perfect. And you specifically call it an option fee?
Jay Conner [00:13:41]:
Correct.
Nathan Payne [00:13:43]:
So I think this is awesome. So for me, I’ve actually raised quite a bit of Private Money too, and this is how I structured it. I would get hard money for 80%, and then I’d get Private Money for the down payment and for the repairs. But it sounds like you’re getting— you have enough, or you’re raising enough to do the whole purchase. Is that correct?
Jay Conner [00:14:02]:
Correct. Purchase more than I need to buy it. And if rehab’s involved, all the rehab money upfront. And the beautiful— one of the beautiful things about, you know, using Private Money, and, you know, I teach all the time how you raise Private Money without asking for it. The beautiful thing is there’s no application fee. There’s no application period. There’s no, uh, credit. Your credit score has got nothing to do with how much Private Money you can get.
Jay Conner [00:14:33]:
It— the way I do Private Money, it really puts you in the driver’s seat and in control of the destiny of your business.
Nathan Payne [00:14:43]:
Wow. So do you suggest people use Private Money for anything outside of backing, like buying a real estate property? Like, is there anything else that they can be doing with that, or is it only buying properties?
Jay Conner [00:14:57]:
So Private Money in the context of real estate can be used for single-family houses. It can be used for commercial, self-storage. In fact, if a self-storage, um, operator is selling and they’re not selling with seller financing, then a lot of my friends use Private Money for that. Private Money is used for small apartments, uh, you know, large apartments. Right? It’s all the same money, but it’s how you structure it differently.
Jay Conner [00:15:26]:
So, like,e on large real estate stuff, we— they’re going to be doing what we call syndication, raising money for a fund. So the private lenders will be investing in a fund that will fund the upcoming project. The way I do Private Money is that everything is what we call one-offs. And what I mean by a one-off is that every single-family house that is funded by a private lender or more than one private lender, that house is collateralizing the note that the private lender, uh, you know, that we’re, that we’re borrowing the money. But in answer to your question, Private Money can be used for anything. I mean, you know, venture capital is, I mean, that’s, that’s Private Money. But in most of those cases, it’s not going to be backed by real estate if you’re, like,e raising money to start up a company or something. Right.
Nathan Payne [00:16:22]:
That was kind of my question is like, uh, can— do other people maybe raise, you know, pay a return of 8% on maybe something, marketing spend, if they want to send out mailers? I don’t know if that really happens, but, uh, you know.
Jay Conner [00:16:34]:
Well, I can only speak from my experience, and the only Private Money that I borrow is when I have a property that’s got the equity in it that I can back and secure that note.
Nathan Payne [00:16:48]:
So let’s, let’s talk about this. So you can get properties at 50% normally or a little bit lower. You ask for 75% of the ARV, so you’re getting more; you’re borrowing more than you need. Um, and they don’t— so they don’t even ask what you, what you got it for. You don’t even talk about it. You’re just saying, hey, I’m— I need 75% of what this property is worth. And that’s the discussion.
Jay Conner [00:17:10]:
Let me go through that discussion, Nathan. Let me go through that script. So one way, or not one way, the way that I raise millions in Private Money without ever asking for it is, first of all, you know, the old traditional way, Nathan, of borrowing money for real estate is you go to the bank, and you get on your hands and knees, and you put your hands under your chin, and you look at Mrs. Banker or Mr. Banker, and you say, please fund my deal. Please fund my deal, right? Uh, in this world, there is no asking, begging, selling, chasing. We’re doing business with individuals. So, you know, the old traditional model is you’re going and asking.
Jay Conner [00:17:55]:
In this world, we’re offering a mortgage. We’re not asking for a mortgage. So how do we start? How do we start? How do we do this without asking for money?
Jay Conner [00:18:06]:
Well, step number 1 is you put on your teacher hat.
Nathan Payne [00:18:11]:
Okay.
Jay Conner [00:18:12]:
And you see, I don’t— my first 6 years I’ve been investing in single-family houses. I’ve done over 450 rehabs. My first 6 years in this business, I relied on the local banks, and I was at the mercy of the local banks, right? And then I lost my line of credit due to the global financial crisis in 2009, January 2009. I learned about Private Money immediately. And so then I put my own program together. You see, I wasn’t going to be following the bank’s program anymore. So what do I mean by my own program? My program as to what I’m going to be paying and offering my private lenders.
Jay Conner [00:18:53]:
What’s my— you know, what’s my interest rate, right? What are the points? What’s the length of the note? Maximum loan-to-value? Et cetera. And so I put my program together, and then I put on my teacher hat,t and I started, first of all, teaching people in my own circle of influence what in the world Private Money is, what self-directed IRAs are, how they can use retirement funds to get unlimited income per year, tax-free or tax-deferred at least.
Jay Conner [00:19:25]:
So I put on my teacher hat. I view myself as a teacher. In fact, when I meet somebody new, they ask me what I do; I say, I teach people just like you and me how to earn high rates of return safely and securely. I teach them about several IRAs. So I teach them what it is, then I teach them my program. I don’t ask them for money. Yeah, they can get those.
Nathan Payne [00:19:49]:
Yeah, you’re— yeah, it sounds like you’re just telling them what you do, and, and yeah, I love it.
Jay Conner [00:19:54]:
And so I’m teaching them the program. I don’t have to ask. I don’t have to ask, you know, do you want to invest, whatever. If they’ve got investment capital, retirement funds, of course they do. Where else can they get these kinds of returns? If they’ve got retirement funds, then I introduce them to my connection at the, um, self-directed IRA company where I refer all of my private lenders that have retirement funds. So now I know how much money they have. So I hadn’t asked; I taught them what it is. Now, how do I get a deal funded without asking them if they want to fund the deal? So I know how much someone’s got to work with.
Jay Conner [00:20:36]:
So let’s, let’s go through this little script roleplay here. So let’s say, Nathan, you’re one of my new private lenders. Let’s say you’ve got $150,000, right?
Nathan Payne [00:20:48]:
Okay.
Jay Conner [00:20:48]:
Just in, just in liquid capital, just sitting there that you’d like to get a high rate of return safely and securely. So I say, Nathan, I’m gonna put your money to work for you as soon as possible. Or if you’ve got retirement funds, I’ll introduce you to my self-directed IRA representative, and they’ll help you move your funds over. So I know how much you got. You got $150,000 in our example. So let’s say a week goes by and now I’ve got a deal that I want, that I’ve got under contract,t and I want to get funded. So I pick up the phone. Believe it or not, Nathan, we still have, uh, handsets here in North Carolina with cords attached.
Jay Conner [00:21:30]:
Can you believe it? So I pick up the phone, I call you, you answer the phone. Here’s the script. I said, ” Hey, Nathant, how’s it going, man?
Jay Conner [00:21:41]:
What can I do for you? We’re having, like,e a little chit-chat, you know, and then I say, Nathan, I have got great news for you. I can now put your money to work for you. I’ve got a house in Newport under contract with an after-repair value of $200,000. The funding required for the deal is $150,000. I know you have $150,000 because you already told me. The closing is next Thursday, so you’ll need to have your $150,000 wired to my real estate attorney’s trust account next Wednesday. I’m going to have my real estate attorney email you the wiring instructions. Now that’s the end of the conversation.
Jay Conner [00:22:23]:
I didn’t ask you, ” Do you want to fund the deal? That’s the most stupid question in the world I could ask you. Of course you want to fund the deal. You’ve been waiting for me to call you to let you know that I can put your money to work. See, there’s a big lesson I learned years ago, Nathan. Don’t ever make this mistake. Don’t ever talk about Private Money, your private lending program, how it works. And in the same conversation, you’ve got a deal to be funded. You’re already desperate, and you don’t even sound like you’re desperate, right? It’s like, when is the worst time in the world to be raising Private Money? When you need it.
Nathan Payne [00:23:06]:
That’s the worst time. Yeah.
Jay Conner [00:23:11]:
Money, right? You teach, you teach people what the program is, how much they gotta work with, and now you call ’em back as soon as you can with a deal for them to fund.
Nathan Payne [00:23:20]:
So let me ask you this. So, in this scenario, this person you called, are you asking or just telling them, hey, it’s time to put your money to work? Is there money in a self-directed IRA, and you know, that’s why you know how much is in there?
Jay Conner [00:23:33]:
No, both cases. Either I have introduced them, they’ve got retirement funds, and I introduced them to myself or an IRA rep, and they’ve transferred funds over, or they’ve told me they’ve got X amount of investment capital, X dollars, $200,000, $300,000 that they want to start with. By the way, Nathan, they always have more than they tell you, right?
Nathan Payne [00:23:55]:
Of course.
Jay Conner [00:23:56]:
So they want to start with $200,000, and it’s just liquid capital.
Nathan Payne [00:24:00]:
Okay.
Jay Conner [00:24:01]:
And I say, okay, I’ll put you down. I’ll put you in the queue. I’m gonna put your money to work for you as soon as possible. Now, one of the first questions they’re gonna ask is, well, how fast can you put my money to work? You need to have an answer for that question. My answer is typically within 30 days. Do you know how I know that? Because when I have a new private lender, guess what? They go to the top of the queue.
Nathan Payne [00:24:27]:
Yes, they did.
Jay Conner [00:24:28]:
And we’re gonna put their money to work first because I want to show them and prove to them that I can perform and I can actually get their money invested for them.
Nathan Payne [00:24:39]:
So let me ask you this. So I have a traditional IRA, and I have a Roth IRA. My wife and I do. We max it out every year, right? But, uh, if we were to transfer it to a self-directed IRA, does that not accrue interest? Does it not make money unless it’s being, um, directed or unless it’s being worked on? Is it just sitting there?
Jay Conner [00:24:57]:
Correct. It’s just sitting there. So I have a moral and ethical obligation if I have even introduced— which, you know, none of my private lenders ever heard of separate IRAs. None of them ever heard of Private Money until I taught them. Your private lenders are probably the same way, right? And so, particularly if they have retirement funds and they’ve moved those funds over for you to put their money to work because they don’t have— they don’t have anywhere else to go because you’re the person that taught them about it.
Nathan Payne [00:25:30]:
Right?
Jay Conner [00:25:31]:
Right. So I am obligated to put their money to work just as soon as I can.
Nathan Payne [00:25:36]:
And, uh, on the self-directed IRA, any money that you make, uh, that they’re making on the 8% is not, uh, is just tax-deferred or they don’t pay taxes on, correct?
Jay Conner [00:25:47]:
Correct. Because all those returns are going back to their self-directed IRA account. The returns are not going to them directly.
Nathan Payne [00:25:57]:
Can you transfer a Roth or traditional anytime to self-directed, or is there like a cutoff on it?
Jay Conner [00:26:03]:
Absolutely.
Nathan Payne [00:26:03]:
Okay, so there’s not a cutoff on age or time or— interesting. Yeah, because I was thinking about doing— making it self-directed, but you can’t invest your own. You have to have someone else invest it, and I don’t think it can be family either, right? It has to be, uh, like it can’t be family,y and it can’t be yourself, correct?
Jay Conner [00:26:21]:
Well, it can’t be yourself. That’s called self-dealing. But it can be your family, ly depending on who your family member is.
Nathan Payne [00:26:30]:
Okay.
Jay Conner [00:26:30]:
So the IRS will not let you borrow money from someone else’s retirement account if you have a vertical relationship, meaning—
Nathan Payne [00:26:41]:
That’s right.
Jay Conner [00:26:42]:
If it’s your father, your mother, your grandparents, your great-grandparents, or if it’s your children, right, or your grandchildren, those relationships cannot borrow from each other on real estate. However, lateral relationships, yes.
Nathan Payne [00:27:00]:
Okay.
Jay Conner [00:27:00]:
So you can borrow from your cousins, you can borrow from your brother, you can borrow from your sister, you can borrow from your uncle, from your aunt. I mean, got it. My wife, Carol Joy, and I, we’ve got a lot of nieces and nephews that are our, that are our private lenders.
Nathan Payne [00:27:19]:
Gotcha. And do you want it primarily when you do a single-family property, do you just try to have one person versus bringing in multiple, uh, Private Money lenders or just—
Jay Conner [00:27:28]:
It all depends. Our minimum, I don’t, I don’t have any private lenders unless they have at least $50,000.
Nathan Payne [00:27:35]:
Gotcha.
Jay Conner [00:27:35]:
That they have to invest either liquid capital or retirement funds. And so it depends on the deal. I mean, it depends on what I’m buying and depends on what money I have available, what I call sitting in the queue, just waiting, just waiting to be used. So, uh, for instance, I bought a, um, bought a property yesterday and $150,000 was in first position, and then there was a smaller $50,000 in second position. So it just all depends on the deal. However, when you’re using more than one private lender to fund a deal, then what you want to be careful about is what we call the total loan-to-value.
Jay Conner [00:28:22]:
So I want to add, if I’m having more than one note, more than one lender funding a property, I would add up both of their loans, right? Divide by the after-repair value. And I still don’t want that after-repair value percentage to be, uh, the loan-to-value to be more than 75%, total loan-to-value.
Nathan Payne [00:28:45]:
Yeah. Okay. So let’s talk about first and second position. Um, I’m— I think I understand it, but just to make sure. How does that work? The person who puts up more money is usually in first position, and the second position. And that means if, for example, you had to sell the property and it was under, the first person would— first position gets paid before second?
Jay Conner [00:29:08]:
When you say sell the property, I’m not sure.
Nathan Payne [00:29:12]:
So, for example, let’s say you borrow $150,000 total and you try to sell the property, but it’s not worth $150,000. Right, you say it’s $140,000, and you’re under, right? Like, you would have to pay off the first position before the second position. Does it— does that make sense in that scenario? Like, you’re just under— underwater, you’re selling it for less than what, uh, you bought it for.
Jay Conner [00:29:36]:
So, so let’s address— let’s address that. So any junior lien position is at higher risk than a first position. Meaning, let’s say a second-position private lender, if they were to foreclose because you’re not paying, well, they’ve got— the only way they can be made whole is they’re going to be inheriting the first position. So that’s why it’s— there’s a big— there’s a 5-letter word in this business that starts with a T called trust.
Jay Conner [00:30:10]:
So you know, well, that’s why I’m not borrowing more than 75% of the after-repair value. If the market starts to come down, then typically I’m going to be able to lower that price and liquidate out before I am upside down. I will say, ever since 2009, doing Private Money, I’ve never been upside down on what I could sell it for versus what I had borrowed.
Jay Conner [00:30:39]:
Um, because of that 25% equity cushion, as we call it.
Nathan Payne [00:30:44]:
Yes. Okay, that makes sense. I, I just— what I know, a lot of people say, like, okay, I want to be in first position, like when they’re, they’re borrowing money, they want that. And I think hard money lenders are all— will never take, like, a second position. They’re like, okay, of course not, right?
Jay Conner [00:31:00]:
Of course not. So your junior positions are only going to come from your own connections and your warm market and people that you teach about this world.
Nathan Payne [00:31:11]:
Gotcha. So what situation would you need a second position? Is that when you’re not able to raise the complete amount from the first position?
Jay Conner [00:31:18]:
Correct.
Nathan Payne [00:31:19]:
Okay. Is there— can there be like 10 positions on a property?
Jay Conner [00:31:24]:
Well, the most I’ve ever had is 5, and that’s when I was doing a property for $900,000, an after-repair value of $900,000. Um, down at Emerald Isle, North Carolina. But that’s out of the ordinary. Typically I’m gonna have maybe 2, maybe 3, depending on how much funding each one has.
Nathan Payne [00:31:45]:
And, and syndication is when you syndicate a property; are there multiple? Does it work like that too, where there’s a first position, second position, or do they all, when they syndicate, get one like the first position? They just bring their money together.
Jay Conner [00:31:58]:
Well, there is no positioning. There’s no positioning in a syndication.
Jay Conner [00:32:03]:
They’re just invest— they’re investing in the fund.
Nathan Payne [00:32:06]:
Oh, okay.
Jay Conner [00:32:07]:
All right. They’re investing in the fund, and they already, I mean, depending on how the fund is set up, if it’s for a development project, there may not be any interest that’s paid. They may get what’s called preferred interest, which is a piece of the back end of the profit 5 years down the road after the project is developed and then sold off. Uh, so when we talk positions, we’re talking about people having mortgages or deeds of trust here in North Carolina.
Nathan Payne [00:32:35]:
Okay.
Jay Conner [00:32:35]:
Uh, that’s the context of when we’re talking about positions.
Nathan Payne [00:32:39]:
All right. And in that scenario, that role-play we did, uh, where you called that person and said, hey, wire— my, my attorney’s going to send you our wiring instructions— is that, uh, the situation someone would be in with a self-directed IRA? They would still have to wire the money from their self-directed IRA, or would you have access to that person’s self-directed IRA to just take the money after asking for their permission? How does that usually work?
Jay Conner [00:33:02]:
Yeah, so regardless of whether it’s just investment capital or if it’s retirement funds, all funds are going to be wired to the closing agent. Now, you know, some states use title companies, and so it may be wired to the title company, but the real estate attorney is still going to prepare the closing documents. For Private Money, the title company doesn’t prepare closing documents. They’re just used to receiving closing documents. But in answer to your question, it doesn’t matter where the money’s coming from— retirement funds, investment capital, liquid funds— it’s all being sent to the closing agent, and then no funds are dispersed until after closing, and everything’s on record. Got it.
Nathan Payne [00:33:43]:
You know what’s interesting? I, I was trying to refinance out of this property that I was telling you about; unfortunately, it’s worth less than what we bought it for. But it’s at 7.5% interest from a bank for an investment loan. So, you’re getting 8%. So, like, we’re pretty close. Has that changed over this time since interest rates have been creeping up? Have your Private Money lenders been like, hey, I want a little bit more since interest is, you know, going up?
Jay Conner [00:34:10]:
No, I’ve had, I’ve had one ask me that question in the past year. And I say, well, what we do is we compare what we’re paying to our Private Money lenders to what a Private Money lender can get in the local bank. And when it’s still close to 1%, 8 times 1% seems pretty good to us. Yeah, for sure. But remember, remember, who’s making the rules?
Nathan Payne [00:34:38]:
You are. They need you.
Jay Conner [00:34:40]:
That’s right.
Nathan Payne [00:34:40]:
Because you’re out there finding the deals and putting their money to work.
Jay Conner [00:34:44]:
Exactly.
Nathan Payne [00:34:45]:
Do you ever come into a situation— wait, let me ask you that. This is not that question. Do you, um, do you ever lend out your Private Money and become the hard money broker, or do you not really?
Jay Conner [00:34:59]:
I use my retirement funds at the self-directed IRA company. I love, I love passive income too.
Nathan Payne [00:35:05]:
Okay, so you’re able to do that because I was just wondering with, let’s say you have all this money from 47 people or more, they, they, I don’t know if you’re able to give them all work, like put all their money to work. So you probably, do you lend their money out as a hard money lender?
Jay Conner [00:35:21]:
No, no, no, no, I can’t do that unless I’m a licensed mortgage broker in the state where the deal is happening. Okay, so I thought you were asking me if I use my own personal retirement funds.
Nathan Payne [00:35:33]:
I’m just saying, like, with all the people’s money that you have available, right, that, uh, I don’t know if you’re able to put all their money to work. And so they’re all just sitting there until you call them. I was wondering how you— if you put their money to work somehow, some other way than bringing them, asking them.
Jay Conner [00:35:48]:
Right. No, I just— yeah, I just use, um, our private lenders’ funding on our deals.
Nathan Payne [00:35:54]:
Okay. Have you— is that— is that what a hard money lender is, though? He has all these Private Money lenders, and he gets them, and he says, hey, I’ll lend it out to this guy.
Jay Conner [00:36:02]:
And yes.
Nathan Payne [00:36:03]:
Okay. But you’re, you’re, you don’t do that?
Jay Conner [00:36:06]:
No. Hard money lender or broker, which I have lots of friends that are; I say make as many relationships as you can. Mm-hmm. But if you don’t have Private Money, hard money is a whole lot better than no deal.
Nathan Payne [00:36:18]:
Yeah. Yeah.
Jay Conner [00:36:19]:
If it’s a good deal, right?
Nathan Payne [00:36:21]:
Have you, have you kind of been on the edge of being like, hey, I got all this, these people that have available money; maybe I should start lending their money out. Have you thought about it?
Jay Conner [00:36:29]:
No, because I’m able to use it.
Nathan Payne [00:36:31]:
Dang. That’s a lot.
Jay Conner [00:36:35]:
I got, I got, I got a, I got $8.5 million of Private Money that we’re using on our projects, but that’s sort of easy to do when you’ve got 9 or 10 projects going simultaneously.
Nathan Payne [00:36:46]:
Yeah. So, how are you coming across a lot of the deals that you’re investing in? Do you have a team that’s going to acquire them? Like an acquisitions team? Do you have people that bring you deals and you just analyze them all day? How does that work on your side?
Jay Conner [00:36:59]:
Well, I sure don’t analyze them all day. It takes me about 1 minute to analyze a deal. So I’ve had a, I’ve had a full-time acquisitionist that negotiates, uh, and gets all the information initially. And so we have multiple marketing funnels that are feeding, that are feeding leads coming in every day. So I’ve got 3 different, uh, pay-per-click Google ad campaigns going on simultaneously. I have 2 Facebook, uh, ad campaigns going on simultaneously. We also track and direct mail every foreclosure open file in our market. And so between the foreclosures, which, by the way, have opened up big time, they have.
Jay Conner [00:37:45]:
and the, uh, Google pay-per-clicks and the Facebook ads and probate, uh, pre-probates, uh, that we direct mail to. Our marketing funnel stays full in a very, very small market of only 40,000 people. How about that? I only— hey Nathan, I only do 2 to 3 houses a month, but the average profit right now is $78,000 per house.
Nathan Payne [00:38:07]:
Do you feel like, uh, because you’re in that small market, you’ve, you’ve really mastered it and it’s— that’s, that has actually benefited you to stay in that local market in that one place?
Jay Conner [00:38:18]:
Outlying smaller markets are always outperforming. The return on your marketing dollars versus all that competition in the city.
Nathan Payne [00:38:26]:
100%. I agree with you 100% because it is— that’s what I kind of, as a wholesaler, we’ve— we have— we target these major cities, right? So because that little place, that, that small area, unless you’re buying those properties, it’s kind of— it’s kind of hard for us when you do nationwide to find those buyers that are, are kind of like you. You’re a buyer, right?
Jay Conner [00:38:47]:
You’re— Absolutely.
Nathan Payne [00:38:48]:
Wow, that’s an amazing strategy. I love it. How long have you been doing that strategy where you’re, like, taking down those deals with Private Money, and you’re running your own thing in this market?
Jay Conner [00:38:58]:
Since 2009.
Nathan Payne [00:39:00]:
Wow, you really perfected that thing. I bet it’s like a well-oiled machine.
Jay Conner [00:39:04]:
Well, I still learn lessons.
Narrator [00:39:06]:
Yeah.
Nathan Payne [00:39:07]:
Well, that’s been— I’ve had a really good time chatting with you. This is amazing that you’re able to do it. And that’s kind of the struggle that wholesalers face: we’re not buying the deal, so we really are at the mercy of whether we sell it. But you’ve solved that problem by bringing— getting enough money where, like, hey, this is a deal, I can make money, I don’t have to run this by anyone, it’s my decision.
Jay Conner [00:39:26]:
Exactly. Like, you are the committee. Yeah, you are the committee.
Nathan Payne [00:39:33]:
Wow. So that would help a lot of wholesalers that are maybe struggling, that are like, man, I know this is a deal, I know there’s a return, but I can’t find anyone to buy it; then you get the Private Money.
Jay Conner [00:39:44]:
There you go.
Nathan Payne [00:39:45]:
So before we end, if you had any advice for a wholesaler that’s, uh, starting, uh, what, what would that be for them?
Jay Conner [00:39:54]:
For a wholesaler starting? Well, first of all, if you want to start in wholesaling, you need to work with somebody who knows what they’re doing, and don’t go about this by yourself. And that guy’s name would be Nathan Payne. You need to work with Nathan Payne. That’s right.
Nathan Payne [00:40:08]:
Yes.
Jay Conner [00:40:08]:
Uh, I mean, you know, I started in this business investing in real estate without a mentor, without a coach. Bad way to go. I lost a lot of money and made some mighty, mighty big mistakes. So be sure if you’re starting in wholesaling, work with somebody that knows what they’re doing.
Nathan Payne [00:40:26]:
That’s 100% true. And, and for anyone that needs it, I’m assuming you have, like, a course, and you teach people exactly how to do the script, kind of what we went over. Is that, is that, do you sell something like that, like a course?
Jay Conner [00:40:38]:
I got something better than that.
Nathan Payne [00:40:39]:
What you got?
Jay Conner [00:40:40]:
How about an absolutely free— F-R-E-E— free— I just recently finished writing my Private Money guide, right?
Jay Conner [00:40:50]:
It’s called 7 Reasons Why Private Money Will Skyrocket Your Real Estate Business and Help You Build Incredible Wealth. It’s free. You can download this Private Money guide to get you on the fast track at www.JayConner.com/MoneyGuide
Nathan Payne [00:41:19]:
All right, let me put that up there. Let me see if I got it for you. We’re gonna, we’re gonna have it just scrolling across the bottom. Is that it? www.JayConner.com/MoneyGuide
Jay Conner [00:41:29]:
That’s it right there.
Nathan Payne [00:41:30]:
Wow, you’re giving that out for free. Why are you so nice?
Jay Conner [00:41:33]:
Because I hang around go-givers like Nathan Payne.
Nathan Payne [00:41:37]:
That’s awesome. You know, I’m actually gonna go and grab that. I’ve been focusing mainly on just getting the down, right? Like, I’ve never really thought, oh, I need to raise the whole, uh, you know, amount. But sounds like it’s a good idea. You know, it saves you on points.
Jay Conner [00:41:53]:
If you really want to be— if you really want to be in control and not pay the points origination Fees, etc. And I tell you, Nathan, um, if I could, let me also tell your audience about my podcast.
Nathan Payne [00:42:06]:
Please do.
Jay Conner [00:42:07]:
Which is all about Private Money. So wherever you listen to your podcast, or, um, Spotify, iTunes, the name of my podcast is Raising Private Money with Jay Conner. Very, very easy to find. Just go in your search bar; I’m on YouTube as well, um, iTunes or Spotify. You can definitely, um, not miss out on anything there. So, Raising Private Money with Jay Conner Podcast.
Nathan Payne [00:42:37]:
Podcast, Raising Private Money with Jay Conner. I actually had the privilege of going on your podcast, and I had a wonderful time. I think it’s amazing. I appreciate you having me. I’m so grateful to have you on here. And we’re actually going to be seeing each other soon, at the end of the month, at one of the mastermind meetups we’re part of. So I look forward to it.
Jay Conner [00:42:53]:
Me too, Nathan. Thank you so much for having me come on.
Nathan Payne [00:42:56]:
Anytime. All right, well, we’ll catch you later. Everybody that’s tuning in, hit up Jay Conner. He’s giving away free books, and he’s got an awesome podcast. Uh, definitely do it because I’m doing it. See you guys later.
Narrator [00:43:09]:
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 7 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.