Episode 49: Can You Use Private Money on Commercial Deals? With Sam Wilson & Jay Conner

Welcome back to Raising Private Money! We’ve got something a little different today—I’m jumping on the hot seat as the interviewee for this episode by Sam Wilson.

Sam is an investor specializing in commercial real estate and hosts the How To Scale Commercial Real Estate podcast. His show focuses on investment strategies in the commercial real estate space that can help you maximize returns and scale your portfolio.

Join us as I go in-depth on private money, its multiple benefits, and how it’s the ingredient you need to boost your commercial real estate investing business!

Key Takeaways:

  • Private money has helped me ensure that finances will never be why I miss out on a deal.
  • The three categories of private lenders and where to find private lenders
  • Building relationships is essential in raising private money.
  • Raising private money is not about asking or begging for funds. It’s about teaching somebody about an opportunity.
  • The lender profile of a private lender.
  • The power of confidence when raising private money.
  • A sample of how to structure a private money deal.
  • On raising private money from a pool of investors.
  • Why you should put private money lender money to work right away, especially for new

Check out my book: 7 Reasons Why Private Money Will Skyrocket Your Real Estate Business and Help You Build Incredible Wealth!

Get it here for FREE: www.jayconner.com/moneyguide

Sign up for the Private Money Academy and get 4-weeks free: https://jay-conner.mykajabi.com/offers/AMM4hCPW/checkout

Connect with Sam:

How To Scale Commercial Real Estate podcast: https://www.youtube.com/@howtoscalecommercialreales334


0:01 – Raising Private Money Is All About Having The Right Mindset

1:00 – Who Is Jay Conner?

3:11 – Private Lenders: Where To Find Them

5:47 – The Warm Market

7:56 – The Existing Private Lenders

13:09 – Self-Directed IRA & Private Money

15:32 – We Protect Our Private Lenders In Every Way That We Can

18:26 – What To Do When You Got Too Much Private Money Sitting In The Shelf

22:30 – Jay’s Free Money Guide: https://www.JayConner.com/MoneyGuide

Can You Use Private Money on Commercial Deals? With Sam Wilson & Jay Conner



[00:00:00] Jay Conner: 

And what I mean by that is when it comes to attracting and raising private money, it’s all about having the right mindset. We’re not begging, we’re not chasing, we’re not selling, we’re not persuading. We’re actually offering an opportunity. The old business model of borrowing private, I mean of borrowing money, is you go to the bank and you get on your hands and knees and your bag.

[00:00:20] Jay Conner: 

Not in this broad of private money. Because you see what we’re doing is instead of asking, I’ve never asked anybody for money. I’ve never asked anybody for private money. I teach them what the program is, and then if they’ve got investment capital or retirement funds, they’re gonna want to know the details of it.

[00:00:37] Jay Conner: 

So the mindset of you are actually serving people, right? There’s no fear of rejection when you’ve got the mindset right? Welcome to the How to Scale commercial real Estate Show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.

[00:00:59] Sam Wilson: 

Jay Conner is a real estate investor in North Carolina. He’s been investing there since 2003. He’s rehabbed over 450 homes. He’s averaged a profit of over $71,000 per deal, and he’s completed over 52 million in real estate transactions. He’s also a leading expert on private lending. Jay, welcome to the show.

[00:01:16] Jay Conner: 

Hey, Sam, thank you so much for having me come on to talk about my favorite subject, that’s private money and private lending. 

[00:01:25] Sam Wilson: 

I love it, Jay. It’s one of those things that I, obviously there’s two things we need in this business. It’s money and deals, and without both of those, it’s hard to get things done.

[00:01:33] Sam Wilson: 

I look forward to diving into that topic, more at length, but there are three questions I ask every guest who comes to the show. In 90 seconds or less, can you tell me where did you start? Are you now? And how did you get there? 

[00:01:44] Jay Conner: 

My wife, Carol Joy, and I started investing in real estate in single-family houses.

[00:01:49] Jay Conner: 

I’ve done commercial deals as well. I got paid in full, it’s a free and clear shopping center in Newport, right next door to us. But we started in 2003 investing in single-family houses. The very first six years we were in the business. I relied on local banks and mortgage companies to fund our deals.

[00:02:06] Jay Conner: 

That’s all I knew. I thought you, you needed money, you’d go to the bank. So I’d go to the bank for six years and get on my hands and knees and beg and say, Miss Banker, please fund my deal. And in January 2009, I had two deals under contract, two houses under contract. I had a great relationship with the local bank for six years, and I found out very quickly, Sam, that I had lost my line of credit.

[00:02:29] Jay Conner: 

I’d been shut down. I didn’t know there was a global financial crisis going on until now. I got a crisis and I got two deals with over a hundred thousand dollars in potential profit, under contract, and no way to fund it. So in less than two weeks, I learned about this. World of private money and private lending.

[00:02:46] Jay Conner:

And so I put my program together. I started teaching people in my own network what private money and private lending were and what my program was in less than 90 days. I raised 2 million, $150,000 in private money. And since that day, Sam, I’ve never missed out on a deal for not having the funding and not having the money.

[00:03:07] Sam Wilson: 

I love that. That’s great, that’s a great story. And I, certainly Knock on something hard. I’ve not not experienced the pains of not getting a deal done because of lack of funding. I certainly have experienced the pains of getting a deal done with challenging funding. And, those are those things I think affect us all.

[00:03:25] Sam Wilson: 

And the reason that I think, Jay, and obviously you know, that this is a show where we focus on the commercial real estate side of things and you focus primarily on the single-family home side of things. But I think there are so many parallels. I think all of us can learn from you how you structure deals, on how you find private money.

[00:03:42] Sam Wilson: 

Maybe for us, the deal size is bigger. Maybe there’s an extra zero attached to it, but the fundamentals I believe are probably the same. So tell me this, how did you, one, how did you raise the money? And then, w I guess just break it down for me. Tell me what I’m missing. I don’t even know the right questions to ask you.

[00:03:59] Jay Conner: 

First, let me start by identifying where you find these people. Yeah. And first, let me even define who a private lender is. I’m not talking institutional money, I’m not talking banks, I’m not talking, I’m not even talking hard money brokers. Now I’ve got a. A great number of friends are hard money brokers.

[00:04:16] Jay Conner: 

We’re in masterminds together and they’re great people. I say forge as many relationships as you can, but a private lender, my definition of a private lender is a human being, an individual just like you or me that loans money from either their investment capital and or their retirement funds.

[00:04:35] Jay Conner: 

Self-directed IRAs are a very important topic to learn about as a real estate investor. But anyway, a private lender is investing in your deal. It may be it’s in a single-family house, or if it’s a commercial deal, they’re investing in your syndicate. Fund. And so it’s an individual you’re doing business with.

[00:04:53] Jay Conner: 

So the question is, where are these people and how do you find these private lenders? Let me break it down. Here’s the follow of the following categories of where private lenders are. The first category is what I call your warm market, your center of influence. People you’ve got some kind of connection with.


[00:05:10] Jay Conner: 

The second category is what I call your expanded warm market. How do you expand your network? Because some people tell me all my people are broke, Jay, my people ain’t got no money. First of all, I don’t believe ’em. But anyway, we talk about how to expand your network. 

[00:05:26] Jay Conner: 

And then the third category of private lenders is what we call existing private lenders. These are individuals, people like you and me that are already loaning money out and investing with real estate investors. So let me come back to the first category. Your warm market. You know a lot more people than you think. Your warm market includes people on your cell phone, people on your email list, people in your social media, and your Facebook friends, and I don’t mean you fake Facebook friends, but people you actually know and have a connection with your LinkedIn connections and et cetera. And so who do you go to church with? Are you involved in the Rotary Club? I can tell you, Sam, I have gotten a lot of private money by being a very active member in business networking International BNI.

[00:06:11] Jay Conner: 

And getting involved in these. In these organizations where you get to tell your story. Now, first of all, before I talk anymore about the categories, and I’ll come back to that in just a moment, I wanna talk about owning the real estate between your ears before you actually own real estate.

[00:06:26] Jay Conner: 

And what I mean by that is when it comes to attracting and raising private money, it’s all about having the right mindset. We’re not begging, we’re not chasing, we’re not selling, we’re not persuading. We’re actually offering an opportunity. The old business model of borrowing privately, I mean of borrowing money here, you go to the bank and you get on your hands and knees, and your beg.


[00:06:46] Jay Conner: 

Not in this world of private money because you see what we’re doing is instead of asking, I’ve never asked anybody for money. I’ve never asked anybody for private money. I teach. Teach them what the program is, and then if they’ve got investment capital retirement funds, they’re gonna want to know the details of it.

[00:07:03] Jay Conner: 

So the mindset of you are actually serving people, right? There’s no fear of rejection when you’ve got the mindset right. And of course, the worst time in the world to be trying to raise private money is when you’ve got a deal because you’re already desperate and you’re begging, you’re not even trying to, when you’re like looking for money for this particular deal, I’ve got some good friends that say, oh, just go get the deal under contract, the money will show up.

[00:07:28] Jay Conner: 

The worst idea was like, where, why? Where’s the money? I say getting the money lined up first. So anyway, back to the categories. So your warm market. Get involved and grow your warm market, grow your connections. I teach a lot about that because I practice it myself. But then you have those existing private lenders that love real estate.

[00:07:47] Jay Conner: 

When I first started raising private money, I got this idea. I said, you know what? I’m gonna hire my real estate attorneys. Paralegal to search local public records at our local courthouse, looking for individuals’ names, not companies, not LLCs, but looking for individuals on public record that are on a mortgage or a deed of trust that has secured a note that they have now loaned money out on the real estate.

[00:08:14] Jay Conner: 

That was a great idea, except here in my small area of only 40,000 people, we only found two individuals in 90 days. I said, there’s gotta be a better way. Back in 2004, we started creating our private lender data feed. So our private lender data feed, we update every month. It’s software that we have, and we update it by getting every private lender loan that’s closed in the nation by zip code.

[00:08:39] Jay Conner: 

Every month there are over 12,000 private lendings. Notes and mortgages that are closed every month, and we get all that contact information with the interest rates that they’re accustomed to getting and et cetera. And I’ll tell you one more and then and then I’ll turn it back over to you, Sam, where can you find these existing private lenders that love to re-loan money out on real estate commercial deals, single-family deals?

[00:09:03] Jay Conner: 

I can tell you where at. And here’s a right or downer at self-directed. Ira networking events, self-directed IRA networking events, so a self-directed ira. I’m sure your audience knows Sam, but just in case a self-directed IRA company is a third-party custodian that’s approved by the I R S that allows individuals to take current retirement funds from their 401ks or pensions or whatever.

[00:09:32] Jay Conner: 

And move them over to the self-directed IRA company and now they can loan that money out and they can invest in real estate and earn tax-deferred or tax-free income depending on the type of retirement account they’ve got. So I said that to say this. Here’s an interesting statistic, 71% of. Account holders and self-directed IRA companies want to invest in real estate.

[00:09:59] Jay Conner: 

71% of them, so as recently as the end of last week, I got an email inviting me to a networking event on Zoom by the premier self-directed IRA company that I use and recommend. And you get to go on there on Zoom and network with existing private lenders. So that’s where those are where you can find them.

[00:10:19] Sam Wilson: 

I like that. And those are, this sounds good on the front end for okay, hey, there are private lenders out there. For me, I struggle and I’ve got some, I have used in the past private money for maybe some smaller deals, but the people that I would say, that we build relationships within the commercial real estate side of things, typically want to be equity investors.

[00:10:41] Sam Wilson: 

They want to be, they want to share in the upside. They wanna see this thing go bang and go, Man, this was awesome. We made a ton of money on it. So who is that person and why is that person wanting maybe to get a reduced return in exchange for maybe a reduced risk? What’s that investor I’m, I call him investor.

[00:10:57] Sam Wilson: 

What’s that lender profile look like for you?

[00:10:59] Jay Conner:  

I can tell you a lot of them, a lot of ’em are sick and tired. The volatility of the stock market, and particularly the older they get, they don’t have time to live through another cycle of the stock market or two more cycles of the stock market.

[00:11:15] Jay Conner: 

And so there’s a key, the, oh, like I’ve got 47 private lenders right now. They are investing in our deals and loan us money on our deals. And the majority of them are over 60 years old. And the reason is, number one, they got retirement funds. I’ll tell you another great category of private lenders is entrepreneurs.

[00:11:35] Jay Conner: 

People that own their own businesses. Cause they get it, they understand business. But people that have been investing in the stock market, they’re looking for as you just mentioned, Sam, there’s more than one way to structure a deal. Of course, you can give them an equity share percentage on the back end of the deal, particularly in our larger commercial project.


[00:11:54] Jay Conner: 

In my case, with single-family homes, they don’t get any equity share. They get a straight. Right now, 8% return on their investment and no origination fees that I pay or anything like that. But again, who are these people? They’re people that are looking for more of course there’s nothing that’s guaranteed.

[00:12:15] Jay Conner: 

But they’re looking for a higher rate of return that’s not coming with some, huge risk coming in the stock market. You have no idea what’s gonna happen, right? And of course, you know these people, when they’re investing, they’re really investing in you. They’re investing in the operator. So you know, you better be confident.

[00:12:34] Jay Conner: 

About what you’re talking about because if you’re not confident in what you’re talking about, they sure aren’t gonna be confident in believing in what you got.

[00:12:41] Sam Wilson: 

Yeah. And I think going back to the self-directed IRA comment, I just had this thought that debt inside of a self-directed IRA is really good cuz then you can skip all of those potential taxes that you may run into as an equity investor.

[00:12:56] Sam Wilson: 

I’m not saying you will cause I’m not a tax attorney by any stretch. But let’s go back to the terms a little bit and how you structure those. I know you said you’re paying a straight 8%, you’re not paying any points upfront. How does that work out? What’s the timeline, what’s, how are you structuring it for your deals?

[00:13:11] Sam Wilson: 

Obviously, everybody else will, can structure it their own,, any way you like, but what’s that look like for you?


[00:13:16] Jay Conner: 

Yeah, for single-family houses, the length of the node is either two years or five years. Now, I’m typically not needing to use that money for that length of time, but here’s why we do it. If it’s liquid investment capital that the private lender has, it’s just money in their checking account or their savings account, or a mutual fund, we’ll do the note for two years.

[00:13:36] Jay Conner: 

Typically, we’re going to be it depends on our exit strategy. If it’s a flip, if we’re buying something to flip we’re probably gonna be in. In and out of it, probably within nine months, depending on the scope of work. I just finished rehab, just the rehab was $192,000. That’s out of the ordinary. And if we’re borrowing money from the private lenders, retirement funds coming from their self-directed ira, then we’re gonna structure that.

[00:14:03] Jay Conner: 

Note for five years. The reason we do that is we still sell some homes on rent to own, to where we actually help people repair their credit to where they can actually get a mortgage and cash us out. So we’ll set that note for five years, but again, typically we’re not gonna use it that long. The interest rate is 8% a straight 8%, and that’s either if we’re doing a flip.

[00:14:24] Jay Conner: 

We won’t even do monthly payments unless the private lender needs the monthly income. A lot of our private lenders are older and elderly, so we let them choose as to, do you need monthly in, monthly payments for part of their income. So what’s left up to them? The maximum loan-to-value that we borrow is 75% of the after-repaired value.

[00:14:45] Jay Conner: 

Now, I didn’t say 75% of the purchase. I said 75% of after repaired value. That’s one of my favorite reasons for private money. I never bring any of my own money to the closing table. I always bring home a check. Who wants to get paid to buy real estate, right? So I bring home a big check, but I’m not gonna bring home a big check when I buy unless there’s gonna be, some type of rehab involved.

[00:15:08] Jay Conner: 

We protect our private lenders in every way that we can. We don’t borrow unsecured funds. They are here in North Carolina. It’s a deed of trust. Most people call it a. Mortgage, but they are, they get a deed of trust. They get the promissory note. They are named on the insurance policy as the mortgage G, just like a bank would be.

[00:15:27] Jay Conner: 

The reason that’s important is that if there’s ever an insurance claim against a property, their name’s on the check and they gotta sign off on the check before we deposit it in our account. They’re named on the title policy as additional insured. And we take care of our private lenders.

[00:15:43] Jay Conner: 

You know of our 47 private lender, Sam, not one of them had ever heard of private money. They’d never heard of private lending, and so what did I do? I put on my teacher hat. I taught them what private money is. I teach them my program and then I’ll tell ’em, I’ll put your money to work for you just as soon as I can.

[00:16:02] Jay Conner: 

If I need to introduce ’em to my self-directed IRA representative, I will if they’re moving, if they’re moving funds over. So it’s a win scenario and teaching people how this works. By the way, side note, I don’t care if you’re raising money for syndication, for a commercial deal, or single family, they always got more than they tell you.

[00:16:23] Sam Wilson: 

I like that. That’s that, that’s pretty funny. That’s really fun. How do you, because is there let me see if I can find a thoughtful question here. You’re doing this one deal at a time. That sounds really, yeah. We call ’em one-offs. One-offs. One-offs. Have you ever put it together? A pool of investors.

[00:16:41] Sam Wilson: 

Let’s say that you had a deal that’s called a $5 million deal, and you said, Hey, there’s gonna be seven different investors who are gonna dump all into this same opportunity. Has that ever happened?

[00:16:51] Jay Conner: 

I’ve never done that. I got a lot of friends that do it all the time, every day and every week.

[00:16:56] Jay Conner: 

And the funny thing is it’s the same people. What do you mean by that? It’s the same profile. It’s the same profile of lenders, however, There’s one caveat to that. My minimum investment that I allow private lenders to come in is $50,000. Sure. However, when you’re raising money for syndication, in a lot of cases, your minimum’s gonna be higher than that.

[00:17:17] Jay Conner: 

So I’ve got a lot more private lenders that have, I can’t say that I’ve got just as many private lenders that have over a hundred thousand with me as I do between 50 and a hundred. But I tell you what’s funny, Most of the time, even when they wanna start with 50, they’re up to the hundred pretty quick.

[00:17:34] Sam Wilson: 

No, absolutely. Absolutely. Once they get used to how you function, get their toe dipped in the water, and figure out the process, it becomes more comfortable. And certainly, that’s part of it. What, how do you handle it? Cuz you don’t necessarily know when the deals are gonna hit.

[00:17:50] Sam Wilson: 

So, what I have found in the capital raising side of our business is that if you don’t. If you don’t consistently have the opportunity, that money has to go somewhere, and so people will deploy it. They’re gonna go, okay, hey, look, Jay, I’d love to give you a hundred grand, 200 grand on your next deal and be the solo investor, but it took you 45 days to get back to ’em.

[00:18:09] Sam Wilson: 

It’s unlikely they’re still sitting on that a hundred grand burning a hole and their checking account 45 days later. How do you overcome that?

[00:18:15] Jay Conner: 

It’s been a juggling act ever since 2009. I’ve always one, one good problem I’ve always got money sitting on the shelf that’s waiting to be used. But you bring up a very good point, Sam.

[00:18:27] Jay Conner: 

You gotta get that money deployed. A couple of tips that I’ve learned over the years when I have a brand new private lender that says, Hey, I’ve got X number of dollars to work with. Let’s do a deal. I, they go to the top of the queue. They go to the top of the list. I may have some other private lenders that I’ve paid off, and their money is waiting to be used again.

[00:18:48] Jay Conner: 

But if I got a new private lender, I wanna for sure note, tell that private lender that I can put their money to work. In fact, what I’ve done, sometimes if I didn’t have a deal just right around the corner, then I have used. New private lender money to pay off an existing private lender and refinance that deal.

[00:19:06] Jay Conner: 

Just so I can get that new money working and start that relationship.

[00:19:10] Sam Wilson: 

No that’s, and I know that’s, it’s probably cumbersome in the sense that there’s a lot of paper that has to get traded in order to make that happen, but that’s almost counterintuitive. And I like the way you’ve way, you’ve, the way you, why you explained it that way.

[00:19:23] Sam Wilson: 

For me, when I have new investors come in, To the Brick and Investor Club, I actually give priority to my existing investors, the people that put money into every single deal. I’ve even had, I’ve even had the unfortunate conversation of having people sign up, for an opportunity and saying, Hey, I’m sorry we’re full because my existing investors came back much stronger than I’d expected.

[00:19:42] Sam Wilson: 

They say, Hey, I’m sorry. Jay’s invested with me in nine out of her last nine deals, and. He gets the VIP passed to the front of the line. So I like the way you spun that the other way and said, Hey, you want to get them in the fold and getting used to you and the process because that’s and the good news is, typically I’m gonna be able to use everybody’s money anyway again on another deal.

[00:19:56] Jay Conner: 

If they’ve just got, if they’ve cashed out and, they just got it sitting there waiting typically within 45 days anyway. And in my experience, at least in the single-family housing part of the business, I’ve never had any problem even waiting, 60 days for the money to go to work.

[00:20:17] Jay Conner: 

And the reason they don’t mind, is they want it put to work right away, but the reason they don’t mind is, they’re going to get a hair more than 1% in a 12-month CD today. And I’m gonna give ’em 8%, right? So that they don’t mind waiting a little bit. Now, I’ll tell you another thing. When I teach a new private lender about private lending and they’re using retirement funds and I introduce ’em to a self-directed IRA representative, and they move those funds over there, I am highly morally and ethically bound.


[00:20:49] Jay Conner: 

To put that money to work. Cause they don’t have anywhere else to go with it. They mo they moved that money over there based on my recommendation and they’re looking for me to put it to work. So I’m really bound to get that money to work for them. Got it.

[00:21:05] Sam Wilson: 

And that makes a lot of sense. Certainly been in that situation as well. So where you help somebody get their self-directed IRA account set up, it is then. Incumbent upon you to make sure that get to work in a meaningful way, in a time timely way. So certainly appreciate you coming on the show here today, Jay This was lots of fun, learned quite a bit of things here from you just on how you approach it, how you find your lenders, good places to do that, how you can structure deals, the length, the terms. All of those things. Certainly been an insightful episode for me. Jay, thank you so much for coming to the show today.

[00:21:34] Sam Wilson: 

It was certainly a pleasure. I learned so much from you. It was a blast. Learning all about how you structure deals, how you find private money, and the type of networking events that you go to. Just really a pleasure having you on this show today. If our listeners wanna get in touch with you and learn more about you, what is the best way to do that?

[00:21:49] Jay Conner: 

Absolutely Sam. Actually, two ways. I’ve got my podcast, which is called Raising Private Money. I’ll talk about that in a second. Secondly, I just recently finished writing my private money guide. This is called Seven Reasons Why Private Money will explode and skyrocket your real estate business and help you build incredible wealth.

[00:22:10] Jay Conner: 

This will get your audience, and your followers on the fast track to private money for your real estate deals. You can download it for free at www.JayConner.com/MoneyGuide. That’s www.JayConner.com/MoneyGuide  and again if you are on iTunes or Spotify, or wherever you listen to your podcast, my podcast, the name is, Raising Private Money with Jay Conner.

[00:22:43] Jay Conner: 

I go live and have two episodes every week. I’d love for you to come to check me out at Raising Private Money Podcast.

[00:22:51] Sam Wilson: 

Awesome Jay, thank you again for your time today. 

[00:22:52] Jay Conner: 

I certainly appreciate it. Thank you, Sam, for having me.