In this captivating episode, Jay and Jonathan dive deep into the world of private money lending and how it can revolutionize your real estate ventures. They discuss the importance of being knowledgeable and specific about your investment strategy when attracting investors and securing funding.
With high mortgage rates in today’s market, it is crucial for new investors to develop relationships with private money lenders to finance their deals successfully.
Plus, Jay shares his expertise on building relationships with private money lenders, networking, and strategies for securing hundreds of thousands of dollars in less than 90 days.
Join us as we delve into the world of private lending and discover how you can elevate your real estate investing game.
Interested in learning more? Jay has written a groundbreaking book titled “Where to Get the Money Now,” which provides invaluable insights into obtaining funds for real estate deals without relying on traditional lenders.
https://www.JayConner.com/Book
With his proven five-step system, you can go from having no private money to securing hundreds of thousands of dollars in less than 90 days. Don’t miss out on this opportunity to gain a competitive edge in the real estate market!
Timestamps:
00:48 – Zen & The Art Of Real Estate Investing, featuring Jay Conner.
06:15 – Experienced investors have an advantage in deals.
09:52 – The time between the initial conversation and closing is crucial. Understand seller motivation for successful deals.
12:24 – Learn from my experience, get a coach!
15:53 – Bank cuts off funding; friend suggests private money. Business triples buying foreclosures with private funds.
21:19 – Teaching method of finding private lenders.
28:59 – Benefits of using referrals and personal relationships for deal flow instead of relying on banks.
32:49 – Private lender relationships are crucial for successful deals.
37:11 – Decide on your real estate focus; beware of scammers.
40:34 – Avoid desperation. Learn and specialize. Build relationships for funding.
44:22 – Where To Get Private Money Now!
47:26 – Using multiple lenders for house financing. (7 words)
50:30 – Jay Conner’s Private Money Guide: https://www.JayConner.com/Book
Connect With Jay Conner:
Private Money Academy Conference:
Free Report:
https://www.jayconner.com/MoneyReport
Join the Private Money Academy:
https://www.JayConner.com/trial/
Have you read Jay’s new book: Where to Get The Money Now?
It is available FREE (all you pay is the shipping and handling) at https://www.JayConner.com/Book
What is Private Money? Real Estate Investing with Jay Conner
http://www.JayConner.com/MoneyPodcast
Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal.
#RealEstate #PrivateMoney #FlipYourHouse #RealEstateInvestor
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How to Fund Your Real Estate Deals Without Traditional Lenders: Insights from Jay Conner
Narrator[00:00:01]:
Welcome to Zen and the art of real estate investing. What if you could learn from experienced real estate investors, find out what got them to where they are now, get insight into their daily habits, and take these insights to inspire your growth? Each week, Jonathan Greene shares an in-depth look at the mindful approach to real estate investing. Jonathan is a real estate investor, advisor, and coach, as well as the founder of Streamlined Properties and the team leader of Streamlined Properties on the market brokered by EXP Realty. Whether you are looking to start from scratch, get to the next level, or just have a straightforward and honest approach to real estate investing, Jonathan seeks to provide a free mentorship program you can take with you anywhere. Now, here’s Jonathan.
Jonathan Greene [00:00:48]:
Welcome back to another week of Zen and the art of real estate investing. I’ve got a great show for you. And this is episode 60. So if you haven’t done it yet you could leave a review, five stars, of course, share it with your friends, subscribe, and hit the bell on YouTube where we have ten-minute clips of every episode. That would be awesome because now we are twice a week because of you, our listeners, Monday and Thursday instead of just Wednesday. This week. It’s Jay Conner. He’s going to talk to you all about where to find private money. If you stick around to the end, there’s a link to his book, Free Shipping, and the book for free. It’s a great book. Where to find the money now. I think you’re going to love this show. Let’s go. This is episode 60 of Zen and the Art of Real Estate Investing with my guest, Jay Conner. Jay is a leading expert on private lending, marketing, and business development. He’s been buying and selling houses since 2003. He’s rehabbed over 450 houses, and been involved in well, more than 50 million in transactions. And his book “Where To Get The Money Now”, you’re going to want to stick around till the end because we’re going to talk private money a lot, but that book is going to be available about the end. Jay, welcome to the show.
Jay Conner [00:02:06]:
Thank you so much, Jonathan, for inviting me to come along to talk about what I’m most passionate about and that’s private money.
Jonathan Greene [00:02:14]:
Yeah. No, I’m excited. But before we even get to private money, when you were younger, before 18, did you have any designs on real estate, or if not, when did it come to you?
Jay Conner [00:02:25]:
Yeah, I was raised in a family that was all about helping people own a home, specifically affordable housing. My father, Wallace Conner, believe it or not, he’s still living 90 years old and still negotiating deals. He’s got three developments under negotiation right now at 90 years old. But anyway, he at one time had the largest retailing company of manufactured houses, and mobile homes, as a lot of people called them in the nation. So I grew up around my dad helping people own a home. When I was eleven years old, he put me in his acceptance corporation in the summertime, and I was picking up the phone, calling and verifying people’s jobs, and asking landlords how they paid their rent. So, yeah, I grew up around the manufactured housing industry.
Jonathan Greene [00:03:20]:
Yeah. That’s amazing. So it was built into you. I, too was brought by my dad in to collect on his rental properties when he didn’t want to. I would come home from college and be the collections. Then he’d show me the ledger and it would be six, seven months behind. He said I guess you have your work cut out for you.
Jay Conner [00:03:35]:
I was like, Great, thanks.
Jonathan Greene [00:03:37]:
Yeah. So when did you start to take all the things that you learned from your dad and then put them into your practice?
Jay Conner [00:03:43]:
Yeah, it was in 2003. So my wife Carol Joy and I, we’ve been full-time investing in real estate, and single-family houses since 2003. We’ve done commercials as well. I’ve built a shopping center from the ground up that prints nicely today with it being free and clear of any debt. And I’ve done condominium developments, but for the most part, since 2003, our focus has been on single-family houses. We’ve rehabbed, renovated, and now have over 475 single-family houses all right here in our local market.
Jonathan Greene [00:04:21]:
Wow.
Jay Conner [00:04:21]:
We do two to three houses a month right now. The average profit is $78,000 per house per flip that we do.
Jonathan Greene [00:04:31]:
That’s a really good margin at scale for two or three months to still be at 78 per flip. I have a lot of friends who get up into those numbers of flips, but their margins are tighter, like 30. And then one thing goes wrong and you wish you never took that project. Sure.
Jay Conner [00:04:47]:
And of course, that’s an average. I mean, I’m scheduled to close on a house the day after tomorrow. The selling price of that house is $687,500. Well, the profit just on that house is $175,000. Yeah, but I’ll have others that come in at 40 and 50. So when it all washes down to the $78,000 profit. And here’s part of the story as well. This is in a very small market. We’re here in eastern North Carolina. The total population of the market that we invest in is only 40,000 people. And so the moral of that story is you don’t have to be investing in a big market to make some significant income.
Jonathan Greene [00:05:31]:
Yeah. I think that’s helpful for people who look at the bigger markets and the prices are bigger and they don’t know how to focus locally. Do you think that over time, with your background, just having that community there has helped you not have to over-market as much? People probably know you by now. They know who to come to when they want a deal. And they know you’re going to get the job done.
Jay Conner [00:05:50]:
That’s the case. I mean, for a long time we have been able to get quite a bit of organic leads from sellers just because to my knowledge we are the only consistent game, the consistent company in town that does this all the time. Now, are there other investors? Sure, but I’m the only most consistent one that I know.
Jonathan Greene [00:06:15]:
Yeah. And I think if you look at the kind of investor landscape now, with a lot of new investors and then the people like us, who’ve been around a long time, they may come in with better offers or flashier things, but most people aren’t going to give them the deals because they want the sure thing and they want someone reliable. And like you said, you have a population of only 40,000 but you’re doing that many deals, it’s because they know you have all of these other things that you’ve done. They can see that you closed on all of them, and rehabbed them. It’s right there for them to see in not a big town, they don’t have to go far. How much has that helped you just make it an easier business model to be, quote, passive? Not passive, but a little bit easier in that aspect.
Jay Conner [00:06:57]:
Exactly. There’s a lot to be said for local homegrown like I grew up here, right?
Jonathan Greene [00:07:05]:
Yeah.
Jay Conner [00:07:05]:
And there’s a lot to be said for the consistency. Right. Doing it week in and week out. It’s like one thing that a new real estate investor needs to decide is are you want this to be a hobby. Are you wanting this to be a business? And it’s a completely different mindset and different frame of mind if you want this to be a business or just a side hustle.
Jonathan Greene [00:07:33]:
Yeah. And I mean realistically, who wants to do business with anyone who’s only on a side hustle? They’re usually just choosing it because it looks flashier in a small package but is also much, much more likely to fail.
Jay Conner [00:07:45]:
Absolutely. One example that comes to mind are you treating this like a business or are you treating it like a hobby. Well here’s one clue, answer this question to yourself that is do you have consistent seller leads? Leads from potential sellers, particularly off-market sellers are coming into your marketing funnel every day and every week and I say all the time, until you have consistent seller lead flow coming into your funnel, you’re not in business.
Jonathan Greene [00:08:21]:
Yeah, right. I mean that’s the name of the game is numbers. And I think people forget that not everything is a transaction right away. So the ones that come in January, maybe it’s going to take them 18 months to figure out when they’re ready to sell, but because they can see that you have the consistency of staying on them, say, hey, how’s it going? Okay, it’s six months out. That helps you put less pressure on them. Where new investors are so excited about the one deal, that they’re trying to jam fake cash down their throat. And Cash is something we’re going to talk about money. Do you think that your ability to do this many deals is related to the way that you source money?
Jay Conner [00:09:01]:
Absolutely. If it was not for the private money being able to close quickly. For example, in all of the offers that we make for sale by owners, and of course, that’s the high majority as to where we get our business in all of our offers, we make the offer that we can close all cash within seven. You know, a lot of people can’t even sell that quickly. But I tell you what, one little secret as to how we get so many of our offers accepted. Just in the past month, Jonathan, we’ve had two sellers say, hey, I want to sell, but I’ve got tenants in the property until next January. Or they’ll say, I want to sell, but we’re not going to be ready to move for six months. Well, here’s a writer’s downer. As you know, Jonathan, time kills deals.
Jonathan Greene [00:09:51]:
Yeah, exactly.
Jay Conner [00:09:52]:
The more time that goes by from your initial conversation until the actual closing, the less likely you’re going to do business. So, for example, that seller that didn’t want to sell for six months down the road, they’re going to stay for six months. We just closed on that property and bought that house because we said, look, we’ll go ahead and give you all your money and you can live rent-free, not rent it back to them, but you can live for free, no rent for six months and then we’ll take possession. The other deal that we just closed on, I said, Well, I got tenants in there through January 31. We said, no problem, we’ll honor the agreement that you have the lease agreement with your tenants. You can go ahead and get your cash now and we’ll take over the management of the property and you can be done. So really understanding what’s the motivation of the seller opens up the door to closing more deals.
Jonathan Greene [00:10:50]:
Yeah, I completely agree and I think that proves exactly that it’s not the price that is the most important thing to off-market sellers. They don’t know where they’re going to go or they don’t know what they’re going to do with the money. They don’t know how to deal with the problem that they have, which could be tenant repairs or anything. When you are experienced in the area, come in and say, no problem, you want to leave all your stuff. Like we always say, leave all your stuff, take whatever you want, leave it. And explain to everybody why you’re able to say, hey, live six months rent free or we’ll keep your tenants. Is it because of the consistency that you built up? Because, you know, you have other deals to balance that out?
Jay Conner [00:11:27]:
Oh, absolutely. I mean, we’ve got deals coming in the pipeline all the time. And like, for example, the one that has the tenant in it, I looked at how much my private money carrying cost was going to be and how much rent was coming in per month with the existing tenant. And guess what? It cash flows. So that was like a no-brainer to do that deal.
Jonathan Greene [00:11:50]:
Yeah. And for the free leaseback, just for the giveback, you’re looking at the long-term value and what you can do. But also, as somebody who’s doing multiple flips or renovations at a time, it’s kind of nice to know that you’ve locked one down. But like, hey, we don’t even have to touch it for six months. Someone’s just going to stay there. And they were the owner, so you know they’re going to take care of it. They’ve got the money. That’s a huge win-win. I think that’s some great advice. Let’s get into how you started with private money. Was it because in the beginning, you’re just trying to figure out, how am I going to buy as many of these houses as I want?
Jay Conner [00:12:24]:
Well, Jonathan, when Carol Joy and I started in this business in 2003, back during those days, I didn’t know anything about private money, never heard of private money. And I thought the only way to fund your deals was to go to the local bank and borrow money from the bank. That’s all I knew. Well, for goodness sake, if you’re listening to this show, don’t start this business the way I did. Be sure and get you a coach or somebody to work with who knows what they’re doing. I mean, I never heard of the creative deals. Jonathan, I didn’t know back then about buying subject to an existing note buying on a wrap, or buying with seller financing, and all that stuff. I was just using my mobile home experience. You got wholesale money, you got floor plan money that you got from the bank or line of credit. So that’s what I did for the first six years. I relied on the local bank to fund our deals. And back during that time, if you could fog a mirror and you could breathe, you could get an unsecured line of credit. An unsecured line of credit? Yeah, I started with a $250,000 unsecured line of credit back in 2003. Well, that was how I operated those first six years, from 2003 to 2009. And then, Jonathan, something happened in January of 2009. I was sitting at this desk, and believe it or not, can you believe we still have handsets and cords?
Jonathan Greene [00:13:53]:
I like it.
Jay Conner [00:13:55]:
Some people don’t even know what this is.
Jonathan Greene [00:13:57]:
Our younger watchers on YouTube don’t know what that is at all. They think it’s a gadget.
Jay Conner [00:14:02]:
That’s right. So I picked up a receiver, a telephone receiver, and I called my banker, his name was Steve, and I called him up in January 2009, and I told him about these two houses that I had under contract to buy and the funding that was required. Well, I had been using Steve as my banker for six years. He had funded a bunch of deals for me. And so I think I’m having a conversation like I’d had many times before. Well, that got derailed very quickly when Steve informed me that not only did I not have a line of credit, but my line of credit had been shut down. And I said, Steve, what’s going on? He says, well, don’t you know there’s a global financial crisis going on, and the banks are not loaning money out to real estate investors anymore? Well, I didn’t know there was a financial crisis going on until now. I got a financial crisis, and it’s like, how am I going to get these deals funded? These two houses represented over $100,000 in profit. So I hung up, I put the receiver down, back on the cradle here, and I sat for a moment. A friend of mine who is also an author, Dr. Benjamin Hardy, wrote a book with Dan Sullivan that became popular a couple of years ago. And I think you just said the.
Jonathan Greene [00:15:24]:
Title, Who not How. That’s right.
Jay Conner [00:15:27]:
Who not how? So I sat here, and this is before I knew Dr. Hardy, as I sat here at my desk, and I said, who can help me with my problem? I got these houses under contract, but no way to fund them. Who can help me with my problem? And by the way, those people that look at you and say, oh, every problem you have is an opportunity I want to throw up, I didn’t have any opportunity. I had a problem, right?
Jonathan Greene [00:15:52]:
Yeah.
Jay Conner [00:15:53]:
I have no way to fund my deals. I mean, talk real to me now. And so I said, who can help me with my problem? Well, the first person that came to mind was Jeff, Jeff Blankenship. He lived in Greensboro, North Carolina, at the time, a good friend of mine and Carol Joyce, and he was investing in real estate investing. So I called him up and I told him what happened with my line of credit. He said, well, welcome to the club. And I said, What club are you talking about? He said, the club of losing your line of credit at the bank that cut me off last week. I said, Well, Jeff, I’m here asking you to help me with my problem. Right. So how are you going to fund your deals? And he said, have you heard of private money? I said no. He said, have you heard of self-directed IRAs? I said no. What’s that? So he gave me an overview of what this world was all about. Let me tell you something, Jonathan. This was the biggest blessing in disguise I’ve ever had in our business. If it had not been for the bank cutting me off and me learning about private money. First of all, I wouldn’t even be here on your show. We wouldn’t have this topic to talk about. And number two, because of getting cut off from the bank, our business tripled in the next twelve months. Here’s why. You remember all those foreclosures were going on, foreclosures were going on everywhere for a different reason than they are now. Well, you had all these foreclosures and the banks weren’t lending money. So the only way you could buy those foreclosures was if you had the cash because the bank wasn’t going to give you the money. Well, in less than 90 days I was able to raise $2,150,000 in private money. So I had all this money burning a hole in my pocket. By the way, I closed on those two deals that I had under contract. So I had a problem, I had all this money, where are the deals? So I was able to triple our business by buying those foreclosures with private money. And again, I’m not talking hard money when I say private money. I’ve got some very good friends who are hard money brokers and hard money lenders, but they are brokers of money. They go raise private money for their hard-earned fund. And what I do and what I teach as well is how do you go straight to the source? How do you find those people and start doing business with human beings, individuals to fund your deals? And that just changed the whole trajectory of our business.
Jonathan Greene [00:18:26]:
So where did you go to start with that 2.9 ish million? Where was the first person that you started with? It was Jeff. But then where did you go from there to figure out before you knew what you know now like, well, who’s going to want to invest with me? What do I have to present to them and how are we going to agree on the terms?
Jay Conner [00:18:44]:
Yeah. So the first thing I did was I got my mindset straight. I said, look, I don’t want to go out asking anybody for money. I don’t want to be begging, I don’t want to be chasing, I don’t want to be selling. Jonathan, I’ve yet to ask anybody for money. I’ve got eight and a half million dollars in private money funds available at any time from individuals. How in the world did I get it? So get the mindset first. So how do I have all this private money available to me without asking anybody for money? Here’s the answer. I put on my teacher hat, my teacher hat and I started teaching people that I already had a relationship with, what private money is, what’s my private lending program. So I had to put my program together. So my program entails well, how much interest, what interest rate am I going to pay? What’s the length of the notes going to be what’s the maximum loan-to-value that I will borrow from anybody? And by the way, it’s a loan to after-repaired value, not a loan to purchase price. How can they get their money back early if they have some kind of emergency come up? So I put together my program that I would start teaching people. So again, it was all about teaching one important lesson. Never, and I learned this the hard way, but never teach your program and have a deal at the same time that you need to be funded in the same conversation with a potential private lender because now you sound like you’re begging and you’re not even trying to sound like you’re begging. Here’s the program, now here’s a deal that I need to be funded. So we separate those conversations to where we teach the program. They love it, they’re on board. I don’t even have to ask them.
Jonathan Greene [00:20:39]:
Exactly. You want to get on board.
Jay Conner [00:20:41]:
I mean, I teach it. Of course, they’re going to tell me without me asking.
Jonathan Greene [00:20:45]:
Yeah, and I think that’s just a regular strong business philosophy for people who become experts in the field. There’s no reason to tout a program or anything. People will find it once they’ve gotten all of this information from you. Whether paid or not, they know they’re going to come to you. And I think that’s just a good thing for especially new investors. You can’t go try to help and have your hand out because it doesn’t look right. So you have to help first, add value first, and then wait. Building a relationship with relationships comes with money if you do it the right way.
Jay Conner [00:21:19]:
Absolutely. I couldn’t have said it better. And so then they’re on board. I mean, do they have retirement funds and you’re going to introduce them to the company that you recommend that does self-directed IRAs? I’ve got 47 private lenders individuals right now that are funding our deals and they’re from $30,000 each to over a million dollars each. And so we teach it and then when you have a deal to fund, here’s the exact script, here’s the script. Pick up the phone, I call them up, have a little chat, and here’s exactly what I say. And let’s say, Jonathan, you’re one of my private leaders. I say, Jonathan, I got great news. I can now put your money to work. And let’s say you’ve already told me you got $150,000, just investment capital that you want to put to work. So I call you up. Jonathan, I got great news. I can now put your $150,000 to work for you. I have a house in Newport, North Carolina, adjacent here to Mortgage City with a repaired value of $200,000. The funding required for the deal is $150,000 closing is next Tuesday. So you’ll need to have your funds wired to my real estate attorney by next Monday. I’m going to have my attorney email you the wiring instructions. End of conversation. If I 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. And here’s why I know you want to fund the deal. Number one, you’ve been waiting for the phone call. I told you I can probably put your money to work within a month or so, and particularly if you have moved your retirement funds over to a self-directed IRA company and your money is sitting there, it’s not earning you anything. And the reason you moved it over there is because I suggested that’s what you do with your retirement funds, the money’s sitting there. If you don’t fund my deal, you’re not going to make any money, because it’s just sitting there in the retirement funds. So in answer to your question, what did I do first? Got my mindset straight. We’re not chasing, begging. We’re not asking. We’re teaching, we’re helping. I got the program that I’m teaching. Right. I know my program. Right. So where do I go and what kind of conversation do I have with potential private lenders? Well, in answer to your question, where did my first one come from? Church. Right. Carol Joy and I are very involved in our local church. We’ve been members since 1988. Trust and credibility are off the chart. Right off the chart there. So where do I recommend you start in your warm market, people that you already have a warm and fuzzy relationship with? I can remember it like it was yesterday, Jonathan. I went to Bible study on a Wednesday night at 730 here at the Church of Christ in Morehead City. Walked in the door. I knew who I wanted to speak with. His name was Wayne. I walked into the foyer, and there are two different types of approaches when talking with a potential private lender that is in your warm market, we have what’s called the direct approach. Then we have what’s called the indirect approach. So the way the indirect approach works, which is what my conversation was about with Wayne, the indirect approach employs the use of a very powerful phrase. And that phrase is, I need your help. I need your help, and I’m not going to be asking for money. So here’s how it played out. I walked into the foyer Wednesday night, Bible study. I walked up to Wayne, we said hello. I said, Wayne, I’ve got something I’d like to visit with you about confidentially after church. Can we visit for a few minutes? He said, well, sure, Brother Jay. So we got together after church, after Bible study, went down to the nursery, closed the door, and here’s exactly what I said to Wayne. I said, Wayne, you know everybody in this town. And he did. He was the original Zenith television Dealer in Morehead City. Now, if you don’t know what the Zenith television dealer was, that means that you only remember Walmart the Zenith television dealer before Walmart came to town. That’s where you went to buy your TVs. And, back in those days, they repaired TVs. So Wayne knew everybody in town. And I said Wayne, you know everybody in this town. I said you’re involved in the Rotary Club. I said I need your help. I have now opened up my real estate investing business by referring only to people that I trust. And here’s what I need your help with Wayne. I’m now paying insane high rates of return on our deals and for people who invest with us. So when you run across somebody who is complaining about the stupid low CD rates at the bank and how volatile the stock market is, would you refer them to me and I’ll tell them about my program? Well, Wayne sat there for a second and what do you think Wayne said? Wayne said, well now brother Jay, what you got in mind, right? And I said Well are you saying you might be interested? He said, well we ain’t getting nothing into CDs. What kind of rate are you paying? And I said, well Wayne, it really sort of depends on the deal. What sounds high to you? And he says, well we’re only getting back in. That day was like three and a half percent, like three and a half percent in a CD. And he says, I don’t know, maybe five or 6%. I said, well Wayne, I can’t pay you five or 6%, but I can pay you 8%. He said to put me down for $250,000, right? And so I went to his and his wife’s house the next day I went over the whole program and they became my 1st $250,000 lender. By the way, they always have more than they tell you. Very quickly they went to 500,600 thousand. So that’s it. I just asked for his help to spread the word that I’ve now opened up my real estate investing business. That’s the indirect approach. And Wayne did refer a lot of private lenders to us over the years. Unfortunately, both he and his wife have passed away now. But they were great private lenders and they referred a lot of other people as well. And I’ll tell you real quick, Jonathan, one of my favorite ways to also start a conversation with a potential private lender, someone you have some kind of relationship with. I love Did You Know Questions. I love Did You Know Questions. So one of my favorite did you know questions. I might be over at know fried Chicken and Pork barbecue joint eating lunch with a friend of mine and I might say something like this Jonathan, did you know there’s a way people can earn unlimited money per year, tax-free? Well, of course, you being my friend, you’re not going to know the answer to that question. You are the guru that you are. Jonathan, you know the answer to the question.
Jonathan Greene [00:28:18]:
But.
Jay Conner [00:28:18]:
Most people don’t know. Well, no. How in the world can people make tax-free income? And then I said, well, have you ever heard of self-directed IRA companies? In all likelihood, they’re going to say no. Well, now I can have a conversation about, well, if someone’s got retirement funds that are in the form of a Roth IRA and they put it in a self-directed IRA company, all the profits and returns are on after-tax dollars. I said, did you know there’s a way you can use $100 and turn it into 20,000? And I’ll tell that story. So I love digital questions to start a conversation.
Jonathan Greene [00:28:59]:
Hey, this is Jonathan. Thanks for listening to another episode of Zen and the Art of Real Estate Investing. In this brief interlude, I wanted to tell you that we have a mailing list. I don’t love mailing lists. There’s so much this is not an automated mailing list where you get on a drip campaign. These are written once a month. We’ll eventually be at once a week again by me Direct, and they’re not spammy. So if you want to sign up for our mailing list, you can go to Bitly streamlined with a D. Mail. Bitly is bit lystrimlined mail. See you there. Yeah. I think you’re placing a question on the table that everyone’s going to want to know the answer to. No one’s going to say, no, I don’t want tax-free money. And that’s the point. It’s like you’re opening up a dialogue where, you know, you have information that can help anyone. They may not understand it or think it’s a scam because that’s kind of like everyone’s first thing is like, well, there must be a catch. But then once you explain it, you’re an expert in the area that opens it up. But I also like what you were saying before. Your first question to your friend is not, hey, are you interested? It’s, hey, do you know anybody who might be interested in this? And of course, if it’s something interesting, they’re going to say, well, what about me? Why are you looking past me? But you ended up, like you said, getting both because Wayne was interested. But then after that, he also referred but then his referrals come with an extra layer of trust because he’s in the program, which makes him an evangelist for what you’re doing, which is why it’s so important. Again, you’re talking about a smaller market, too. So what you’re doing is you’re using other people to help build your funnel of potential investors by if you do a good job for five, and those five tell five people now, you’re going, yeah. Interesting. But I think newer investors, have to understand you’re building a funnel of unlimited money so you can increase your deal flow instead of, again, going back to the bank, trying to work out what their new issues are, and less vetting. Right? If you have a personal relationship, you’re not going to do all the vetting that a bank does. They’re not going to do it to you because they already know.
Jay Conner [00:31:20]:
Yeah, well, and Jonathan, I am very different with what I practice and with what I teach other real estate investors about this world of private money. And I’m getting ready to say something that I know you’ve heard 100 times, and it drives me bonkers. A lot of educators out there in the real estate investing space. Here’s what they say. They say, oh, just get the deal under contract. The money will show up. And I want to go, what are you talking about? I mean, is it going to rain from the clouds or something? I was a guest on someone else’s podcast not too long ago, and I was having this conversation about what I said, Why in the world would an educator tell somebody, particularly a new real estate investor, just get the deal under contract? The money will show up because the money follows the deals. I know you’ve heard that as well. Do what?
Jonathan Greene [00:32:23]:
I’ve heard it. I just never enjoyed it. Just like you.
Jay Conner [00:32:26]:
Exactly. And it’s like so my podcast host that I was on with, he says, Jay, I can tell you why an educator would advise a new real estate investor to just get the deal under contract. I said, Please tell me because I’ve wanted to know for years. He said Because the person who gives that advice is selling a course on how to get deals under contract.
Jonathan Greene [00:32:49]:
Yeah, but I would argue that the deal that you have to get under contract isn’t the house. The deal is what you’re talking about. It’s having a private lender relationship. So you have the money because you shouldn’t even be able to get under contract if you don’t have confirmed money. So how can that happen? Right? That’s what we’re talking about. You have a much better presentation when you have a fully streamlined process. This is where the funds are coming from. This is how many deals we’ve done, as opposed to someone doing an off-market acquisition with no money, fudging their way through, hey, we’re under contract. Now I got to go find the money. That’s bad. Wholesalers to A-T-I love your advice. I think that it can help the new brand of investors who are caught up in looking at all the courses out there that say, everything’s so mean. You don’t have to reinvent the wheel. We’ve both been doing it for a long time. But you do have to understand which parts come first. How can you be under contract if you don’t have the money? It makes no sense to me. Somebody’s doing something wrong on the seller’s side.
Jay Conner [00:33:53]:
And what goes along with that as well, Jonathan, is I experienced this when I got that first private money from Wayne. And I think back on how much more confident and how many more offers I made when I got money burning a hole in my I just don’t want to be out there making offers on properties and I don’t have any idea how I’m going to fund them. Now, a lot of people have been trained as new real estate investors to do creative financing, buy subject to the existing note, and seller financing. Well, I tell you what, I’m a pretty good negotiator. My acquisitionist is I mean, she’s been with us for 17 years, our acquisitionist, talking to sellers. But my statistics show after all these years, Jonathan, only 13% of for sale by owners will sell to me creatively, either subject to the existing note where they’re transferring ownership and we make their payments and all that. What do the other 87% of all those for sale by owners require? All the money. Yeah, that’s why they want Jonathan on your show. We’re talking real-life stuff.
Jonathan Greene [00:35:12]:
Yeah. That’s a good point. Jargon no, and I think if you’re doing sub two or creative finance, you have to build lists that are perfectly set up for that and your regular especially also if you’re building a reputation in the area and they know you’re going to close, it’s hard to get them to understand. It has to be the only thing you do, in my opinion. I find it hard to do that all the time and then just mix in a subject too. Seller financing is okay, I think because they think they understand. They don’t want to take cap gains, so it makes sense on their behalf. But yeah, I think you’ve set up what is a straightforward approach, especially by building. You have 47 lenders, so you know, you have the options and I like the way that you phrased it before. Also, here’s your opportunity to put your money to work. And they’ve already vetted the system, so they’re ready. Like you said, they’re waiting, money sitting there, let’s deploy it and get the return. Great stuff.
Jay Conner [00:36:09]:
You know, the most dangerous time to be raising money is when you need it.
Jonathan Greene [00:36:15]:
Yeah, but that’s exactly why you said what you did before. If you put something under contract somehow and then you need to go get the money, you’re going to do everything you can to get the money, which means you’re in like a hard sell position, which means nobody wants to do business with you. You may agree to terrible terms for the money now. You’re going to go from eight to 15% because you weren’t prepared. You’re going to take hard money now at 15%, two to three points, terrible idea. And then you’re going to try to flip it. And you know, we all know what’s going to happen. It’s going to take two times as long and costs you two times as much. You’re going to be into the balloon, like way quicker. So for someone new who’s just getting started. How would you advise them to start down this path of trying to figure out one, not just what they want to invest in, but how they’re going to fund it in a smart way from the beginning?
Jay Conner [00:37:11]:
Yeah. Well, first of all, as a new real estate investor, decide what you want to invest in. I mean, is it going to be a single family? You need to decide, okay, are you going to do double wides on land as well? Are you going to do condos? Are you going to do townhouses? All those decisions so that you’re not making that decision when you’ve got like, a lead coming in. So what do you want to focus on? And don’t be all over the board. Don’t try to do multiplexes duplexes. Don’t try to do land deals. I mean, decide what your lane is and learn your lane. There’s a writer downer. I never said in my life, learn your lane. Right. Know what your lane is. Decide up front where’s your geographical area that you’re going to invest in. Right? If I get a lead from Newburn North Carolina, 45 minutes away, I know I’m not going. Right, easy decision. And I do want to give this word of warning, Jonathan. This just came to mind and it’s so important and I keep hearing more about it. So here’s a big word of warning, particularly if you’re a new real estate investor and you’re looking to use private money, you will see on the internet. You will see on social media, you will see supposed private lenders, and you’ll see stuff that should be an immediate red flag to you, such as, hey, I’m a private lender and I only charge 3% interest. Right? Good luck. I mean, come on. So here’s the game and how they play it. They want you to send them money upfront. They want you to send what’s called. They have all kinds of names for it. A funding fee, right? A closing fee. Right? I have a friend of mine who got duped last year. My friend sent one of these scammers. And that’s what they are, they’re scammers $9,000 had to be sent for some baloney fee before the money could be wired to his closing attorney. So here’s your smell test. Here’s the smell test. If a supposed private lender, of course, if you’re teaching somebody in your warm market, they’re not going to do that. You’re teaching them. But if you have somebody you’ve never met and they want you to send them money before closing, you never send money to a private lender, supposed private lender, or a real one until after you close, after you close, after you own the property. So I just want to put that big word of warning out there. Don’t let the private lender scammers out there con you into sending any kind of money to a supposed private lender before closing.
Jonathan Greene [00:40:18]:
I mean, generally, if it sounds too good to be true, it is, yes.
Jay Conner [00:40:23]:
And what they’re looking to do is they’re working to get your greed glands swelling up in your neck. And if you allow that to happen, your sense of reason goes out the window.
Jonathan Greene [00:40:34]:
Yeah. Again, why be in a desperate position where you have something that you have to fund right away? I wanted to go back on one thing that you said when you were saying Learn the Lane, which could be a new book for you right here, Learn Your Lane. But what I like about that is that I think about how traffic patterns grow as well. You want to learn your first lane so it’s running as smoothly as possible. Then once you have enough traffic in that lane, that’s when you go and build the second lane. So you have two lanes going each way. So maybe you start with single-family you get good at and you’re like, okay, well, now I’m good. I have a little funnel, like, let’s try multifamily. But if you try them all at the start, you’re not going to be good at any of them. And that’s going to make it much harder for you to get money because they know you don’t know what you’re doing. You don’t even know what your asset target is. So why would someone give you money if you’re like, well, I’ll do a deal on anything? I have a big on-market team, too, and we work with 500 or so investors. And when I get a new investor and they come to me, I say, well, what are you looking for as an investor? And they say, oh, well, anything as long as the numbers work. I’m like, okay, well, I’ll pass on that. Too early for me. You haven’t done the work to do it. So in this economic climate now with regular mortgage rates so high, just touching at like seven now, do you think more than ever it’s important for your, I guess not novice investors, but your beginning investors who’ve done a little bit? This is the time to start working on your private money relationships. You have to I mean, how else are you going to fund the deal right now?
Jay Conner [00:42:08]:
Exactly. I’ve got some hard money lenders right now, friends that are in the hard money business. And I mean, they’re charging over 12%. Yeah, right.
Jonathan Greene [00:42:18]:
I’ve seen 15%.
Jay Conner [00:42:20]:
Yeah. And points. In this world of private money, there are no points. I never pay origination fees. I pay a straight 8%. Right. There are no extension fees. My private lenders don’t even want their money back anyway, but there are no extension fees. And guess what? In this world of private money, you as the real estate investor and the borrower, make the rules. Right. I mean, when I was borrowing money from the banks. They made the rules, right? They set the loan to value and all that. Well, in this world of private money, we set the rules. You know, the old traditional way of borrowing money is you go to the bank, you see your banker, you get on your hands and knees, you put your hand underneath your chin and you go, please fund my deal. Please fund my deal. That’s the old traditional way in this world. You’re not asking for a mortgage, you’re offering a mortgage. So it’s a whole in Kentucky they say it’s a 360. It’s not a 360, it’s a 180. Right. It’s a complete opposite shift in how you’re getting funding without asking for any money.
Jonathan Greene [00:43:28]:
Yeah, I think 8% is also the perfect private money number because it’s high enough that no one’s saying no to that. If they have money to burn, it’s like a fantastic return, but it’s also high enough that they’re not going to be worried about the origination fees. Like they don’t need a little bit extra. And as you said, you’re not looking at a twelve-month balloon where it’s going to end. Because whatever, they’re getting 8%, you want to keep paying me 8%, that’s against whatever 2% or 1% what I’m getting at the bank. So why not? This is great advice for investors. Again, like I was saying, especially now rates are high. This is something to get into. So tell us a little bit about how your book started and what advice you give in there. I’m sure we talked about a lot of it, but it’s really like, this is important, right? This is so timely. I’m so glad that we have this going right now.
Jay Conner [00:44:22]:
Jonathan. Well, my book, I’m so excited about it. The name of it is “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 Traditional Money”. So I just finished writing the book. It came out about a year and a half ago and so all the information is very timely. Listen, I do not hold anything back in this book. I don’t hold anything back in my book. And by the way, this is not an ebook. You can’t download it. I autograph it and mail it to you. Believe it or not, the post office is still in business. So I mail you the book, you’ll get the book in the mail and this book, it’s going to walk you through the five steps that I practice and that I teach in the book. Five steps from having no private money to getting hundreds of thousands of dollars in private money in less than 90 days. So I have a whole chapter on private lender luncheons and events and how I’ve raised $969,000 at just one private lender luncheon event. So I go into the details of that in this book, I’ve got the exact private lending program that I teach and offer new private lenders. So the whole program is in there. I talk about how networking is so important in growing your private money and how to use business networking internationally. So I’m a past president of the local Business Networking International group here in our area. I’ve gotten hundreds of thousands of dollars into the millions just by being an active member of BNI. Well, I’ve got a whole chapter dedicated to how that works and how can you directly so you can get the book. You can get the book. I’m going to mail it to you. Just go to www.JayConner.com/Book. By the way, I’m an ER, not an OR.
Jonathan Greene [00:46:15]:
That’s www.JayConner.com/Book
Jay Conner [00:46:24]:
That’s it. Jonathan www.JayConner.com/Book. And I promise you, if you go there, we’ll get it in the mail to you in less than 24 business hours.
Jonathan Greene [00:46:35]:
Yeah, fantastic. And then one more thing. I think what you’re saying about all of these things that you’re training people for is so important. Networking is always going to be at the top of the list because that’s how you grow over time. But this is interesting because we’ve done so many shows on syndications and that’s kind of making a big fund but comes with much more regulations. This is wholly different. This is creating kind of like a pen, a holding pen of investors looking to go in on one deal without having to create a giant syndication for it. That’s a huge advantage because then you have much more control and much less not that it’s regulation in a bad way, but you’re not taking people’s all money and pooling it together. You’re working with one at a time most of the time. Are there times when you’ll put two people’s money together for one?
Jay Conner [00:47:26]:
Yes. So we can use more than one private lender to fund a house, a single-family house. And so that’s going to be on the bigger houses. I could have a private lender in the first position for the purchase. And then I could have a private lender, a couple of private lenders in a junior lien position that has smaller money. Typically the private lender that’s loaning the biggest amount of money is going to go in the first position. So we use what’s then called the total loan to value. Total loan to value. So I still don’t want to borrow more than 75% of the after repaired value. By the way, I did not say 75% of a purchase, I said 75% of the after repaired value. We always bring home a big check when we buy. So let’s say I’ve got a house with an after-repaired value of $200,000. Well, I don’t want to borrow more than 150,000 of the after repaired. I may buy it for 100 at my purchase price. Well, I could have a private lender in the first position at 100,000. I could have a second private lender in the second position with 50,000. So I added those two together. 100,000 from this private lender, 50,000 from this private lender. That’s a total loan amount from both private lenders of 150,000, which is 75% of the after repaired value.
Jonathan Greene [00:48:46]:
And again, much easier to put those together like that because you have separate loan agreements with each of them. So it’s just coming in and they’re directly just sending the money into your attorney or into that. They’re not sending their money together in a fund. So there are no securities issues there. You just have one-to-one relationships. And I like what you’re saying because people do have to understand there’s a first position and a second position, and it’s great to have that. You have a first loan on the property, and a second loan for the rehab, both making good returns, and then you’re going to be able to slot them like that. And then over time, you might find people because of what you’re saying before, it’s interesting because you can see like, well, this is how much they have to give. This is a perfect fit for the back-end renovation because they have 60,000. We need 60,000 for rental, as opposed to someone who has 800. And you just want to take 60. Might as well wait till you can use it for one big thing for them.
Jay Conner [00:49:38]:
Absolutely. Yeah. Everything we do, all the transactions we do, we call them one-offs. One-offs. So you’ve got a private lender or a few private lenders that are funding that one house. And each of them has its promissory note. They have their own in North Carolina. It’s a deed of trust. Most people call it a mortgage. They have their mortgage and their deed of trust. So we’re not borrowing any unsecured money. They are getting the collateral that we’re buying. They’re getting the collateral to back that note.
Jonathan Greene [00:50:09]:
Yeah. This has been great. I appreciate it. Jay, the best place for people to get a hold of you, that’s at www.JayConner.com.
Jay Conner [00:50:17]:
www.JayConner.com. Our phone number is on the website. And guess what? We pick up the phone and answer when you call. Can you believe we answer the telephone? It’s a phenomenon.
Jonathan Greene [00:50:30]:
Yeah, I think that’s great. And remember, go to www.JayConner.com/Book. You’re going to get that book in the mail. That’s going to be great. I’m going to be first on that list, though, as well. Jay, it’s been an absolute pleasure. I look forward to staying in touch with you. I got a lot of personal information out of this. One last thing before we hop off, even me, who’s been in the business of investing for 30 years, and I grew up as a cash investor because I grew up as a cash investor, I almost was, like, embarrassed to ask other people for their money. And I think that’s something like, of course, I’m fortunate that I grew up that way, but it’s hard to ask other people for your money. And I think understanding that it’s a win-win relationship, which is going to be in your book, you’re giving them something of value. You’re not asking them for anything. You’re providing them an opportunity. That’s really what makes you able to do this. Right.
Jay Conner [00:51:23]:
That’s the key, right? There is no begging, chasing, or selling. You’re offering value. You’re helping them. And it’s like, where else are they going to get these rates of return safely and securely? So you have got a big value. The only complaint, Jonathan, that I’ve gotten from my private lenders over the years is they will complain. Why didn’t you tell me about this sooner?
Jonathan Greene [00:51:45]:
Yeah, exactly. I mean, that’s the best complaint you can get. All right, Jay, thanks so much. I appreciate it. I hope people are using that link to get the book. Appreciate you coming on.
Jay Conner [00:51:56]:
Thank you, Jonathan, so much for having me. God bless.
Jonathan Greene [00:51:59]:
Yeah, my pleasure. That was Jay Conner. I’m Jonathan Greene. That was episode 60 of Zen and the Art of Real Estate Investing. We’ll see you next week. I hope you enjoyed that episode of Zen and the Art of Real Estate Investing with me, Jonathan Greene. And I just want to remind you, and this is always an uncomfortable part, I don’t want you to think that I’m begging for you to, like, subscribe, follow, and do whatever you have to do for the podcast. Leave a five-star review. But if you like the podcast and you think it adds value in the real estate investing sphere, then just do me a personal favor. Like the podcast, follow it, share it when you can with your friends, and be so kind as to write a five-star review if you believe it deserves a five-star review up against what else is out there, I would appreciate it, and I hope you keep listening.
