7 Reasons Why Private Money Will Skyrocket Your Real Estate Business
In this post-pandemic world, institutional money has tightened and interest rates are higher. However, there is an abundance of private money – and this is a good opportunity to earn with fewer risks and effort. Julie Houston and Melanie Davidson sit down with Jay Conner who presents several reasons on why private money will give huge boosts to your real estate investments. He explains how to increase profits from your warm market without having to chase after lenders endlessly. Jay also shares how he discovered private money after experiencing huge losses himself, and now considers it as his biggest real estate win since 2003.
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7 Reasons Why Private Money Will Skyrocket Your Real Estate Business
I am very excited to have our special guest who is known as one of America’s number one private money experts, as well as a veteran investing and raising private capital. Jay Conner, I want to welcome you to the show. It’s such an honor to have you here.
Thank you so much, Julie and Melanie, for inviting me to come along and talk about my favorite subject that I’m so passionate about and that’s private money, how to never miss out on a deal for not having the funding, having more money than you can put to work and making your rules so the money’s chasing you and you’re not chasing the money.
That seems to be a hot topic. I got to be honest. I’ve had several investors I’ve had conversations with that are like, “I need the private capital. If I could come up with the private money or the capital, I’d be able to do this and finish this.” Are you finding it booming more, the need for private capital, especially in the economy?
Absolutely, all institutional money. When we’re talking about private money in this context, I’m not talking about hard money lenders, brokers or institutional money. With private money, I’m talking about doing business with individuals and human beings that are using their investment capital and/or their retirement funds to loan out to us real estate investors and invest in our deals with us.
The answer is yes. Hard money and all institutional money has tightened up. Interest rates are higher. What’s interesting right after COVID was hard money went away. There was no hard money available for a few months and I had more private money chasing me than ever before. Prior to COVID, there was $18 trillion in cash sitting in people’s retirement accounts and they didn’t know what to do with it.
On the side of COVID, there’s $31 trillion in cash sitting in people’s retirement accounts that can be used for private money. It’s like the perfect storm in the vortex has come together. Institutional money for real estate has tightened up. Interest rates are higher. Private money, there’s an abundance of it. All we got to do is get the word out to potential private lenders as to how they can earn high rates of return safely and securely. You got existing private lenders and individuals that are already lending out. They know what it is.
My wife, Carol Joy and I have got 47 private lenders and individuals loaning us money from their investment capital and/or their retirement funds. Not one of those 47 people ever heard of private money or self-directed IRAs until I told them about it and taught them what it was. The traditional way of borrowing money is you go to the bank, get on your hands and knees, put your hands under your chin and say, “Please fund my deal.”
In this world, there’s no asking, chasing, begging and selling. We’re offering a mortgage. All of these 47 private lenders that are funding our deals, I put on my teacher hat. That’s the secret right there. How do you attract and raise private money from your warm market without chasing it and begging? You teach them what it is. You teach them your private lending program. “What interest rate are you going to pay? What’s your term?” How can they get their money back in case of an emergency coming up?
I’ve got all that put together that people can duplicate. Teach them what private money is and you don’t even have to ask them. Where else are they going to get these high rates of returns safely and securely? They tell me how much they got and then I go find a deal as soon as possible to put their money to work for them. We’ve got a bunch of friends that say, “Just go get the deal under contract. The money will find the deal.” Where’s the money going to show up? Is it going to rain out of the clouds?
I’ve been told the same thing my whole life. It’s not about the money, it’s about the deal.
That’s the most stupid thing I ever heard in my life. Think about how much more confidence and offers a real estate investor is going to make if you got the money burning a hole in your pocket waiting to be put to you. That’s why I practice and teach to get your private money lined up first. There are always deals. Get your money lined up, go get a deal in the contract and put the money to work. It helps you sleep better at night. I’m not interested in getting a deal under contract and I have no idea how I’m going to fund it.
What’s nice about it and as you build these relationships, as I’ve built some myself through the few years, these are long-lasting relationships.
I’ve got some of the same private lenders that started doing business when I first started teaching people about private money, which was in 2009. It was January 2009 when I lost my line of credit at the bank along with every other real estate investor in the nation. We started using and working with private lenders in 2009 and a lot of those private lenders are still with us.
That’s what comes from those relationships. I like how you have the reverse psychology on it. Learn how to raise the capital first and then you get to cherry-pick whatever deals you want to do. That’s a great position to be in.
Here’s the deal. The worst time to be raising private money is when you need it for a deal. One thing I learned years ago is don’t make this mistake. Don’t be talking to a new potential private lender about your private lending program and how they can earn high rates of return safely and securely. You bring up a deal in the same conversation that you’re looking to get funded. You already sound desperate without even trying to sound desperate. Once you’re subconsciously communicating to that person, “If I don’t loan them money, then they’re going to be out of this deal,” you already sound like you’re chasing right there.
We separate those conversations. We have a first conversation about private money and private lending program. “How much have you got? How much do you want to put to work? Is it retirement funds? Do I need to introduce you to my favorite recommended self-directed IRA company and consider moving your retirement funds over to them so you can start earning tax-deferred or tax-free returns depending on the type of retirement you got? If you know what you got, I’m going to come back to you in 1 week, 2 weeks or 3 weeks, as soon as possible and here we go, I got a deal ready for you to fund.”
Particularly, these new private lenders are trusting you to look out for them because they never heard of private money. I’m talking about people in your warm market. Particularly, if you have introduced them to a self-directed IRA company, they transfer funds over. When their account is funded, they’re looking to you to put their money to work because they’re not making any money but it’s sitting over there in that retirement account and it’s not invested.
When I’ve got somebody like that, I move them to the top because they are counting on me to get their money to work and start getting some good returns on it. When I’ve got a deal under contract and I’ve got a private lender that’s been waiting for me to put their money to work, I call them up. Here’s the exact script that I say to them, “I’ve got great news for you. I can put your money to work. I know you’ve been waiting for this phone call.”
I give them four pieces of information. Where the property’s located, the after-repaired value, the funding required for the deal and the date we’re going to close. I call them up, “I got great news. I got a house over in Newport under contract. The after-repaired value is $200,000. The funding required for the deal is $150,000.” I know the person I’m talking to got $150,000, they already told me. “Closing is next Friday so you’ll need to have your funds wired to my real estate attorney and closing agent by next Thursday. I’m going to have my real estate attorney email you the wiring instructions.” End of conversation. I didn’t ask them if they wanted to fund the deal. That’s the most stupid question I could ask in the world. They’re going like, “Maybe I don’t want to fund the deal.”
It’s because you already had a conversation about how to earn more on their idle money.
I’m not going to have them fund a deal that doesn’t fit the criteria of my program. For example, I don’t borrow more than 75% of the after-repaired value of the property. I didn’t say 75% of the purchase, I said 75% of the after-repaired value. I’m looking after my private lenders. I’m keeping it conservative. I’m not borrowing any unsecured funds. It’s all backed by the real estate that I’m buying so they’re going to get a deed of trust or a mortgage to collateralize that note. It’s a win-win scenario for the private lender and the real estate entrepreneur who was borrowing the money.
It’s a win-win. In the market, prior to COVID, the interest rate in the local bank at a 12-month certificate of deposit yield, believe it or not, right before COVID, got down to 0.17% national average. Interest rates have risen this side of COVID. Even with the rise in interest rates, the national average is still barely over 1%. When you come along and pay your private lender 8%, I’ve been paying them the same thing since 2009. 8% is still a whole lot more money than a hair over 1%.
Private Money: Right before COVID-19, the interest rates in a local bank at a 12-month certificate of deposit of yield got down to 0.17% national average. After the pandemic, it only increased by barely over 1%.
The reason I love private money is very long. It’s a long list. Just to name a few, I’ve already said it, you make the rules. If you’re doing business with an existing private lender that’s already been loaning out, then you’re not going to teach them your private lending program. They are already a private lender. They already know the game and the interest rate that they are accustomed to getting. When I’m teaching new people what private money is, then I’m teaching them my program because they don’t know what the private money program is.
Number one, you make the rules when you’re borrowing. You’re offering this program to people that you have connections with. I close any deal in seven days. I get more offers accepted from sellers like FSBOs because I can close quickly, versus using institutional money. I typically bring home a check when I buy because most of the time, I’m doing some type of rehab on the house. There’s no down payment involved. As opposed to the bank, they’re going to loan you 80%. You got to bring the other 20%.
Your credit has got nothing to do with how much money you can get. Hard money lenders and institutional lenders are going to pull your credit. Credit doesn’t come into play in this world because this is a collateral-based note. As I said, closing quickly. There’s no limit to the number of private lenders and the amount of private money I can borrow. I had a limit.
There are no debt ratios to meet that you would have with the bank or anything else so there’s no limit to what you can borrow.
I can borrow across state lines. Private lenders are not regulated by the commissioner of banks so I can do business with anybody. Plus, doing private money the way I do it, where every deal stands on its own. All these are one-offs. I’m not raising money for a fund, which that’s syndication. Typically, you raise money for a fund and syndicate when you’re doing larger commercial deals but it’s all the same money. I’m not limited to borrowing from accredited investors. I can borrow from anybody.
Private Money: Private lenders can borrow across state lines since they are not regulated by bank commissioners.
Private money, we tripled our business in 2009 when I was cut off from the banks. You talk about a blessing in disguise. When I was cut off from the bank, I had an 800 credit score but there was a global financial crisis going on. I didn’t know there was a crisis going on until I lost my funding. Now, I got a crisis going on but it was the biggest blessing in disguise.
Mel and Julie, I know both of you and everybody that’s reading this episode, we’ve all been through challenging times in our life. It could be personal, financial, health, career or relationships. We live through those trying times. We look back and say, “I’m a better person for going through that difficulty. Growth takes place in the valley.” When I lost my line of credit, I could have quit. My mantra is it’s impossible to fail unless you choose to quit. Quitting wasn’t an option. I lost my line of credit.
I called up my friend Jeff in Greensboro, North Carolina. That was real estate investing in 2009 when I lost my line of credit. I told him what happened. He said, “Welcome to the club, Jay.” I said, “What club?” He said, “The club of being cut off from the banks. They cut me off last week.” I said, “How are you funding your deals?” He said, “Have you heard of private money?” I said, “Nope.” He said, “Have you heard of self-directed IRAs?” I said, “Nope.” I knew he had said something to me that I needed to learn about. As a result of pushing through finding a better way, it’s had the biggest impact on our real estate investing business of anything else that’s happened since we went full-time in 2003.
I love the angle because you’re helping people gain more interest in their idle money with a win-win. Whether it works out or not, you’re going to either gain a property that’s worth more than you lend anyway.
Everybody’s protected. I name my private lenders as the mortgagee on the insurance policy, which gives another layer of protection to the private lenders. If there’s ever an insurance claim against that property, the insurance company’s going to make the check payable to the private lender and the owner of that property. The private lender’s got to sign off on that check before it can be cashed. It’s another layer of protection. I put my private lenders on the title policy as an additional insurer in case there are any title issues down the road. We got to look after our private lenders and protect them, particularly the new ones that have never done it before.
That’s true. There are a lot of new people out there in the real estate world.
A lot of new real estate investors or real estate investors that have never raised private money, they’ve got in their heads this fear of rejection. You cannot be rejected if you’re not asking anybody for anything. I’m not asking for anything. I’m teaching what I do. I’m teaching them how the program works and how they can earn high rates of return safely and securely. I’m teaching them something they’ve never heard of. When I get through with my twenty-minute spiel on how this works and what it is, then I don’t have to say, “Are you interested? Do you want to loan me money? Do you want to get involved?” I just shut up. Believe it or not, I know how to shut up.
You cannot be rejected if you are not asking anybody for anything. Click To Tweet
If they’ve got investment capital or retirement funds, they’re going to ask, “How do I get started? This is how much I got to work with. Do I write a check to you?” No. You do not write any checks to me as the private lender. You sit on your money. I’ll let you know when we can put it to work. When we have a deal, you’re going to wire your funds, either from your checking account, savings account or retirement account to my closing agent. Here in North Carolina, we use your estate attorneys as our closing agents. No monies or funding is dispersed until everything’s on record and everybody’s protected.
For our audiences that have been reading, for more information about everything that Jay has covered so far, which I know he could cover even way more as long as he’s done this, you can go to FullerWalletMedia.com/PrivateMoney. We’ll have more information about everything we’ve discussed there.
We’re going to give away at that website my new private money guide. You can download it for free, 7 Reasons Why Private Money Will Skyrocket Your Real Estate Business. If you want to get on the fast track to getting all the private money you would ever want and more than you can use, download this free guide at the website Julie gave out and it’ll get you on the fast track. It’s free. Go ahead and get plugged into the private money.
Before we close out, what would maybe be some of your recommendations for people starting that you would say off the bat, “I recommend or suggest not doing or doing?”
Don’t start the way I started, is my best advice. The way I started is I read a few books and I said, “I can do this.” I was out there learning some very expensive lessons. It’s like, “You’re going to pay for your mistakes and your screwups or you’re going to pay for education with somebody that knows what they’re talking about.” Get aligned with a mentor or a coach. I’m sure Julie and Melanie have great people to refer you to but get your education.
I’m telling you, that’s a whole lot cheaper than making over $100,000 mistakes that I have done in this world. You’ll get there faster, quicker and much safer. Get lined up with someone you can resonate with that’s been in this business. Here’s a big criteria. I want you to find out about that mentor or coach that you start working with in real estate investing. If they are still not very active in real estate investing, they are not your person.
Private Money: If your mentor is not that active today in real estate investing, they are not the best person to teach you.
What worked well 3 or 4 years ago as far as marketing and finding motivated sellers and off-market deals is not working so well today. What is working well today, such as Google Ads or Pay-per-click, I do three different vendors in my local area, I dominate the market, that didn’t even hardly exist for real estate investing years ago. Align with someone that’s been doing it for years and is still very active.
That is the best advice I honestly could hear and recommend for anyone that’s reading. Jay, it’s been such an honor and pleasure having you with us. Any final thoughts before we close?
2023 is the best time I know to get into real estate investing since 2007, 2008 and 2009. Here’s why. I’ve never seen foreclosures opened up as they have in 2023 since 2007, 2008 and 2009. There will always be foreclosures but there hasn’t been this much opportunity to serve so many people and to help them get back on their feet. My overall advice, in addition to getting involved, is to always lead with a servant’s heart when creating win-win situations. My dad told me in my early twenties when I started in business, he said, “Jay, if all parties are not winning in the transaction, do not do the deal. Everybody’s got to win and come out ahead.” That’s my words, Julie and Melanie.
That’s some great advice.
Thank you so much for having me on.
Thank you. It’s been such an honor. Until next time, we’ll see you on the next episode.
My name is Jay Conner and let me tell you: I CAN RELATE to all these feelings and frustrations of losing out on so many deals. When I started out investing in Real Estate, I did it ALL THE WRONG WAY! Like so many other Real Estate Investors, I was taken to the slaughterhouse. I went to my local banker and was able to do a few deals but you know what happened: I had to come up with Big Down Payments, pay origination fees, and most importantly play by their rules. (Including signing personal guarantees on everything I owned.) I hated it. I felt owned by the bank, out of control, and stressed out.
So, I got some education and learned about buying properties “Subject-To,” Using Options, and buying with “Lease/Options.” These tools opened up my opportunities, but then The Hammer Came Down!!! When the market turned south big-time my banker CUT ME OFF!!! With No Warning!!! I knew I had to find another way. I searched high and low for another system that would give me the funds I needed. Then I realized I needed to combine the best aspects of all that I researched. And that’s when I created the basis for this system. I kept refining it until I thought I had the best formula. Then I put it all together and made contact with my first prospect. I trusted my system and the very first person I approached gave me $250,000 in Private Money and what blew me away was How Easy It Was!!!
Within a few, short months…I had $2,150,000 in Private Money!!! And that was just a couple of years ago and it has ROCKED MY REAL ESTATE INVESTING CAREER! (My banker actually did me a HUGE FAVOR…I just didn’t know it at the time because that setback forced me to create the system that would bring me lots of money Fast and Easy without relying on bankers or my credit.) The Massive Profits (7 Figures Per Year) I’ve been blessed to enjoy by creating and putting into action my “Where To Get The Money Now” System has without a doubt been my Biggest Quantum Leap since becoming a Real Estate Investor. And I live in a city with only 40,000 people.
My name is Jay Conner and let me tell you: I CAN RELATE to all these feelings and frustrations of losing out on so many deals. When I started out investing in Real Estate, I did it ALL THE WRONG WAY! Like so many other Real Estate Investors, I was taken to the slaughterhouse. I went to my local banker and was able to do a few deals but you know what happened: I had to come up with Big Down Payments, pay origination fees, and most importantly play by their rules. (Including signing personal guarantees on everything I owned.) I hated it. I felt owned by the bank, out of control, and stressed out.
So, I got some education and learned about buying properties “Subject-To,” Using Options, and buying with “Lease/Options.” These tools opened up my opportunities, but then The Hammer Came Down!!! When the market turned south big-time my banker CUT ME OFF!!! With No Warning!!! I knew I had to find another way. I searched high and low for another system that would give me the funds I needed. Then I realized I needed to combine the best aspects of all that I researched. And that’s when I created the basis for this system. I kept refining it until I thought I had the best formula. Then I put it all together and made contact with my first prospect. I trusted my system and the very first person I approached gave me $250,000 in Private Money and what blew me away was How Easy It Was!!!
Within a few, short months…I had $2,150,000 in Private Money!!! And that was just a couple of years ago and it has ROCKED MY REAL ESTATE INVESTING CAREER! (My banker actually did me a HUGE FAVOR…I just didn’t know it at the time because that setback forced me to create the system that would bring me lots of money Fast and Easy without relying on bankers or my credit.) The Massive Profits (7 Figures Per Year) I’ve been blessed to enjoy by creating and putting into action my “Where To Get The Money Now” System has without a doubt been my Biggest Quantum Leap since becoming a Real Estate Investor. And I live in a city with only 40,000 people. 
