Today's Guest: Jay Conner
Jay is a “real estate magician,” a proven expert in the private money space, and has been a full-time real estate entrepreneur for 14 years. Since his encounter with private money in 2009 after losing his line of credit, he has never asked anyone for money. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties and works seemingly magical deals for buyers and sellers alike. From his experience raising private money over the years, Jay has developed new, easy and simple techniques for raising all the private money you will ever want for your real estate deals.
Highlights From The Show:
We begin the episode with Jay sharing his background story and how he ended up specializing in private money. He shares that he got into private money as a result of a need, and all his quantum leaps in business and finances came out of big problems and challenges that he had to push through. For his first six years in real estate, Jay was primarily devoted to investing in single-family houses and relied on the local bank to finance his deals. He had one lender that he relied on for six years, but in January 2009, he learned a lesson the hard way. Jay had two houses under contract that he needed the bank to fund, but he learned he had lost his line of credit as the banks had stopped lending to real estate investors. Jay was not the only one, but he had to figure it out and landed on private money as a solution through a friend. He learned what private money was and how it works and put his program together, and since 2009, he has never asked anyone for money. Jay started teaching people he knew and had a relationship with, and from just being a teacher, he was able to attract over $2M in less than 90 days, and his business tripled.
We then talk about what private money is and what Jay teaches people about it. Jay shares that private money is not commercial money. It’s not getting money from the bank. It’s not getting money from an institution and does not equal hard money. Private money is when we, as real estate investors, borrow money to fund deals from individuals just like us, and they loan us their money from their liquid funds, investment funds, or retirement funds. Jay shares that right now, he has 44 private lenders that are funding his deals, and he has 20 projects going on simultaneously. Over 50% of his private lenders who are funding his deals are doing it from their retirement funds, and none of them had ever heard about private money, but he was able to educate them. According to him, when you are able to educate other people about private money, there is no chasing, there is no begging, and there is no selling. Instead, the lenders are chasing you.
Next, we talk about why private lenders would lend you their money even when you have done just a couple of deals. Jay explains that if you don’t pay the private lender, the property does. When borrowing private money, you are not borrowing unsecured money. You give the lender the collateralized note. That gives them the legal right to foreclose on you if you don’t pay them. Sometimes as investors, we fear screwing our private lenders when the deals go sour. Still, Jay stresses that that will not happen if we buy right, know what our formula is for your maximum offers when we are playing on cash, estimate repairs correctly when renovations are involved, and protect ourselves and our private lender by not borrowing too much money for a property. Don’t overleverage a property, and don’t borrow more than 75% of the after-repair value.
We then talk about how to find people who have money who might want to lend it to you. Jay shares that there are three primary categories of private lenders and where you can find them. The first category is a warm market; family, friends, and connections in your phone, email list, and social connections. The second category is your expanded warm market. Whether you are well connected or not, you have to grow your network intentionally by getting involved with your community by giving, not getting first. Get involved in the local city groups, chamber of commerce, lottery club, and church to grow your local network. Networking is a big part of attracting private money. The better quality and bigger your network is, the better. Your network is the foundation of your net worth. The third category is existing private lenders. These are people that are already lending money out individually to real estate investors.
Lastly, we talk about five steps to use when teaching a warm market what private money is. Jay shares that the first step is making your list. The first people to put on your list are people who are retired because there is a good chance they have a retirement fund that is not giving them high-rate returns safely and securely. The second step is to have a very casual, simple, no-pressure, no-selling, and no-chasing conversation over the phone or in person. Step three is arousing their curiosity by teaching them what private money is. Step four is teaching them your private money program, where you set the parameters, interest rate, maximum value, length of the note, and frequency of the payment. Step five is where they give you a verbal pledge, and then you find a deal. Jay advises to not present a deal that you need to be funded by a private lender in the same initial conversation when teaching the private lender program. You definitely want to avoid sounding desperate!
Make sure you don’t miss another amazing episode of the Just Start Real Estate Podcast with Jay Conner and get valuable information on how to raise all the private money you'll ever need!
Notable Quotes:
“When you are able to educate other people about private money, there is no chasing, there is no begging, there is no selling. Instead, the lenders will be chasing you.”
“Don’t overleverage properties. Protect yourself and your private lenders by not borrowing too much money for a property. Don’t borrow more than 75% of the ARV.“
“Networking is a big part of attracting private money. The better quality and bigger your network is the better. Your network is the foundation of your net worth.”
“Private money is where you want to end up because of the volatility of the hard money world and how the rules are changing.”
“Leveraging private money is easy - you just need to follow the right steps, don’t overthink and over talk, when someone says yes, your job is done.”
Thank You for Listening!
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Resources and Links From Today's Show:
Money Guide
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