jay how do you start how do you start raising private money well the first thing you got to do is get your mindset right you got to own the real estate in between your ears before you start going out and buying and selling real estate using private money so what are if you're a real estate investor and are wondering how to raise and leverage private money to make more profit on every deal then you're in the right place on raising private money we'll speak with new and seasoned investors to dissect their deals and extract the best tips and strategies to help you get the money because the money comes first now here's your host Jay Connor welcome to the show Jay how are you thank you so much thank you so much i'm so excited to be here to talk about what I'm so passionate about that being able to raise unlimited funding and private money for your real estate deals without ever having to ask for money thank you so much for having me this is awesome Jay because I know that many people they are curious and they are waiting to hear from you how to raise all this private money i know that there are people that are sitting on the sidelines they want to get into real estate because of fun they couldn't but today they are going to hear from you they will listen to your perspective on how to do that so can you tell us how do we raise private money yeah so what led me up to private money and using private money is when I first started investing and by the way my focus has been on single family houses uh now this private money is the same money whether you're using it for single family houses commercial apartments small apartments duplexes or just single family houses it's all the same structure the deals so my wife Carol Joy she's also from Texas like you um we started investing in single family houses all the way back in 2003 here in our small market and from 2003 until 2009 the first six years that we were in the business here's what I did i went to the local bank i got on my hands and knees i put my hands underneath my chin i said "Please fund my deal." And of course the banker would make me pull up my skirt so the bank could see my personal assets and give me a colonoscopy and pull my credit and make me you know cough up financial statements well I had to do all that stuff i had to jump through all those hoops for the first six years but then everything changed in January of 2009 in January 2009 after being in this business for six years I called up my banker he and I have been doing business for six years i called him up and I had two houses under contract to buy and so I'm talking to my banker his name was Steve i told him about these two houses and just like that over the phone I learned that they had shut down my line of credit at the bank and had given me no notice whatsoever wow and I said to Steve I said "Steve what in the world are you saying you've closed my line of credit with no notice to me?" And Steve says "Jay don't you know there's a global financial crisis going on right now?" I said "No but you just gave me a global financial crisis because now I don't have a way to fund these two deals." And so anyway I hung up the phone with Steve and I'm going to share with your audience right now a very very powerful question that I ask myself and this question that I ask will help anybody fix any problem they've got i don't care if it's financial relationships health career doesn't matter and here's the question I asked myself when Steve notified me I'd been cut off from the bank oh by the way these people running around saying "Every problem is an opportunity i want to throw up i didn't have an opportunity i had a problem." Right let's face reality i had a problem two deals under contract no way to fund them so here's the question I want to share that I asked myself and you know the power is in questions the right questions and here it is i said 'Jay who there's the powerful word who do you know that can help you with your problem and I immediately when I asked myself that question I immediately thought of a dear friend of ours Jeff Blankenship he was living in Greensboro North Carolina at the time and he was investing in single family houses i said "Well maybe Jeff can help me out." So I picked up the phone I called Jeff and I told Jeff what had just happened with me getting cut off from the bank and Jeff says 'Well Jay welcome to the club i said 'What club is that he said "The club of having the bank shut you down." He said "My bank shut me down last week." I said "Well Jeff how are you going to fund your real estate deals?" He said "Well have you ever heard of private money and private lending?" I said "No what's that?" He says 'Well that's when an individual loans money to a real estate investor either from their investment capital andor from their retirement funds um and funds your deals uh I said "No I never heard of that." And he wasn't talking about hard money and I never even heard about hard money back then and he says "Well have you ever heard of self-directed IAS?" I said "No what's a self-directed IRA?" He said 'Well a self-directed IRA is a third-party custodian it's a company approved by the IRS that allows individuals that to move current retirement funds say from the stock market or from a previous 401k over to the self-directed IRA company with no tax effect and then they can loan that money to us real estate investors and the money that you pay them is either tax deferred or taxfree wow i said "Jeff I know i've I've never heard of what you're talking about." So anyway Jeff and I continued the conversation he told me more about what private money is and how it works and so here's what I did i hung up the phone and the first thing I did was I put my program together now what in the world do I mean by that my program my opportunity that I first was going to go about here in my local area where we live and expose uh and offer this opportunity to people in my own connections people I go to church with people in my cell phone people at the Rotary Club etc and just let them know about private money and so the first thing I had to do and and this is one of the first questions I get asked all the time is Jay how do you start how do you start raising private money well the first thing you got to do is get your mindset right you got to own the real estate in between your ears before you start going out and buying and selling real estate using private money so what did I do well here's what I did i put on my teacher hat private money teacher i put on my teacher hat and my teacher hat says private money teacher so I set myself up as an expert as being able to offer an opportunity and information to people in my own connections that had never heard about private money here's what's interesting today Carol Joy and I have got 47 individuals just like you and me regular people these are not like high-profile people regular people like you and me i got 47 private lenders that are funding our real estate deals either using their investment capital just liquid funds and or their retirement funds and you know what's interesting not one not one of these people had ever heard of private money or private lending or self-directed IAS until I put on my teacher hat and I started teaching them about this opportunity now here's a very very important here's a very very important part of the system that I created that's critical to understand it's very important to understand to separate the conversations m between teaching the opportunity as to what a private lender is what kind of rates of return you can earn how to get your money back in case of an emergency and not having any deal attached to it because here's a ride or downer desperation has got a smell to it desperation the worst time to be raising private money is when you need it for a deal so if you lead with a servant's heart lead with a servant's heart exposing people and teaching people about this opportunity of what private money is how they can earn high rates of return safely and securely then they tell you how much they got and then I come back and give them a deal to fund and here's what's interesting i've never pitched a deal in my life so I'm going to share right now the exact script the exact script how I get my real estate deals funded without ever asking for the money and then I'm going to turn it back over to you Bola so here's the way it works in fact let's just do a little role play so let's say Bola that you are one of my new private lenders i've taught you the program and you know let's say you know you and I have known each other for a while we're friends maybe we go to church together whatever we got some kind of connection that's right and so I've told you about the program uh you know I I've taught you that I'm gonna pay 8% you love the interest rate because you only get three and a half or three and three/4er at the local bank i pay 8% i've taught you how you can get your money back early in case of an emergency i've taught you what the maximum loan to value is and all that and you love it and so in our conversation in our visit you love the program you want to get involved and you tell me that you've got $150,000 hypothetically speaking let's say you got $150,000 um sitting in the stock market as a retirement fund say at Charles Schwab or Guardian or Edward Jones or wherever and you're not happy with the volatility of those funds right so I've introduced you to a self-directed IRA company that I respect and I recommend and you've moved those funds over with no tax penalty uh and wanting to invest with me perfect you've done that it took a couple of weeks now here's the script bola I told you that I would put your money to work for you just as soon as possible when you were moving those funds over so let's assume you've moved the funds over you've told me you've called me up you said "Jay the funds are ready i'm ready to go." I said "Great i'm gonna put your money to work for you just as soon as possible." So I call you up i know it's hard to believe but we still have landlines here in North Carolina with cords attached to them but I I call you up and you say hello we have a little chitchat here's the exact script on getting the deal funded i say "I have got great news for you Bola i can now put your money to work i've got a house under contract in Newport with an after repaired value of $200,000 now the funding required for the deal is $150,000 that matches up to what you have in the self-directed IRA company and closing is going to be next Tuesday so I'm going to have my real estate attorney email you the wiring instructions you'll need to have your funds wired to my real estate attorney's trust account by next Monday right that's the end of the conversation i mean the most that's it i mean the most the most stupid thing I could ask you is do you want to fund the deal of course you want to fund the deal and there's three big reasons why you want to fund the deal number one you've moved your retirement funds over to the self-directed IRA company that I recommended and so you're not making any money until I put your money to work secondly I'm not going to bring any deal for you to fund unless it matches the criteria of the program that I already taught you notice in that little script I said I got a after repaired value of $200,000 on this house the funding required is $150,000 well that's 75% of the after repaired value i didn't say 75% of the purchase price that's why I'm always able to bring home a big check when I buy who wants to get paid to buy houses right so it matches their criteria and I told you previously I'll put your money to work for you just as soon as possible so I'm just fulfilling what I promised you to do so let me take a second and unpack what I said and I'm going to turn it back to you okay so first of all separate the conversations you know I've never pitched a deal and by the way I know you've heard educators say what I'm getting ready to say and I want I want to go run into a brick wall like the Kool-Aid character when I hear this it drives me crazy have you ever heard the educators say "Oh just get the deal under contract the money will show up." You ever heard that absolutely yeah i want to throw up it's like where is the money going to show up is it like gonna you know like rain down on clouds or something you know he's like "Oh have you heard him say this the money always finds a good deal." Just get it in the contract the money has Has money got legs no has money has money got a brain no way i mean money is neutral so it just makes sense to me i mean think about how much more confident you're going to make offers on deals when you got the money lined up ready to go and you can close on any deal in seven days with private money so that's just sort of an overview of what happens first what happens second what happens third and it just takes the stress out of real estate investing oh wow jay this is amazing i must tell you uh if even if we end the uh episode right here I know people would benefit but let's let's try to unpack this so let's say I'm the private lender and you are right you you put let's say 8% i don't know if that's your standard rate yeah it is it is that's higher than what the bank will pay me today so yes that means I'm earning more now I'm thinking about this what is the typical duration the length of the loan that you get from uh this private uh money lender typically it's two years two years typically typically it's two years so you know this world of private money is very very different than hard money you know and ask you the difference between between hard money and private money yeah that's um and the list is long right but and I and I'll answer that but you know we're doing business we're doing business with individuals and um as you said you know that 8% is is a whole lot higher than like they could get at the bank but anyway I'm sorry I I interrupted you go ahead so yeah if I'm making 8% that means uh I'll now be paying back the loan that I that I got from my selfdirected IRA that's correct correct 8% every year so that and that's an annual percentage rate just like you said yes yeah so that is that is good for the investor uh that is putting money on you but now the the next thing that I'm thinking about is um how often or how many private lenders do you have to reach out to in order to raise fund well I haven't had to in many years because I just keep using the money over and over and over again that's another great benefit about private money is like when you when you like I I rehab most deals we've rehabbed renovated over 500 houses here in our local area since 2003 and so the private lender they don't want their money back if they if they get their money back they're not earning any money right they they just want to keep using it so I'll either pay off the private lender when we're cashing out so I'll buy the house renovate it put it put it on the market and then I'll either cash them out or I'll do what's called a substitution of collateral and we do this all the time because the private lenders they don't want the money back so if that note is still open and the note has not come due yet if I have another property because you see I don't borrow unsecured funds we collateralize every note with the real estate with the property right all these single family houses that we do is called oneoffs oneoffs so that means the SEC does not regulate this right so we don't have to worry about the SEC the Security Exchange Commission and all these oneoffs see I'm not raising money for a fund right i'm not syndicating i'm not raising money for a syndication i've got a single family house and a private lender maybe a couple of private lenders and each of them have their own promisory note they each have their own deed of trust here in North Carolina it's deed of trust texas is a deed of trust most states call it a mortgage and if you don't pay them as the borrower they get the property that's that's the protection that's the protection to the private lender but back to the substitutions of collateral if I pay off the private lender and cash out on a property if I have another property right behind it ready to go then we'll keep the promisary note open which is what the private lender wants they want to keep earning money they don't want their money back they want to live off of their money and if they've loan me retirement funds the interest payments are going directly to their retirement account growing their retirement account and so if I'm if I've cashed out I got another property to go then we'll just I'll have my real estate attorney draw up a substitution of collateral which is also known as a loan modification and the private lender will have to sign off that we're substituting the substituting the collateral and then we will keep that promisary note open so they can keep earning money so let me ask you this how often do you pay back the private money uh lender is it monthly quarterly or maybe one time every year i leave it up to them so it I don't have a preference it's I mean because and here's why I leave it up to them different private lenders have got different objectives right so I want to serve I want to serve my private lenders based on what their needs are i have some elderly private lenders that are relying on the monthly income right so they'll loan out their investment capital they need and want that monthly check coming in right and that's fine because look I'm bringing home a big check when I buy so I can use part of that initial check to cash flow their monthly payments now the only way this works is if I'm buying properties at deep discounts and I do I buy properties at deep discounts because they need renovation right so some need monthly payments if they're loaning money from their retirement account I never make monthly payments because that money is not going back directly to them it's going in their retirement account and I never make principal and interest payments it's interest only either interest only payments or interest only acrewing right and that's a win for the borrower and that's a win for the lender it's a win for us the borrower because interestonly payments are smaller than principal and interest payments and it's a win for the lender the private lender makes more money over time because they're keeping all of their money invested and not having the principal paid down now if I'm borrowing the money from a retirement account I only make I only do that quarterly quarterly quarterly interest and with some of our lenders I can structure the deal to where I don't make any interest payments at all if I'm renovating and rehabbing and I'm going to cash out say in maybe nine months 6 months nine months I can just let the interest acrue and when I cash out the house pay off all their principal and all the acred interest and then go do another deal so stop and think about what that does for your cash flow follow this you buy a house you take none of your own money to the closing table never you bring home a big check from closing because you're always able to borrow more than you need to purchase it i make no payments to the private lender until we cash out the deal you think that'll help you cash flow absolutely as long as you know where to find these deals and how to negotiate them and buy them right and that would be my next question i heard you talk about deep discounts and of course we we said offmarket deals how do you find them yeah well they're not in the multiple listing service for sure that's why they're offm market you know I haven't bought a single family house in the multiple listing service since co five years ago nothing in the multiple listing service but we have no inventory here in my area you put a house in the multiple listing service to sell it and it's in great condition like our houses i mean multiple offers right so how do we find these off-market houses well we have multiple ways to do it but I'll tell you my most consistent way to find them is by using Google search vendors so there's pay-per-click and there's pay-per- here's the difference if you're doing Google pay-per-click then you set up your account with Google and you got to know what the you know search terms are or I got 75 different search terms for people to be looking for in Google and they want to sell their house fast they are motivated sellers uh either their lives are personally distressed or the property's distressed or both right and so pay-per-click means you're paying Google per click right right i don't do I don't do pay-per-click i don't do pay-per-click i do pay per lead so I've got seven different vendors that I pay and I pay them per lead so I let them be the expert i let them be the expert on getting me these leads and I got you know protected protected territory so I only get the leads to these deals in my area i don't have to compete with other real estate investors and so you know as long as you've got consistent seller leads from motivated sellers coming into your marketing you got a business and not a hobby so that was a long answer to a short answer the most consistent way we get motivated seller leads I've already gotten three this morning already is from Google Payer lead vendor services so are you teaching people how to do this of course okay awesome because I know many of my listeners uh they want to connect with you and learn how to do this i know there are people out there that really really want to get into real estate but u money has always been their barrier so uh this would be a service that uh my listeners will benefit from can you tell us one of your most profitable deal uh that you've closed sure just a few months ago so I live here in Morhead City North Carolina small area our total population that we um target is only 40,000 people we do two to three deals a month average profits are $86,000 per deal but I don't share that to brag i do not share that to brag i share that to make a point and that is there's an argument to be made to be a big fish in a small pond dominate the market instead of competing in those large cities so you asked me to share a recent deal well this deal I'll share with you it blows my average out the water my net after realtor commissions and carrying costs was $161,000 but here's how it happened so a few months ago a lead came in from one of our Google vendors and it was a So across the high-rise bridge from Morehead City North Carolina is Atlantic Beach and Atlantic Beach sits on a 22mile island in the southern tip of the uh Outer Banks mhm so this lead comes in and the owner owns this condominium an oceanfront condominium on the top floor of the condominium complex right and he was motivated to sell for a number of reasons number one it was inherited inherited from his parents both of his parents had passed away so it was inherited property and he didn't have any use of the property he lived out of state there's another layer of motivation out of state owner and third motivation is the property is going to sell at foreclosure on the courthouse steps in two weeks of him contacting us so he was highly motivated and needed to move quickly so anyway uh we he contacted us and we talked to him we put the condominium under contract for $425,000 $425,000 it was totally furnished with luxury furniture and when you were in the living room and looking out you look like you're in a a cruise ship looking at that at the ocean beautiful the total renovation only cost $11,000 and that was for interior paint and some sheetrock repair so I was able to buy it put it back on the market all within less than six weeks i sold it i put it on the market had multiple offers right away i sold it sight unseen for $618,000 bought it for $425 put $11,000 in rehab in it now here's the secret that's one big reason I love private money you can close fast right so I closed that deal in seven days wow from talking to him that's because the private money lender was ready to wire the funds and close the deal plus we had the courthouse sale the courthouse sale coming up that we had to get around as well so we netted on that pro on that deal even after realtor fees of putting it on the market my realtor fee was right at $30,000 uh we netted $161,000 and the reason we were able to do it was because of the deals coming in the leads coming in from our marketing and having the private money ready to close ready to go awesome so what's your top advice for anyone looking to build wealth through real estate what would you tell them to do work with somebody that knows what they're doing for goodness sakes maybe it's Bola maybe it's somebody local right maybe it's me whoever but don't make the mistake that I did in 2003 all I did was leverage my previous experience in the mobile home manufactured housing business i read a few books but I really didn't get a mentor or a coach to really work with me so don't make the mistake that I did get somebody to work with you that knows what they're doing and it'll save you hundreds of thousands of dollars oh that is so good so Jay we are coming to the end of this show i try to keep it short so that my listeners can get actionable uh instructions from this uh episode now uh in the beginning you told me that you have a gift for my listeners and it's your book Where to Get the Money now can you please uh tell us more so that my can go there and find your book absolutely this is a bestseller it's on Amazon it's called Where to Get the Money Now and don't spend money on Amazon i'm going to show you how you can get the book itself for free but the subtitle is how and where to get money for your real estate deals without relying on traditional or hard money lenders and I'll autograph the book for you i'll send it to you express mail and you can get it at www.jconor J connor J- Ayer.combook that's J connor with an E not a O R j A Y Ner.combook and there's a gold medallion up here in the right hand corner of the book the book also comes with two tickets to my $3,000 live event but I'm going to send you the tickets um called the Private Money Conference so I'll also invite you to my uh private money conference live event and I'll rush that right out this will get you great foundation get you started very easy to read again it's jconer.combook and I'll rush it right out thank you Jay i'll be sure to leave the link in my show notes so that my listeners can connect with you i appreciate all your wealth of experience the knowledge the information that you have shared with us today i'm sure I'm confident that my listeners they will find this you really beneficial thank you for your time Jay thank you so much god bless god bless you too are you feeling inspired by the knowledge you gained in this episode then head over to jconor.com/moneyguide that's jc ner.com/moneyguide and download your free guide that shares seven reasons why private money will skyrocket your real estate investing business right now again that's jconor.com/moneyguide to get your free guide we'll see you next time on Raising Private Money with Jay Connor