On this episode of the InvestFourMore Real Estate Podcast, I speak with Jay Conner. Jay has been a full-time real estate investor for 14 years. He used to use banks for his financing. During the financial crisis, banks cut off his line of credit, and he had to find a new source of funding. Jay was able to obtain over 2 million dollars in private-money financing in a very short period of time. Private money has allowed Jay to fund over 350 rehabs in his career, and it has helped him build a very impressive business. On this show, we discuss how Jay got started in real estate, how his career evolved, and how he sources so much private money.
Click the green play button below to listen to the podcast
How did Jay go from the mobile home business to investing in single family homes?
Jay grew up in the real estate business but made a big change early in his career. His father was one of the biggest mobile-home dealers in the nation, and Jay started following in his father’s footsteps. Right around the year 2000, bank financing dried up for mobile homes, and Jay decided to completely shut down the business. He moved into rehabbing stick-built homes using bank financing. He completed 3 rehabs in his first year of flipping houses. Before the mid-2000s housing crisis, Jay had no problem getting lines of credit from banks. But 6 years into his flipping business, and with no notice, banks cut off his lines of credit.
How did Jay finance his flips after the banks stopped financing him?
Jay had two deals he was trying to buy when the banks said they were closing his lines of credit. He had to find money in a very short period of time and had to start asking people he knew if they wanted to lend him money. It was not easy for Jay to ask people for a loan, but he realized that he could offer a great service. He could pay a much higher rate than people could earn investing in CDs or other secured investments. Instead of begging for money, Jay offered people a way to earn a much higher return. Jay was able to fund his deals and obtain millions in private money, both from people he knew and even from people he didn’t know.
How does Jay find private-money lenders and what does he pay them?
Jay loves to use private money because it is cheaper than hard money and has less hassles. Jay typically pays his lenders 8 percent interest over a two-year term. He uses a two year term because he often sells his houses using rent-to-own deals, and it takes a couple of years to finish the deals. He secures the loans with a first position-mortgage that equals 75 percent of the repaired value.
Jay finds his lenders from many different sources. He found his first lender through his church. The best candidate for a private-money lender is someone who is:
- A non-aggressive investor.
- Someone with money already invested in something.
He finds his lenders through a number of outlets:
- Social networks
- Business Networking International
- Rotary Club
- Public records
What does Jay say to potential private-money lenders?
Asking for money is one of the toughest things many people do. Jay says investors need to realize they are not asking for money but giving others an opportunity to earn more money. When trying to secure private funding, you need to have the right mindset. Jay also stresses that people have to be prepared before they talk to a potential lender. He suggests role playing with others regarding how the conversation will go. Jay has a list of questions he asks lenders, and we go through a script on the podcast detailing exactly how he asks for money.
How can you learn more about private money and contact Jay?
Jay has two free gifts for InvestFourMore listeners (and readers). Go to Jayconner.com/investfourmore to get in touch with him and get the free gifts, which discuss private money even further.
How to get a free book from me
I am still running my free-book promotion. I have published two new books this year:
- How to Buy a House: What Everyone Should Know Before They Buy or Sell a Home.
- The Book on Negotiating Real Estate: Expert Strategies for Getting the Best Deals When Buying & Selling Investment Property
I am giving away free copies of these books (either a PDF or paperback version). All you have to do is leave a review on Amazon and send me an email on any of my paperback books, and I will send you a free book of your choice. You can find all of my books here: https://www.amazon.com/Mark-Ferguson/e/B00FP1LZ1C. My email is [email protected]
[0:00:13.9] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.
So on this show, we’d like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, on how I buy properties, check out investfourmore.com.
[0:00:58.8] MF: Hey everyone, it’s Mark Ferguson with Invest Four More and welcome to another episode of the Invest Four More real estate podcast. I have a great guest on for today’s show. Jay Conner who has been a full time real estate investor for 14 years, he really specializes in private money which I know, I get emails on all the time about people asking how to get private money, that’s his specialty, that’s what he’s worked on most of his real estate career, he used to work with big banks and then realized how much easier private money was to deal with.
We’re going to talk to him about how he got started, how he got into the real estate business, what it was like working with banks and then moving into private money and then he’s got a lot of other great information and some free gifts as well for our listeners. Jay, thank you so much for being on the show, how are you?
[0:01:44.4] JC: Hey Mark, I’m doing fantastic, all the way here from Moorhead City North Carolina and thank you so much for having me here on your show.
[0:01:53.8] MF: No, I appreciate it, it’s great to talk with you, I’m excited to learn about how you have been so successful and also I’m always looking for more tips on private money myself. That’s a great topic.
How did you first get into real estate, what got you into the business?
[0:02:13.1] JC: Well, I’ll tell you, I was raised in the Mobile home business or some folks may recall it as the manufactured housing business, seen the wise devil wise, I mean, back in the 60’s and 70’s, people called them trailers and so my dad had a business, ended up actually being the largest retailer of manufactured housing in the nation.
Back in 1993, some really good friends of ours that live in Newborn North Carolina, about 30 minutes from our home, they wanted to build a house but they didn’t have the downpayment or the seed money.
Well, our friend’s wife’s daddy lived down in Florida, he was a real estate investor and flipper for years and he said, well I’ll tell you what, our friend’s names are Craig and Kim. He said, “I’ll tell you what Craig and Kim, he said, I’ll come up there to North Carolina, I’ll find a fixer upper and you all can do the sweat equity on the weekends and on the nights and we’ll sell it and you can keep the profit and use that for your down payment to get your house going.”
They did that in less than 60 days. Back in 1993, they pocketed over $25,000 and I said, “I’m going to remember this”, because at the time, Mark, I was struggling to even make $3,000 on a single wide mobile home. Fast forward to 14 years ago, the retail financing was literally cut off overnight for the mobile home and manufactured housing business.
I found myself shutting down the company and it’s a lot more fun to startup something than to shut something down. I went to the Homes magazine, that’s back when we actually had Homes magazines you know? That the realtors put out and I said “well, common sense tells me to look for the nastiest, ugliest gag of maggot house I can find like a foreclosure” and my dad and my wife to this day says “You found it Jay.”
It was in the homes magazine, this house had been on the market for nine months, been shown over 65 times with no offers. I said, “Hm that sounds like an opportunity” so I walked in that thing and it gagged me so bad I had to walk outside and spit. But some book I had read said that was the smell of money so I didn’t quit.
Anyway, I’ll put that house on the contract for $50,000 and I said “man, I’m so proud, I got to show my wife this.” Carol Joy wouldn’t even get out of a driveway and go inside the house when I showed it to her. My dad, he walked inside and looked at me and said “son, you’ve lost your mind.”
Long story short, I bought it for 50,000, put another 50,000 in it, had a hundred thousand in it and then in less than 60 days, sold it for 140,000 so my first profited deal on a turnaround flip was about 90 days and made the $40,000. I said, “Hm I like this.” Our first year, 14 years ago, we just did three houses. I want to start one to finish, one to finish and we wrapped up, closing down the mobile home company and we’ve been growing the company every year. Now, bear in mind, that first year, I was funding my deals with an unsecured line of credit.
Of course back then if you could fog a mirror, you could get money from the banks. So that’s where that first year and we’ve been growing it ever since.
[0:05:43.7] MF: That’s great and I think being in the real estate business for a while, my nose is either – I’ve come to get used to the smells or just naturally my smelling ability has disappeared. I guess you kind of have to.
[0:05:56.7] JC: Well I tell you, you know, I’ve rehabbed, I say I. My training and I have rehabbed now over 350 houses since we started. We’ve done a lot more deals than that but the rehabbing goes through 359, I tell you, I’ve only walked in to maybe five houses, that first one being one of the five that I actually couldn’t stay in there, I had to walk out.
Until I’ll tell you, I was on a bus tour up in New Jersey this past weekend, teaching and training some real estate investors on how to estimate repairs and you know, how to buy bank owned properties and how to find deals, that kind of thing. This has been a long time since I had walked into a house and I’m telling you, I don’t know what horses they had had living in that house but I was in, I’m telling you, this is just a day before yesterday. I was in there like 20 seconds and I said, “Wow.” Anyway, it burned my nose, I had to run out but you know what?
Once you get good in this business as you are very well yourself, we can make offers on houses and don’t even have to walk through the house you know? Anyway…
[0:07:09.1] MF: Yup, nope, that’s true. You see some interesting properties for sure and like you said, a lot of people you know, think that you’re crazy for buying some of these properties but sometimes those are the ones you make the most money on because everybody else thinks, they won’t even touch them but yeah.
[0:07:24.1] JC: Believe me, absolutely. I mean, some of my most profitable deals have been those as you just said, the real estate investors won’t even walk through the house.
[0:07:33.0] MF: Yup, exactly. Yeah, you mentioned you were getting an unsecured line of credit. I know when I was flipping houses with my father in the early 2000’s, that’s kind of what he had too, was a line of credit where it was really easy, we could buy houses from the public trustee sale, the foreclosure auctions, get the money the same day but then when the housing crisis came along, those kind of disappeared.
We had to change our financing up, is that kind of happened? What happened with you or how did your financing changed over the years?
[0:08:02.0] JC: My lands, that’s exactly what happened, I’ll tell you what. You know, starting 14 years ago, the first six years, now we started out with the unsecured line of credit. I just walked into the bank and I said “Hey, I want to own an unsecured line of credit to go buy and sell some houses” and the banker knew me and said “okay,” you know, I walked, the next day I had $250,000 unsecured.
We moved into doing some security lines of letting the houses be the collateral but my lands, it was so easy and the first, I mean, it’s not easy now as long as you can ship to nowhere else to get the money. The first six years, I was using lines of credit, man, I tell you Mark, I remember exactly where I was standing in my office, this past – just a couple of months ago, eight years ago and I called up my banker, his name was Steve, don’t know what happened to Steve but his name was Steve at the time.
I called up Steve and I had been doing it for six years with Steve and I called up Steve and I said, “I’ve got two houses under contract, earnest money tied up,” got him telling that but that’s just a taste “and over $100,000 on these two houses” and that was going to be profit. I told him where I were located and I want to close in less than 30 days which was my normal cause for course of action and conversation with Steve.
There was this dead silence on the other end of the phone which is never a good sign and Steve cleared his throat and he says “Jay, I’m sorry but the bank has collapsed your line of credit.” I never heard of a line of credit being collapsed but I knew it didn’t sound good. I said, “what do you mean Steve? The bank has collapsed my line of credit?”
He said well, “We’re just not loan at the bank just isn’t loaning out money and funding deals for real estate investors.” Now bear in mind, I had an 800 credit score, we had never been late on any payments with the bank or anybody else and I’m being cut off with no notice whatsoever.
My first thought was, “sure been nice to known that before I tied up my earnest money in them houses and my second thought was what in the world am I going to do?” Well, my definition of coincidence is god’s way of staying anonymous and in less than two weeks, I was introduced to this wonderful world of private money and private lending and I tell you Mark.
It was a huge blessing in disguise. If I hadn’t been cut off from the bank, I wouldn’t have known anything or had any reason to go find out about this world of private money and as a result, to this date, she’s been cut off from the banks, I was over to go out and raise two million, one hundred and fifty thousand dollars in private money after being cut off and I have not missed out on a deal since that time because I did not have the money.
Private money saved our career and tripled our income the first year after being cut off from the bank.
[0:11:20.8] MF: No, that’s great. I use a lot of private money myself as well that I’ve kind of, I found new sources the last few years and I was hesitant at first because I know the rates can sometimes be a little higher, sometimes you’re paying more points.
The bank money’s really cheap for me right now but at the same time, it’s so much easier to use.
[0:11:41.6] JC: Well, and you know, you mentioned points Mark and this wonderful world of private money is not the world of hard money, there’s a big difference between hard money and private money. Most real estate investors when they’re not using the banks, they’re familiar with hard money but here’s the difference.
What I have learned how to do and what I plug other real estate investors into on how to do like I do is we circumvent the hard money lenders. The hard money brokers and for the listeners that may not be familiar with what we’re talking about, I’m talking about middle people.
I’m talking about people that have gone and found money from private lenders, individuals, that’s what a private lender is, it’s an individual just like you, just like me that loans out money from their investment capital or their retirement accounts and we can talk about that if you want to Mark when we get to it in a moment.
Hard money is a middle person, in the world of private money, average interest rate now is seven to eight percent. The average interest rate on hard money nationwide now is 14%, in the world of hard money, the average number of points or origination fees is four points, at least two and the world of private money, there’s no points.
I now use and invest from 44 lenders, about five and a half million dollars that we just turn over and turn over in single family houses and you know, every closing we do, a hard money lender’s only going to advance you like 65 to 80% of your purchase price and this world of private money that I do, we get 100% of purchase price and up to an additional 25% above purchase price to get our rehab money upfront.
It’s hugely different than hard money.
[0:13:40.7] MF: Yeah, I would completely agree with that and I’ve used both private money and hard money and the hard money too, you have to realize, it’s not just the points and the interest rate but they’ll pack in as many fees as they can and there for appraisals and loan.
[0:13:56.1] JC: My word. Absolutely. And then there’s another big one and that’s the term. You know, how long will a hard money lender give you to cash that house out and you know, average term from a hard money lender is six months to 12 months and of course if you don’t have it cashed out in that time, they’ll be glad to renew your note if you’ve made your payments on time but what do they want? More money.
[0:14:20.0] MF: Right.
[0:14:22.2] JC: To renew that baby and in this world of private money, the average term on just investment capital is two years and if it’s coming from a self-directed IRA, the term is five years and then if we haven’t cashed out in that period of time, the private lenders absolutely want to renew and there’s no fee to renew, it’s a beautiful thing.
[0:14:46.1] MF: That’s great. Tell me, how did you get your first private money deal? Who was that person, how did you find him?
[0:14:54.9] JC: Excellent question. I’m glad you asked. There’s two primary categories that we get private money from. One is what we call our one market, people that we have some kind of relationship with, they’re in our cellphone, they’re Facebook friends, LinkedIn, social media, some kind of social group. Rotary Club, et cetera. The other category are existing private lenders.
So, an answer to your question, how did I get my first private lender? It actually was after church on a Wednesday night. I learned about private money within the past week, I had this two deals under contract that I just told you about, had no way to fund them. I teach just five steps to getting private money in the warm market so I had identified who I thought would be an excellent candidate to be a private lender.
I walked up to them before church on a Wednesday night and I said to him. I said,” I’ve got something really important to talk to you about but we need to talk confidentially.” I said, “Can you talk to me after church” and they said “yes, of course” this person had known me a long time.
After the closing prayer, I looked across the way and this person is coming around the corner chasing me down, can’t wait to hear what this confidential thing is that we need to talk about. We visited confidentially, I told my program and that’s another thing about private money, the warm market. We make the rules.
You know, when I was borrowing money from the banks, the banks made the rules. But now, we make the rules in offering our program to potential private lenders. I told him my program at the end of that conversation Mark, he looked me in the eye and he said “Jay, put me down for $250,000,” it was that fast.
I went and used that funding to fund those two deals that I had under contract and so it grew from there. About half of our 44 private lenders, used their retirement money and we helped them get it transferred over into self-directed IRA’s and of course they never heard of private lending, they’d never heard of self-directed IRA’s until we told them about it.
IT grew from that conversation, that short conversation on a Wednesday night, a little over eight years ago.
[0:17:20.4] MF: Wow, that’s fantastic. Obviously you grew very quickly from there, finding more private money lenders. What kind of terms and rates were you offering people who are investing with you?
[0:17:33.6] JC: Sure. In the warm market, now, bear in mind, I’ll tell you about the existing private lenders in a second but I offered to people that I have a relationship with and I offer my program. Right now, I’m paying private lenders 8% which is my lands, fantastic for them. Did you know, and you probably do Mark but your listeners may not know? Every Thursday, the USA today publishes on the front page of the money section in the lower left hand corner, a little green box and in that little green box, they published every week the national average certificate of deposit as to what it’s paying in a bank.
As of this past Thursday, you know what a 12 month certificate or deposit is paying on average across the nation? When I travel the nation, I ask that question, I’ll get you know, guess is from 1%, one and a half percent, 2%. National right now is 0.34% as of this past Thursday.
Here’s the point. People don’t know where to put their money and have it safe and secure. We come along and tell you, 8%, my lands, how many times is that over 0.34% you know? 8% and if it’s investment capital, two year term, five year term, if it’s retirement money. We actually have a way that can get their funds back in case of an emergency. Let’s see here.
We don’t borrow any unsecured moneys from our private lenders. All the funding that we do from our private lenders is secured. They get the same security as a bank which means they get a mortgage or deed of trust. In the event that I default, they get the house, if I don’t pay them, the house pays them.
Then on top of that, the maximum loan to value that we borrow is up to 75% of the after repaired value but however, since I’m buying most houses at 30 to 40% of the after repaired value, that’s how we’re able to walk away from the closing table with a check.
Those are the terms that we’re offering right now to the warm market.
[0:19:59.2] MF: Okay, that makes sense. Now, if you’re doing two year terms and you’re offering a mortgage in the property you’re buying. How often are you taking those full two years to do a property? Seems like that’s a pretty long time.
[0:20:12.5] JC: Yeah, here’s the reason for the two years. Up until a year, year and a half ago, 80% of our homes we sold, our exit strategy, we sold on rent to own or lease purchase. We would require our buyers to enter into their credit repair program and get them ready for a mortgage and then cash them out.
That process form the time you buy it, if you’re going to rehab it, if it needs rehabbed, get it occupied and then get the buyers qualified for a mortgage, then that’s about 12 to an 18 month process. Of course, the market is so hot, my land. Like across the nation now as you know.
Even here in our little teeny tiny town that I live in. I put a house, we put a house in MLS in the multiple listing service this past Friday afternoon, a week ago. At 4 PM. By 7 PM on Saturday, we had five showings, three offers, one of which above list price and of course we accepted that offer. In today’s market, if I’m just selling stuff in MLS and we went under contract above list price.
In today’s market, if my exit strategy is MLS, don’t need two year money you know? It’s such a hot market but as we know, the most expensive way to sell a house is through a multiple listing service. It’s called ordinary income taxes because you’re flipping it in less than a year, the realtor’s fee and et cetera and of course home inspectors job is to beat you down on that, when you sell on terms, with the un list purchase, that’s the most profitable way because they’re not buying price, you never negotiate on price and et cetera.
Right now, our exit strategy is about 50%, put them in MLS to sell and about 50% still contained the rent to own because once I get past that 12 month part. I now have long term capital gains instead of short term. I mean, instead of ordinary income.
[0:22:16.5] MF: Yup. Nope, that’s very true. I just had a question. I was going to say. You found 44 private lenders which is a lot to keep track of but if you’re doing a lot of deals, that’s great.
How have you found most of them? Were most of them warm contacts like you said or did you have to go out there and find new people?
[0:22:35.3] JC: Yeah, about 20% of them come from the existing lender pool, I used to hire my attorney’s paralegal to look for existing private lenders and public record and then mail them letters and contact them et cetera.
We got a much easier way now, I’ve got my own private lender data feed that I plugged my students in to and they can just contact them that way. Still yet, 80% has come from our warm market but here’s what happens.
I mean, these private lenders, they just can’t keep their mouth shut and they spread the word to their friends and so I mean, probably 30% maybe of our private lenders have come to us by referral without us even asking. They just keep knocking on the door and sending their friends because where else can the people get this kind of return safely and securely?
[0:23:31.7] MF: Right. That makes sense. What kind of people were you looking for when your lawyers were sending letters? I know a lot of people when they’re first starting out, obviously don’t have people referring them to them and they’re looking for private lenders. What’s the best way for new investors or people who haven’t used private money before to find private money lenders.
[0:23:50.3] JC: Yeah. I teach what’s called A Magic 44 Grid. What the Magic 44 Grid is I’ve identified 44 categories of people that people know within their own network and I have them go through the exercise which doesn’t take that long of identifying the top 100 potential private lenders and again, we just go through the exercise. First I teach them to look for a trend of what the private lenders look like. Well a lot of private lenders that have recently retired or they’ are retired and they have retirement funds and they quite honestly are too scared to live through another correction in the stock market.
What’s beautiful about our program is that the principle remains the same of their investment until the house cashes out. So they don’t have to worry about losing any of those principle amount that they have loaned out. So number one, retired people and I teach my students how to make that list of the retired people. Secondly as I eluded to earlier, a big group is in the social networks. What kind of groups are you in and of course, some of the students say to me they’ll say:
“Well Jay, I really don’t have that much of a warm market as you talk with. I don’t have a lot of friends, I don’t get out there and network all that much” well I can tell you Mark, where I have raised a lot of money. So somebody who doesn’t have a warm network, I recommend them joining in what’s called BNI, Business Networking International, which I have been very involved in and I’m sure you’ve heard of it. Ivan Misner started it a few years ago.
And so Business Networking International is a group of professionals that would end up referring you the type of prospects that you are looking for. I’ve raised a lot of money in BNI. Of course, if someone doesn’t have a strong social network, The Rotary Club. I highly recommend getting involved in that and being a volunteer and of course you’ve got some people that say, “Well you know I’m just not really interested in all of that social stuff and I am not interested in networking”.
“You know I just wanted to do business with business people.” Well, I’ll tell you into my existing private inter data feed, so what we look for and all that comes from public record like I did it with my attorneys paralegal, so we’re looking in private records for individuals not institutions, not banks, individuals in public records that have loaned out money on a property other than the property that they lived in and sold. So we are not looking for any seller carry bags or owner financed deals.
These are truly the individuals like us that are already in the business or in the habit of loaning out their capital, investment capital to other real estate investors and so we have automated that through software to where people can just play into that. I get over, me and my students, we get over 12,000 new private lenders a month all across the nation coming into the data feed and a lot of them have loaned out two or more loans in the past year.
Some have loaned out five or more in the past year and so then we contact them and establish a relationship to go from there.
[0:27:27.1]MF: Wow, that’s great. Quite a system you’ve built to find lenders and really if you’re going to be successful in business whatever you’re doing, system seemed to be what makes it works so it’s not surprising to see that.
[0:27:38.7]JC: True but you know I didn’t – I’m 56 years old now and the light bulb really didn’t come on in my head until about 12 years ago after I have gotten into this business for two years and that is truly the more I get out of the way and the more I automate and delegate, listen I’ve got this full saying called dictate, delegate, disappear, okay? And then of course show back up when they least expect you. Ronald Reagan said “Trust but verify”.
But the more I get out of the way, I mean one of my mentors, Ron Legrand out of Jacksonville, Florida he’s been teaching and training real estate investors for over 30 years. His mantra is “the less I do the more I make” and it really, really is true. Automate, automate or die.
[0:28:36.2] MF: Right, that’s great and I try to do things the same way but it’s not always easy. That’s for sure.
[0:28:43.3] JC: I mean us guys, its a guy thing, most owners are control freaks. We think nobody else in the world can do it as well as we can but then of course, everybody else is as smart as us, right? So we want to do it ourselves and then you share this concept with these listeners Mark. I know you already know it but here’s the concept that really came home to me 10 or 12 years ago and that is, listen carefully, and that is not every activity I am doing at the time this doesn’t matter what business you’re in, whatever activity I am doing at the time, if I can hire somebody else to do that activity for $15 an hour, while I am doing that activity I am earning $15 an hour, okay?
So it made me wake up and think, “You know Jay what are you doing? Okay, can I delegate this out to someone else?” and you know do I want to earn $15 an hour or $800 an hour as a real estate investor? So that really made me think about my time and the value of my time.
[0:29:57.0] MF: Yep and I know a lot of people who had that same philosophy and it is just a huge concept once you can figure out how to apply it that can really make your business jump forward. All right, one thing I know that a lot of people always ask me and always worry about that I want to get to before we move into some other items, how do you talk to a private lender? Say some warm context of what you know. So many people are worried about asking them for money or even if it’s family, they don’t want to ask family for money, how do they get over that?
[0:30:29.1] JC: Absolutely and that’s a good question because that first individual I approached after church on Wednesday night eight years ago, I was scared to death. Of course I had good reason to be scared to death. I was getting ready to lose over $100,000 in those two deals if I didn’t find funding somewhere but what I discovered is that the more I know exactly what I am going to say either by bullet point in my head or by scripting, whichever, I want to be prepared.
And so what I teach my students are different scripts on exactly what to say to a potential private lender but let me share just one and so what I’m going to share now is ought to be said to a potential private lender in your warm market. This could take place over the telephone, it could take place in person and so let me role play here for just a moment if I can. So Mark let’s say you’re one of my friends, you’re in my warm market, we know each other in some kind of way and we’ve known each other for a while.
So I call you up and you answer the phone and so I say, “Hey Mark, this is Jay. I hope you’re doing well. I haven’t talked to you in a while. How are the grandkids? How’s the golf game?” etcetera and I give you the chance to chitchat just a little bit and then I get right to it because everybody’s busy and then I will say something like, “Mark as you may or may not know, I’m investing in real estate these days and I am taking advantage of this tidal wave of foreclosures that’s still going on.”
“But Mark what I’m getting ready to tell you, very few people know about because quite frankly the only way the find out is if I tell them. Now let me put you on hold here for a second Mark and explain to everybody what I just did.” I’m getting to let you in on a secret because I just said what I’m about to tell you very few people know about because the only way they find out is if I tell them and now I say “you see my god, now I opened up my real estate investing business to people I know and trust”.
Now the reason I said that is I want to anchor with you as my friend that we know each other, we got a relationship and we trust each other and then I say, “I’ve got a program that may or may not be for you” so when I say I’ve got a program that may or may not be for you, in other words, I’m communicating I’m not going to try and talk you into anything. I’m not chasing you, I’m not begging you and quite frankly I know in my heart of hearts that you’re really down right blessed.
You’ll hear about this program because where else can you get this kind of rates and returns? So I’ll say, “Mark I may have a program that may or may not be for you. So what I’m doing is I am paying up to 20 times as much in returns as people can get through traditional resources and unless you answer yes to the following question, there’s no need for me to send you any information.” By the way, let me just tell everybody what I just did, that’s called the takeaway.
Unless you answer yes to the following question there, there’s no need for me to send you any additional information and that question is, “Do you have investment capital or retirement funds that’s not paying you a high rate of return safely and securely?” and then I do something that’s pretty hard for me to do, I say it “and I’ll let you answer that question. Do you have retirement funds or investment capital that is not giving you a high rate of return safely and securely?”
“Now Mark if you answer that question no, I know you don’t, because zero point three four percent is not a high rate of return. If you say yes, then the magic starts to happen. I’ve got this 16 minute recording called Stress Free Investing that I’ve been using for eight years. I’ve recorded over a thousand of them for my students and I’ll email or text you that recording called Stress Free Investing. It’s a 16 minute audio recording and what it does is it gives the overview of what private lending is all about but it doesn’t spill the beans.
It doesn’t tell you the interest rate i’m going to pay, how you’re protected just in case I lose my mind and moved to the Caribbean, blah-blah-blah.” It just raises all these questions. We let the audio do the work that then leads to what we call the one on one and the one on one is where we spill the beans, tell the interest rate, what we are paying, etcetera and I will tell you what I have found out and that is all my potential private lenders at the time that listen to that audio after I asked that magic question in that script, once they got to the one on one nearly 100% of them came on board. So that’s an example of a conversation.
[0:35:30.7] MF: Wow that’s great. Like you said, there is so many people out there with their money tied up making nothing and if you can give them a little better way to invest, so many people jump on it and I think just giving that little bit of information here helps a lot of people see it’s not the end of the world to ask for money and you’re presenting an opportunity for someone. You are providing a service, you’re helping them out. You’re not really asking or begging for something yourself.
[0:36:01.9] JC: Right and that’s a huge mindset and I’ve got some students who’ve said, “You know Jay I don’t want to ask people I know for money” and then I share with them, I say, “Well you know what? Let me tell you the only complaint, the only complaint that I have received from my private lenders that came from the warm market and that was “Jay why in the world didn’t you tell us about this sooner?” and that’s the only complaint” and so I get it.
I get it like sometimes students will say to me, “But Jay I don’t want to risk, I don’t want to put my friends or my warm market into any kind of risk and what in the world if the deals goes sour? What happens if this thing goes upside down?” Well, here’s my answer: In eight years, none, zero, nada, zilch of these deals are going south and here’s why. Number one is because of how we buy. We are only buying at 30 to 40 to 50% of the max of the after repair value.
And we say we find those deals as another call, right Mark? But that’s what we do and we don’t allow our lenders to learn those more than 75% of the after repair value. So we keep the whole thing conservative and you know what? If you as a real estate investor, if something did go awry there’s risk in everything we do, then your private lender just got that property and quite frankly if they put in an email list they are going to make more money than the interest they would have paid to you.
So that’s why it is so important to have the best interest at heart for the private lenders. Now one more comment too, sometimes some of my students will say, “Jay I’ve never done a deal. I don’t know what I am doing” so here’s my big piece of advice and Mark I think you’ll agree, do not borrow money from a private lender if you’ve never done a deal before without at least having a very experienced mentor or joint venturing with a very seasoned real estate investor that can hold you by the hand along the way.
So absolutely, if you are a newbie, never done a deal before then give the business to somebody that you can learn while you earn and of course you know if you’re a newbie and you learn how to get the private money like I teach, you bring money to the table, you’ll have the seasoned real estate investor’s lined up wanting to train you on how to do the business but I’ll tell you, Mark you look out for yourself. I mean in my land where somebody doesn’t know how to do real estate investing is just sign on with you is what I’d say.
[0:38:57.2] MF: Yeah, there is so many different ways to learn now with online resources and books and programs and there’s a lot out there in the world we live in. So if you haven’t done a deal that doesn’t mean you obviously cannot learn or do one very quickly with a little bit of help that’s for sure. Now you mentioned one thing, I don’t want a long response here – well no, when you are getting your deals, what’s your number one source right now for getting deals?
[0:39:25.9] JC: Here’s on my foot for getting deals to buy.
[0:39:28.0] MF: Yeah.
[0:39:29.0] JC: Yeah, 25% of my deals actually come from a direct mail system we have of tracking every notice of default for foreclosures but beyond that, our biggest source of getting settlement needs believe it or not is Facebook ads targeted right here in our territory, right here in our target. I’ve only got two criteria on the Facebook ads. Number one, 35 years or older and number two, the zip code you are targeting.
[0:40:00.2] MF: No, that’s great and I only want to ask that to everybody. Obviously like you said, we could spend a whole other call on finding deals but it is great to get an idea of just what people are doing out there and there is so many different ways to find deals so that’s awesome.
[0:40:12.6] JC: Absolutely.
[0:40:13.6] MF: All right, so we’ve gone over a lot of the private money, you provide some awesome information and even the scripting, how to talk to people, now what’s the best way to get in touch with you if someone wants to learn more? I know you have some free gifts as well for people, how can people get those?
[0:40:28.7] JC: Absolutely. So if you want to learn more about private money, how to get funding for your deals and if nothing else, take advantage of the free gifts that we’ve got for you right here now. I’ve got two free gifts as a thank you for listing in. That is my book, The New Masters of Real Estate: Getting deals done in the new economy, and I also have an audio recording called, “How I raised $2,150,000 in less than 90 days from getting cut off from the banks”.
So we will mail that to you in hard copy autographed so you can download it and here’s where you go, www.jayconner.com/investfourmore all in lower case, Invest Four More just like Mark’s show. www.jayconner.com/investfourmore.
[0:41:33.8] MF: And we’ll have show notes that give all those links and the free gifts as well so people can check that out. Great show, before we get out of here any parting advice, any words of wisdom for somebody who’s new to real estate investing looking to get into the business whether they’re using private money or not, what are some things they should think about?
[0:41:53.3] JC: Yes, number one, do not try to enter this real estate investing business on your own as we just mentioned. Don’t go out on your own. Get a mentor, get excellent training, you are already prepped into Mark and his information but do not do this alone, all right? That is number one. Number two, let the math make the decision on what you buy. Here’s what I mean: For example when I am buying and paying all cash, funding with private money.
I use what’s called the Maximum Allowable Offer formula and so whatever your formula or map is that you’ve been taught on what should be your maximum offer, let the math make the decision and not your emotions, okay? Thirdly, pull the trigger. The number one thing that I have discovered that holds real estate investors back from moving forward is that nasty little four letter word FEAR, okay?
So there is nothing to fear when you’ve got the training, you’ve got the information and you got someone that is holding your hand and knows what they’re doing. So number one, make sure you got the training, number two, as I said, “Don’t do it alone get the formula with the math made decision and take action.”
[0:43:18.1] MF: That’s great advice and I think I tell people the same thing where you use math in the analysis paralysis problem in the same way I tell people figure out what a good deal is to you. Figure out the numbers, what makes it an awesome deal, when you find that deal and it meets those numbers, just buy it. Don’t think about it, don’t analyze it, if it meets the numbers, if it makes sense buy it and that eliminates that fear and that second guessing and all that question that comes up.
[0:43:47.5] JC: Exactly, if the math says buy it and your math is the right math, then there you are. Decision made. What’s holding you up?
[0:43:54.2] MF: Yep, exactly. Well Jay thank you so much for being on the show. Great advice, great insights, you’ve got an awesome system in place and it’s really fun talking with you and learning how you’ve built this business up. Thank you again for providing those free gifts and we have to keep in touch and yes, thank you again for all the information.
[0:44:14.4] JC: Thank you so much Mark for having me on and I’ll tell you what? I’ve been interviewed by a lot of podcasts show hosts and I must say, yours is one of the most enjoyable. You’ve got a great following, you got a great blog and so yes, let’s please stay in touch and who knows? Maybe we can be together in a little different subject or whatever but thank you so much Mark.
[0:44:36.5] MF: Yep, thank you Jay. Have a great rest of your week and yeah, for sure let’s keep in touch.
[0:44:41.0] JC: All right, bye-bye.
[0:44:42.9] MF: Bye.