Jul 28, 2022
Jay Conner is a Real Estate Investor from North Carolina. He started his first Real Estate Investment way back in 2003. He rehabbed over 450 houses. Even better, he also developed the ‘golden touch’ in creating unlimited potentials in private money.
Completed over 52 million in Real Estate Transactions and consulted 1:1 with over 2000 Real Estate investors and is a leading expert in private lending
In this episode we talked about:
Useful links:
https://www.jayconner.com/7-reasons-report/ - Money Guide
Transcription:
Jesse (0s): Welcome to the working capital real estate podcast. My name's Jessica galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, my name's Jess Fraga. You're listening to working capital the real estate podcast. My guest today is Jay Connor. Jake Connor is a real estate investor from North Carolina has been doing that since 2003 rehab and over 450 homes all averaging over 71,000 in profits per deal.
Completed 52 million in real estate transaction and has consulted one on one with over 2000 real estate investors and is a leading expert on private lending. Jay, how you doing today,
Jay (52s): Jess? I'm doing fantastic. And I'm so excited. You invited me to come along to be on the show to talk about my favorite subject, private money.
Jesse (1m 2s): That's fantastic. Well, thanks for coming on. It's been a while since we had that Southern twang on the, on the podcast, so glad to hear it. Oh,
Jay (1m 8s): My land. Are you saying I've got a Southern twang? I didn't even know. I had a Southern twang.
Jesse (1m 13s): Yeah. Yeah. I'm the one with the accent, I guess from your vantage point,
Jay (1m 19s): Actually you sound normal to me.
Jesse (1m 20s): There you go. We call, I think it's called the neutral language. It's it's whatever the, you know, the broadcaster's voices, they think we've got an, a accent up here in can or up here in Toronto, but I feel like that's maybe east, east and west coast.
Jay (1m 33s): Yeah. I don't know. My wife is from Texas and I mean, they just like talk flat just like their state it's flat. So,
Jesse (1m 43s): Yeah, that's great. Well, I have some relatives in Jersey and New York, but we won't get started on wood accents coming out there again. Thank you for, for coming on Jay. I really appreciate it. I think it's a topical time to talk. I don't mean to make that much alliteration topical time to talk about private lending, given the fed right now, interest rates the, the environment with real estate. But before we get started on that topic, maybe you can give listeners a little bit of a background on basically how you got into the real estate world and, and where you're at today.
Jay (2m 17s): Yeah, well, you know, specifically, I got into the real estate world and this world of private money, my wife, Carol joy, and I, we live here in a really, really small area. We're in Eastern North Carolina. Our total population that we invest in is only 40,000 people, 40,000 people. It's it. We don't do that many deals, two to three deals a month, two to three residential houses a month, but we rehab 'em average. Provinces are $71,000. So you run those numbers and we've been very blessed to net over 2 million a year in a small area.
We started in 2003 jets. And in the first six years we used just the local bank to fund our deals. That's all I knew. That's all I'd been exposed to. And for this first six years, my banker's name was Steve. We did a bunch of deals and Jess, I remember it like it was yesterday. I picked up my telephone. Yeah, we actually still have landlines here in North Carolina. I picked up my telephone and I called Steve, my banker.
I told him about two houses. I had on a contract to buy, told him when I wanted to close the funding required. And he went quiet on me on the other end of the line, which is a never a good sign. When your banker goes quiet. And I learned very quickly on that conversation that I have been cut off. I've lost my lines of credit. I have no funding at the bank. My first thought was, you know, I wish I'd known that before I put Ernest money down. Cause back in 2009, you couldn't get it back after you put it down. And so here I am with no way to fund my deals.
Well, you know, Jess, our biggest blessings are those that come in in the form of a disguise. So I hung up the phone. I called my buddy Jeff, who was a real estate investor in Greensboro, North Carolina. I told him what had happened, cut off from the banks. And I had a great credit score. Jeff, my buddy says welcome to the club. I said, what club? He said, the club of losing your lines, accredited the bank. I said, you lost yours. He said, yeah, they cut me off last week. Of course, Jess, you're probably old enough to remember what was going on in 2007, in 2008 global financial crisis.
So I said, Jeff, what are we gonna do? He said, you ever heard of private money? I said, no. He said, you ever heard of self-directed IRAs? I said, no. He said, well, you need to learn about it because that's how we're going fund our deals because the banks aren't loaning money anymore. So I did some fast study. Jess, I learned about private money. I'm not talking hard money. I'm not talking institutional money. I'm talking about doing business with human beings, individuals that loan money out from either their investment capital or their retirement accounts.
So I learned about it and I started teaching people right here in my local market about private money and how they can make high rates of returns safely and securely. Now here's what Senator and Jess, since 2009, I've yet to ask anybody for money. I've never asked anybody for money. So how do I have right at 9 million in private money that I moved from project to project. I put on my teacher hat. So I started teaching people about private money, less than 90 days.
I attracted 2 million, $150,000 in new funding that I did not have otherwise. And so since that time I have not missed out on a deal for not having the cash to close the deal. Private money has had the biggest impact of any strategy, any part of our business of anything we've done since 2003.
Jesse (6m 8s): So that pipeline, so you said you at the, you haven't had to use any anybody's money with that deal. How did that pipeline attract through education and through you, you putting the teachers hat on.
Jay (6m 20s): So can you ask that a different way? I don't quite understand the
Jesse (6m 23s): Question. So the, the 2.1 million that was raised there, how was that sourced and, and what that relationship with the, with putting your teachers hat on? What was that relationship with?
Jay (6m 34s): Sure. Yeah. So where do you get? Where do you find these people? I get that question all the time, right? So there's four main categories of where you find individual or private lenders. The first category is your warm market. People, you know, people in your cellphone, people on your email list, Facebook connections, Instagram, LinkedIn, who do you go to church with? Who do you play poker with?
Who do you know? Right. That you've got already got some kind of relationship with where trust exists already to some degree. So that's what we call the warm market. People. There's already got a, that's why we call it relationship money, right? So that's the first category. Second category is what I call your expanded warm market. So sometimes people will tell me, say, Jay, my connections, my people are broke. They don't have any money. I don't believe them, but whatever, whether they do or they don't, I believe Jess, you should expand your warm market, expand your connections.
How do you do that? Get involved in your community, right? Get involved in your civic clubs, get involved in the chamber of commerces, get plugged into the community and expand your warm market. So you can teach more people about what private money is. The third category of the, of private lenders are what we call existing private lenders. They are individuals that are already loaning money out to real estate investors. Don't have to teach them. They're already doing it.
Well. Where do you find them? Well, there's three places to find existing private lender. One is public records. So here in the United States, when a private lender and individual loans money out and it's backed by real estate with a deed of trust or mortgage that's on public record, you can get their contact information, a great place to network and find people that are individuals that are wanting to loan their money out to real estate. Investors are at self-directed IRA, networking events.
So here in the us, self-directed IRAs, I it's an IRS approved institution called a third party custodian. Did you know that 70% and more of account holders at self-directed IRAs are wanting to loan their money out to real estate in that's what they want to do. So, you know, don't, you wish you had bought some stock in zoom about two and a half years ago.
Anyway, self-corrected IRA companies now have zoom networking events to where real estate investors can come onto zoom during these scheduled events and go into private zoom rooms and you can have networking and get to meet existing private lenders, learn, you know, what you know, kind of interest rate they're accustomed to getting and that kind of thing. But when I say teacher hat, here's what I mean by that private money.
I'm not talking hard money, by the way, I'm not talking institutional money. I'm not talking hard money. I'm talking private money. The definition of private money is doing business with another human being. It's a one-on-one transaction, no middle person involved between them and you or your company and your entity. So when I say put on your teacher hat, what I'm talking about is that's opposite from borrowing money from the banks. You know, my biggest and favorite reason for using private money for my deals is that I get to make the rules.
Hm. When I was borrowing money from banks who made the rules, they made the rules, they set the interest rate. They set how often you had to make payments. They set what's the maximum loan to value that you could borrow. But in my world of private money, we make the rules. We tell people here's what the interest rate is. We tell people here's the maximum we will borrow. And you know, a lot of deals we structure. We don't even make payments until we cash out on the deal. So it fixes your cash flow problems.
It puts you into driver's seat of your business. So I simply started teaching people when I was cut off from the banks here in my local area, what private money is, how it works and my private lending program. So I developed the program, right? How much am I gonna pay in interest? I let the lender decide how often they want payments. Doesn't matter to me. And I always borrow more money than I need to buy the property because there's a spread between the after repaired value and what I'm buying it for.
I'm buying these properties at discounts. So I always bring, 'em a big check. My lands, look at this right here today, this morning, Jess, this morning, I'm gonna cover up the account number. I brought home a check for $108,000, $108,000. I got paid to buy this property and took none of my own money to the closing table.
Now I'm only gonna bring home $108,000 check if I've got a major rehab. Yep. So I got all my rehab money up front. Didn't take any of my money to close. And, and part of that money is equity equity that I pulled out of the property that I can use anyway, that I want to. So private money is the quickest best, fastest, most beautiful way. I know to fix your cash flow problems and to keep your cash flow in a very, very positive place.
Let me catch my breath.
Jesse (12m 37s): No, that's a lot of good information there. Couple points. So for listeners, the self-directed IRAs on the us side, I think the closest equivalent would be registered retirement, saving savings plans for Canadians. Now, when you talk about finding owners, I assume that secretary of state that you'd go to, to find registered owners for different properties where Canadian side would be what we have as a land registry system, but same idea. So the, so that's great. That's, that's probably topical now because I know a lot of listeners and I've experienced it with my, myself and other clients that we're in a lending environment that at least in our world lenders are being overly cautious.
I think some of it's warranted because we're in a fickle time right now with inflation and interest rates. But usually when you get granular with deals, you can figure out if it's something that you should or should not lend on. So I guess part of the reason private money is, is fantastic. When it comes to real estate, is that you can have somebody that has a bit more of expertise in the asset that you're looking at. So maybe for listeners, you could just give an idea of why you would use private lending, you know, for a property as a, as a side, besides using save not hard money lending, but institutional capital in an environment like we're in today.
Jay (14m 2s): Well, there's lots of reasons. First of all, the interest rate, right? So I'm paying my private lenders 8% interest only. Yep. That's a win for them and a win for me. And if they're getting monthly payments and some of our elderly, private lenders need monthly payments, cause they don't wanna touch their principle. They wanna live off of the return. So 8% interest, only a institutional lender. I mean my lens, Jess, when COVID came along, they all shut down.
Yeah, there weren't nobody lending during COVID. When it started, then they started opening back up. Well, the average in the us, I don't know about Canada, but the average in us right now for institutional money, hard money is 12 to 14%. Give me a cotton pick and break 12 to 14% versus 8%. Then the institutional lender, hardly lender's gonna charge points, origination fees. Okay. That's common.
But in this world of hard money, there are no points, no points, right? In addition to that extension fees. And so if you haven't cashed out with your institutional lender in six months or nine months, they'll probably extend your note if you haven't cashed out, but what do they want? More money? So they'll charge extension fees. I know one hard money lender right now that's charging 1% for each additional 90 days. Holy moly.
Well, in this world of private money, there are no extension fees. The length of the note, hard money lenders, six months, nine months, maybe 12 months. Okay. In Pearl, in this world of private money, there's no rush to pay it back. If they're loaning us investment capital, it's two years. If it's retirement funds, it's five years, we can pay off early with no penalty. And here's the big one, which I just showed you. You know, the great big old check that I brought home. Here's the big one.
How much money will an institutional lender advance to you at purchase? Well hard money lenders, 65%, 80% of purchase price. Yep. Well, in this world of hard money, I'm getting a hundred percent of purchase price. I'm getting a hundred percent of rehab if rehab's involved and by the way, private money is not just for the ugly house business. Private money is for when the seller requires all the cash. Well, hello.
What's the real world. Now, are we gonna talk to for sale by owners about terms sell to me creatively subject to the existing notes, seller financing, give me an option. Sure. But after I've reviewed thousands of property, lease sheets, only 13% of for sale by owners will sell to me creatively. What do the other 87% of sellers require all the money? Right? So private money having the cash ready to go is going to assure you that when the math makes sense, you never miss out on a deal because you got the money lined up to go.
So again, that was your question difference between institutional hard money and private money. You know, it all comes down to you. You're setting your own rules. So like there's no application process. Yep. You are already approved. You're already approved your credit scores. Got nothing to do with it because the private lenders that you teach, they are loaning the money because it's collateral. It's, it's a collateral based loan. And you know, there's no asking, there's no begging, there's no selling.
There's no chasing. We teach the program and guess what? Now they're chasing us prior to COVID. There was 18 trillion in cash, just sitting in retirement accounts. And now on this side of COVID 31 trillion, just in the United States, sitting there looking for a home and Jess it's our ethical and moral responsibility to relieve those people of their problem of what in the world would do with their money.
Hey, they can put it in the local bank and own and earn 0.17%, 0.17%. Or they can get a high rate of return from us safely insecurely. And we're in the driver's seat. It's a win, win, win for everybody.
Jesse (18m 33s): So Jay, the majority of the deals kind of alluded, it, alluded to it. Here are in terms of the deals on average, what term length are you looking at? You've you know, you said the ugly host where that would probably be a short term IO loan and then perhaps get stabilized debt after that. Or do, are you doing longer terms as well?
Jay (18m 53s): All the above. Yep. So you use private money for a quick flip. You can use private money for buy and hold. So at 8%, I'm not gonna want to be holding that for ever at 8%. Yeah. But I can buy it quickly at 8%. I can get it retro. I can get it seasoned by the way, if somebody's interested in commercial, small apartments, duplexes quadplexes or large apartments, you know, syndication, it's all the same money.
It's just structuring it differently. But in this voter of private money, if I'm gonna buy and hold a property and I wanna just stay in it for the long term, then I'm probably gonna buy it with private money, get it red, get it seasoned, get the cash flow going, and then refinance it, you know, maybe in a year or 18 months with an institutional lender and, you know, get the interest rate of five or 6%.
Jesse (19m 54s): Okay. And that was the next question. In terms of the preferred exit strategies, is that the one?
Jay (20m 0s): Well, it depends on the property. So I am not going to want to leave a bunch of money. A what's my definition of a bunch of money. I don't wanna leave 30 or $40,000 of private money or my own money buried in a property for a long period of time. But if, if it's going to be like, my definition of a light rehab is less than $10,000. That's not bearing a bunch of money in there. And you know, sometimes people say, well, Jay, why you wanna borrow private money?
If you've got all that money yourself, why don't you just use your own money using your own money is a great way to get in and out quickly. But I got 25 projects going on. I ain't putting all my money in 25 projects. Right. I'm using OPM other people's money.
Jesse (20m 49s): Yeah. No, that makes sense. So in terms of the, like the actual, if you could go in a little bit more detail of, if you're looking for private lenders, that process, you know, where's the, where's the first place that you would start with that process?
Jay (21m 3s): I would start with my own more market. Okay. To tell you the trade, cause you already got the relationship. I am so excited about this brand new private money guide that I just finished writing. And if you want to, I'll give it, I'll give it to your audience for free. They can just download it. Sure. But I've got a five step process in the warm market of what you do. I mean, what do you say to these people? How do you make your list? I can tell you, you start with retired people.
It's retired people. That's probably got retirement funds and a lot of 'em are not happy with their rates of return that they're getting. And so five steps in the more market, make your list. Little script conversation. That's easy, easy, easy. And then I've got a 16 minute audio. Let the tools do the work that introduces what private money is. Then I got a short little PowerPoint presentation that now we teach, we put on our teacher hat. We teach the private lending program and they give us a verbal pledge.
You know, I've never pitched a deal. Jess, I've never pitched a deal. I've never called up one of my private lenders and said, Hey, here's this deal? Boom, boom, boom, boom, boom, boom, boom. Do you want to do it? That's the most stupid question I could ever ask. Of course they want to do it. You know, the worst time to look for private money is when you got a deal on the contract and you don't have funding. That's the worst time. Yeah. Cause now you're desperate. I say the money comes first. Jess, the money comes first. Get you private money lined up first.
And it's easy to get a half a million dollars pledged, ready to go in less than 30 days. How much more confident will you be out there making offers when you got $500,000 burning a hole in your pocket waiting to be spent. So when I got a deal to fund, I already know how much money they got. They're dying on the vine to invest it. I call 'em up and tell 'em four things. I got great news for you. I can now put your money to work. I got a house over here in Newport with an after repaired value of $200,000.
Funding requires 150,000. You need to have your money wired to my real estate attorney next Thursday. Cause that's when closing is boom, end of conversation. They've been waiting for the phone call, right? Yeah. So again, you teach your private lending program, which people will learn in my private money guide. You teach the private lending program and you present a deal in the first conversation. You're already desperate. You're coming across desperate and you don't even mean to come across desperate.
So teach then, then let 'em fund a deal.
Jesse (23m 49s): And there it is. All right, Jay, I know this was gonna be a short one today, cuz we're a little tighter on time for listeners to reach out to you will put links in the show notes. Is there any, any other specific place aside from Google search that you'd like us to send them?
Jay (24m 5s): Absolutely. Cause I want to give, I mean, I am on a mission to make sure real estate investors didn't go through the pain that I did. I just finished writing my private money guide, which is titled seven reasons why private money while skyrocket your real estate business and help you build incredible wealth, download it for free at www dot J Connor. And by the way, Jess, I'm an ER, not a or so www.jconjayconner.comslashmoneyguidejcon.com/money guide.
It will get you on the fast track for private money, having all the cash you need to make all cash homes.
Jesse (24m 50s): My guest today has been Jay Connor with an EJ. Thanks for being part of working capital.
Jay (24m 56s): Thank you just for having me. I've had a blast.
Jesse (25m 7s): Thank you so much for listening to working capital the real estate podcast. I'm your host, Jesse for galley. If you like the episode, head on to iTunes and leave us a five star review and share on social media, it really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for Gale F R a G a L E, have a good one. Take care.