August 22, 2017

JF1085: Could you use More Private Money For Your Deals?

Jay is an active investor who started out funding all his deals with lines of credit from the banks. Once he tapped out that resource completely, he discovered private money. Now Jay focuses on connecting private money with investors that need it. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Jay Conner Real Estate Background:
-President of the Private Money Authority Teaches Real Estate Investors How to Get Unlimited Funding and Connect Private Lenders with Investors
-Been buying and selling houses for 14 years and has been involved in over 52 Million dollars in transactions Leading expert on Private Lending, once raising over $2M in less than 90 Days
-Contributing author to the best-selling book Real Estate: Getting Deals Done In The New Economy
-Based in Morehead City, North Carolina
-Say hi to him at
-Best Ever Book: University of Success

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Jay Conner. How are you doing, Jay?

Jay Conner: Hey, I’m doing great, Joe. Thank you so much for having me on the show.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Jay – he is the president of the Private Money Authority. He teaches real estate investors how to get unlimited funding and connect private lenders with investors. He has been buying and selling homes for 14 years and has been involved in over 52-million dollars in transactions.
With that being said, Jay, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Jay Conner: Absolutely, Joe. My wife and I live here in Eastern North Carolina. We’ve been buying and selling single-family houses; we also do commercial as well – we’ve got a shopping center – but our focus has been single-family houses for the past 14 years. We don’t do a lot of transactions per month or per year – we do about 2-3 transactions a month, but the average profit right now in the past 12 months running is $64,000 profit per deal on a single-family house.

I wanna drive this point home, Joe, to you and your listeners, and that is you don’t have to be in a big market to make significant income. Our total target market is only 40,000 people. In fact, Morehead City, North Carolina has only got 8,000 people. The communities and towns surrounding Morehead City is where we target, and up until eight years ago all of our funding was taking place by using lines of credit at the bank. Then, with no notice, we got cut off from the banks and didn’t have funding, and then I was introduced to this wonderful world of private money, which I’m sure we’ll talk about… And that’s how we’ve been funding our deals ever since.

About 25% of our deals we get from tracking foreclosures in the local market, tracking them before they get in the multiple listing service, and we do a lot of Facebook marketing – finding sellers and buyers. As for the past six and a half years ago, we’ve automated our business using virtual assistants, to where I’m actually working in the business only about ten hours/week or less, and  we’re doing about 35 live events across the nation, teaching and showing other real estate investors how to get funding for their deals and not relying on the banks.

Joe Fairless: And what’s your business model behind doing those live events?

Jay Conner: Well, the business model to the real investors is that about 50% of the homes that we buy — well, let me back it up… The majority of the homes that we buy – in fact, to be exact, 87% of the houses we buy, we fund with private money. That could be bank-owned properties that are ugly houses and need rehabbing – we do a lot of rehabs; we’ve rehabbed over 350 houses to date – or it could be what we call a pretty house in the business, as you know, that doesn’t need any rehab, but the seller requires all the funding upfront.

Now, 13% of the deals we will buy using some type of creative financing, such as buying subject to the existing note, lease purchase options, owner or seller-financing etc. But what we’ve learned over the last two years is that no matter how good of a negotiator we are, 87% of all sellers are gonna require all funding when you buy, whether it’s in the multiple listing service or if it’s for sale by owner. We use private funding to fund those deals from private lenders. We’ve got about 44 private lenders funding our deals now, a little over five million dollars that we keep investing in and out, in and out.

So we get them ready to market quickly; we do business with contractors, we have our own crews as well for those that we’re gonna rehab, and then about half of them we sell on rent-to-own or lease purchase to tenant buyers, where we get them into credit repair, get them ready for a mortgage to cash out in about nine months down the road… And the others today, since the market is so hot, we’ll just go ahead and sell them in the multiple listing service.

Joe Fairless: And just to make sure I’m clear on the live events – you’re doing 35 live events across the nation, so clearly that’s a focus… What’s your business model behind doing the live events?

Jay Conner: The live events that we’re presenting across the nation are all real estate investors that are either newbies and have never done a real estate deal before, or they’re seasoned real estate investors and they’re all looking for more funding for their deals, regardless of their credit, income or experience.

Joe Fairless: Okay, but I’m asking why do you do the live events? What’s your business model? How do you make money from the live events? Because I’m sure there’s gotta be a business angle to it as well, that’s my question.

Jay Conner: Oh, okay. I’m sorry I didn’t understand the question. So of the 35 live events, four of those live events are our own that we have right here in Atlantic Beach, Morehead City, North Carolina. The other events that we do, other real estate investor speakers or promoters will have guest speakers on the platform. So I will come in, I’ll teach private money, and then for those students that want to learn all the nuts and bolts about private money, then they’ll have an opportunity to work with me one-on-one.

Joe Fairless: So you’ve got a consulting or a coaching program within that.

Jay Conner: Absolutely.

Joe Fairless: Got it, I’m with you. That makes sense. So let’s talk about — you’re focused on single-family homes, but you have dipped your toe in the water of commercial real estate, because you mentioned you have a shopping center. Pros and cons to both, and why do you focus on single-family homes?

Jay Conner: Single-family homes are the quickest way in order to get big checks; commercial is much more of a long-term building wealth. I recommend you do both, and not just concentrate on one.

Using private money and private funding is the quickest way that I know for real estate investors to get a big check, and here’s why. The way I use private money – and by the way, I’m a private lender myself, using my own self-directed IRA to fund other real estate investors’ deals… But using the private money, we always borrow more than we need to actually buy the property, and as a result and using private money we get 100% of our funding upfront, so we’re not talking hard money… We’re actually talking getting funding directly from the private lenders, and I actually match up private lenders with real estate investors and borrowers all across the nation. I’m gonna say, it is the quickest way I know to get a big check – we borrow 100% of the funding, we don’t have to bring any of our own money to the deal for the closing. We get a check when we buy, then we get another check if you’re selling on rent-to-own, and then of course another check when we cash out.

Back to your pros and cons, when borrowing private money for commercial or duplexes, triplexes, quadplexes or even larger apartment complexes, the term of the note will be longer, but the interest rate will be smaller. The interest rate right now on single-family houses that private lenders get is about 8%, but that’s fantastic compared to the average hard money across the nation, which is 14% plus points in origination fees and such.

So the pros and cons bottom line – the single-family houses bring much bigger checks quicker; commercial – long-term building wealth.

Joe Fairless: So do you take the profits that you make in the single-family, since you’ve just mentioned commercial is more long-term building wealth – are you planning on investing in more commercial, or do you do buy and hold stuff for your own portfolio? What do you do with the profits to set up long-term?

Jay Conner: Right now for the long-term I’m doing more shopping center — in fact, I’m adding on to the current shopping centers that we have. I am adding to the long-term portfolio. However, with the market being as hot as it is right now in the single-family houses, I’m putting a lot of those profits right back into that, because the houses are just turning so fast.

Joe Fairless: So you have multiple shopping centers.

Jay Conner: Actually, we have two, and they’re right here in our area.

Joe Fairless: Oh, cool, so they’re in Morehead City?

Jay Conner: Yeah, in Morehead City and Newport.

Joe Fairless: I wanna switch to single-family home stuff, but I have a couple more follow-up questions with the shopping centers. You said you’re adding on to them – what are you doing, exactly?

Jay Conner: We’re just adding more retail space, because these shopping centers are all retail space, and so — we went through a period until about a year ago to where some of those spaces were staying empty, but as of a few months ago the spaces are totally filled up, and we’ve got demand now; more retailers are just asking for retail space, so due to demand, we’re just going to expand the size of the shopping centers.

Joe Fairless: So now let’s focus on the 2-3 transactions a month that you’re doing – congratulations, you said you’re making $64,000 profit per deal on 2-3 transactions. Walk us through the last deal you made at least $64,000 on, and… Can you outline the numbers?

Jay Conner: Sure, absolutely. Let me think here just a moment on a very recent deal… I will tell you as a sidenote, the most profitable deal that I’ve ever done actually was not using private money (it’s been a while), but I bought a lot subject to the existing note, and the person just actually had to talk me into it, but actually Joe, it was a piece of land overlooking the [unintelligible [00:12:05].25] right here in a resort area. We pocketed $225,000 in four months, just taking over the note subject to.

But recently – I’ll give you one that we just cashed out on. It’s on [unintelligible [00:12:19].23] Drive, down Highway 24, which is very close to where Julie and I live. So let’s start at the beginning of that house. We started out on that house locating it through our foreclosure system. As I mentioned, about 25% of our deals we get through our foreclosure system, which consists of tracking each notice of default in our area, and we have an eight-letter direct mail campaign that we mail out to the owners to see if we can provide a solution, put some money in their pockets so that the bank is not foreclosing and they’ve got to start over with no money. So these people responded to our eight-letter campaign. We contacted them, negotiated the deal, and we were able to buy the house for $80,000. We just did this like three months ago – we very recently bought it.

The house did need some rehab, but the house did not need a whole lot of rehab; the house needed less than $20,000 in rehab. [unintelligible [00:13:19].27] MLS, Joe, on a Friday afternoon at 4 o’clock. By Saturday evening at seven o’clock we had three offers, and then one of them was actually more than the list price. We listed it at $179,900, went under contract to cash out at $180,200.

So how did we find it? By the foreclosure system, mailing them letters (eight direct-mail letters), negotiating with them, then we funded it with private money – and another cool thing about the private money is we’re able to close very quickly, which is very important to a for sale by owner; we get the phones very quickly. Then we did the rehab quickly, put it in the MLS and cashed out.

Joe Fairless: The eight letters that you sent the potential seller – are they the same letters on different stationery, or are they different messages that they receive?

Jay Conner: Each message starts intensifying a little bit more and more. Each letter looks different, each letter is in a different envelope, each envelope is hand-addressed, each envelope is a different color and a different size, and by the time we get to number seven and we get to number eight – we’re using a very big envelope on seven and eight; they actually get a [unintelligible [00:14:39].05] but with a rattle inside of it, just for the sake of curiosity. So of course, with each letter we also start talking about how time is running out and time is of the essence; “if you’re interested in a solution and having some cash to put in your pocket, reach out to us and we’ll see what we can do.”

We also mail these letters three days apart. So here in North Carolina, from the time of a notice of default until the hearing day is typically about 4-6 weeks, depending… After the hearing day, then the sale date’s about two weeks after that. So it’s about eight weeks from the time of the notice of default. So at three days apart we’re going through these letters about every 24 days, and we’ll keep mailing the letters until we have a response, or until the house goes to sale.

Joe Fairless: Do you do any follow-up phone calls?

Jay Conner: No, we haven’t been doing any phone calls, and I don’t knock on doors, either. But you know, believe it or not, the United States Postal Service is still in business, and due to everything is so much being online these days with the marketing, when you go in with your marketing to using the post office, you don’t have near as much competition in the mailbox as you used to. In fact, these letters – we get a cumulative response of 57%.

Joe Fairless: I know the definition of cumulative, but I feel like that’s an important word when you said 57%, because that’s astronomically higher than the typically direct-mail response that I’ve heard… So can you elaborate on that response rate?

Jay Conner: Sure. When I say cumulative response, what we’re saying is that sometimes we’ll get a response on the first letter, sometimes it’ll be the second letter, sometimes we won’t get a response until the seventh letter. That’s why it’s so important in direct mail to not rely just on one mailer. As I say, we’re doing eight different mailers.

Now, bear in mind, 57% response – the definition of response also includes vulgarity. [laughs]

Joe Fairless: Right… Yeah, of course. So how is your team structured? Who’s fielding these phone calls?

Jay Conner: One principle of marketing, whether you’re a real estate investor or in any other industry is the more ways that you give a potential respondent to respond, the more responses you get. So when we mail the first letter, the only call to action is a cell phone number to an individual’s name.

The second letter that goes out we then include — it’s going from a handwritten note to actually on a piece of stationery, and we’ll give not only the cell phone number, but then we’ll give an e-mail address.

The third letter that goes out, we’ll give the cell phone number, the e-mail address and then a 24-hour recorded message hotline that we know people can bail out on if they don’t wanna talk to anybody. However, the beautiful thing about using a 24-hour recorded message hotline is that you’re able to capture 100% of the phone numbers when someone dials in, so you can reach out back to them if you want to.

Believe it or not, we still get people to use fax machines, which blows my mind… So we’ll even include a fax number in there.

Joe Fairless: What letter does the fax machine come into?

Jay Conner: That doesn’t show up until letter number five. [laughs]

Joe Fairless: Okay. What’s new on number four – anything?

Jay Conner: Well, we’re doing the progression – cell phone, then cell phone and e-mail, and then cell phone, e-mail, 24-hour recorded message hotline, and then we do add a tear-off. People can just write in their information and put it in the envelope and mail it back into us. So we’re still allowing people to respond by mailing back in.

We also of course have the website, so people can go to the website and say “Hey, if you’d like for us to make you a fast cash offer right here on our website, then here’s our website.” So we end up having many multiple ways people can respond.

Joe Fairless: I imagine text message is in letters five through eight?

Jay Conner: Absolutely, as you know. That’s how people are communicating these days. As a matter of fact, when someone calls the 24-hour recorded message hotline, or they call one of our live operator hotlines and they just like a hang-up or they don’t talk, we capture the phone number and we will actually text back to them and say “Hey, this is Pat with Conner Properties. I saw you called about the possibility of selling your house. When’s a good time to text?” So we actually start using that text language – “When’s a good time to text?” because that’s so much less invasive than like a phone call.

Joe Fairless: I’m grateful that you shared with us this progression. Describe a deal that has completely flopped for you.

Jay Conner: I’ll tell you a deal that’s flopped for me; I’ll tell you three deals that flopped for me, and they all flopped for the same reason, Joe… And the reason they flopped is because all three of these deals, which were all done the same year – we’re gonna go back to about 10 years ago, and we know what was going on about 10 years ago… They all three flopped, and this is the biggest mistake I’ve made in real estate, and that is don’t ever buy or invest in a property (single-family house particularly) that you’re counting on flipping it for the profit, and it will not cashflow in the event you have to rent it out. So what do I mean by that?

We live here in a resort area over on the beach, so I invested in these three condos, and the market was hot, hot, hot, like it is now. So I bought those properties, got them all rehabbed really quickly. By the time I got them in MLS, the market had already started to cool off very quickly. And here’s the big lesson – if I had started to rent them out immediately, they would not have cash-flowed at the time of just renting them out. So as a result, for years we lost money — I mean, we put them on the rental market, but lost money on them because they would not cash-flow on the rent to cover the underlying mortgages that I had on them.

Lesson learned – it’s great to be investing in a property that you’re gonna flip and make the profit on it, but run the numbers and make sure it will cash-flow in the event you have to step back and apply a different exit strategy and rent that property out.

Joe Fairless: What is your best real estate investing advice ever?

Jay Conner: Do not rely on the banks to fund your deals, because I got cut off with no notice. I had lines of credit at the bank, and I got cut off with no notice; I had never been late on a payment, I had an 800 credit score, and I had two deals under contract. Now, this goes back about eight years ago.

I called up my banker, and there was just dead silence on the other end of the phone, which is never a good sign. When a banker clears his throat and says “I’m sorry, Jay, but we had to collapse your line of credit…” I said, “What do you mean?” He says “We’re just not lending out money to real estate investors anymore.” Well, let me tell you something, coincidence is my definition of God’s way of staying anonymous… In less than two weeks I was introduced to this wonderful world of private money, and since then I have yet to miss out on a deal because I did not have the funding.

Joe Fairless: Was that a community bank or credit union?

Jay Conner: Actually, it was a pretty large bank. It was not a community bank. It’s one of the largest banks on the East Coast.

Joe Fairless: Okay. Are you ready for the Best Ever Lightning Round?

Jay Conner: Sure… I think. [laughs]

Joe Fairless: Oh, I’m confident that you are. First though, a quick word from our Best Ever partners.

Break: [00:22:36].23] to [00:23:37].09]

Joe Fairless: What’s the best ever book you’ve read?

Jay Conner: No question about it, University Of Success by Og Mandino.

Joe Fairless: Best ever deal you’ve done?

Jay Conner: Best ever deal I’ve done was over [unintelligible [00:23:47].06] a year ago… Profited almost $300,000. Funded with private money, found it with the foreclosure system.

Joe Fairless: Where did you meet your first private money person?

Jay Conner: At church on a Wednesday night.

Joe Fairless: What’s a mistake on a transaction that you’ve made that you haven’t mentioned already?

Jay Conner: Well, that was the big one – buying to flip, instead of buying to hold. Here’s a common mistake – not only with myself when I started out, but other real estate investors and my students, and that is know the calculation that determines what your maximum allowable offer will be, and let the math make the decision on your investment and not your emotions.

Joe Fairless: What’s the best ever way you like to give back?

Jay Conner: [unintelligible [00:24:38].25], Joe… I’m so glad you asked that, and here’s why. About four months ago, and I planned on sticking with it for a long time – I am giving back totally free with no hooks and no conditions, free real estate investing content and advice, and I call it Free Coaching Fridays. It’s every Friday afternoon at [3:30] Eastern Time, on Facebook, I like stream it. People show up and ask their questions, and I’ll for an hour at a time. If somebody’s interested in that free content – like you do, Joe – they can just go to Facebook and look for Jay Conner, The Private Money Authority.

Joe Fairless: What is the best place the best ever listeners can get in touch with you outside of Facebook live [3:30].

Jay Conner: I’ll tell you what – just as a thank you for everybody tuning in, I’ve got some free gifts – I’ve got a book called The New Masters of Real Estate: Getting Deals Done In The Economy, and I’ve got an audio that goes over the five steps as to how I got $2,155,000 in private money in less than 90 days when I was cut off from the banks. All those are free just for the asking, and here’s the website on how to reach me and get those gifts:

Joe Fairless: Jay, thank you for being on the show. Thanks for talking about the pros and cons for shopping centers and single-family homes, and then why you’re focused on single-family homes, the approach that you take, a case study that you walked us through, and the ways that you and your team approach direct-mail; that’s the primary method that you get the foreclosures that you track and the deals that you do, and how each letter has a progression of ways to reach out to you from cell phone, and then from cell phone to e-mail etc.

Then a couple things to watch out for, like making sure that we have multiple exit strategies. In your case, when you’re fixing and flipping, you make sure that you can also rent it out and cash-flow, which I imagine could be a challenge depending on the type of private money that you’re securing… But if you do have the right private money structure, then you can certainly pivot.

Thanks so much for being on the show. I hope you have a best ever day, Jay, and we’ll talk to you soon.

Jay Conner: Alright, thank you, Joe.



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