The No Ask Approach To Private Money Lending

Hey, it's Mark Podolski, the Land Geek with your favorite niche real estate website, www.thelandgeek.com. and I'm really excited for today's guest for a number of reasons. But before we talk to our guests, I'd be remiss if I didn't properly introduce my co host, Six Sigma. You know him, you love him. Scott Todd from scotttodd.net landmodo.com and most importantly, if not automating your Craigslist and your Facebook postings, posting domination.com TheLandgeek Scott Todd, how are you?

Mark? I'm great. How are you?

I'm good, I'm good. Just a reminder to all the listeners, today's podcast is sponsored by GeekPay IO. It is the only way to automate payments via achievement. The ach fails the credit card on file via borrowers and lenders. GeekPay IO start automating your note payments today. Get your first Note free. The landgeek.com geekpay so today's guest is Jay Connor from J connor.com now, if you don't know who Jay is, I'm just going to put it this way. Think money. This guy has the way to get you unlimited funds. He knows a lot about real estate, he teaches it, and but most importantly, like, he can get you money. So, Jay Connor, welcome to the podcast. How are you?

All right. Hello, Mark. Hello, Scott. Great to be with you all from here in eastern North Carolina. And wow, thank you so much for inviting me to be on.

Yeah, no, it's our pleasure. So, Jay, let's just get into it. Let's just skip the pleasantries. Let's rewind the tape. And how did you start becoming a professional land investor, or not land investor, but real estate investor?

Yeah. So I was actually brought up. And Scott, you'll relate to this down there in Florida, I was brought up in the mobile home business or the manufactured housing business. In fact, my father, Wallace Connor, I don't know if you heard the name or not, Scott, he was the largest retailer of manufactured homes in the nation up until the late 80s. So I've been around housing and affordable housing all my life. But I knew if I ever got out of the mobile home industry, which we did, I wanted to get into single family houses, buying and selling houses. So I started doing that. This is my wife, Carol. Joy is in my 15th year of investing in single family houses. And the first six years I use lines of credit at the local bank. Of course, when I started back then, Mark you know, if you could fog a mirror, you know, I could. I had a $250,000 line of credit. Unsecured. Unsecured. So the first six years, I was using lines of credit at the bank to fund our deals. And so six years, nine years ago, this past January, I called up my banker, Steve. Well, the operative word is Steve was my banker. And I called up Steve, and I'd had this conversation with Steve many times. I said, steve, I've got a couple of deals under contract equity and profit is going to be over $100,000. Told them where they were located. I wanted to close in 30 days. And Steve went quiet. Dead silence on the other end of the phone. All right, Steve cleared his throat and he says, jay, 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. And I said, what do you mean? I had a perfect score. 800 credit score, never laid on payments. He says, well, we're just not loaning money out to real estate investors anymore. And you all may recall what was going on in 2008, 2009. It's like the spigot was turned off overnight. So I had no way to fund my deal. So I was introduced to this wonderful world of private money for funding deals. And I raised over $2 million in less than 90 days for my deal. So really it was a blessing in disguise. Since that time, rehabbed over 350 houses. Never missed out on a deal because I didn't have the money. And I don't do that many transactions, two or three a month here in our county. Small county. But the average profits last year were $67,000 per deal.

Wow.

So why are your profits so big, Jay?

Good question. So the profits are big because we know how to find the deals. And so obviously I'm not finding these deals in the multiple listing service. We do a lot of offline marketing to. We got 55 different ways that we find deals, but the top ways that we find them, I do a lot of Facebook, lot of Facebook reaching out to for sale by owners and looking for motivated sellers. So my average after repaired value on the houses that we sell are like $225,000. So obviously to make $67,000, you got to be buying them at less than 50% of the after repaired value. And. And your rehab should not run more than 25 to $30,000.

I like this model, Jay. So the funding then. So let's say that you're buying a house for 125,000, right?

Correct.

How much of that is your own money? How much of that is other people's money? How much of that is coming from private money?

I'm so glad you asked. First of all, zero coming from my pocket. In fact, when we buy a house using private funding, by the way, let's be clear on private money. I'm not talking hard money. This is not hard money. This is not hard money brokers. Private money is doing business with individuals just like you, just like me. That loan money out to us as real estate investors from either their liquid capital or from their retirement funds. That is using self directed IRAs. Got 47 private lenders funding or loaning money to our business. Over half of them are funding the loans from their retirement accounts. So I'm sure you all being as around the block, as much of you all been know all about separate IRAs, but that's a big important part. So anyway, how do we make that much profit? Well, I answered that. I forgot your question. I went on a rant. Tell me the question again, Mark.

Okay, so how, so how much of that money is coming from you? How much of his private, how much are you doing traditional lending?

Exactly. Zero. Traditional lending. Zero. Zero. So when, so private money is used when you're going to be paying all cash or not cash. But when the seller is requiring 100% of their money up front. We've learned from for sale by owners. Only 13% of for sale by owners will sell to you or us. Creat, let's say seller financing or buying subject to the existing note or selling on lease option. So the majority of the people, they need and require all the money. So no money comes out of my pocket. 100% coming from private lenders. And so here's the deal. You know, traditionally, I mean this is one of my favorite reasons for using private money. Traditionally you got to bring, you got to bring some skin to the game, right? You know, you got to bring 20%, 15%, whatever. Well, in this world of private money, we get 100% of the purchase price. Let's say the after repaired value is 200,000, I'm gonna buy it for 100,000. So I'll get 100% of the purchase price and up to on average another 25% of the after repair value in my rehab money up front. So if I want to do rehab, I'm getting like in that case, $25,000 up front to take care of my rehab. If I'm not needing any rehab Then I'm just getting 100% of purchase price, which is unheard of in the world of hard money. That does not happen in the world of hard money, as I'm sure you all know.

Right, right. So just so our listeners completely understand the difference between private money and hard money, would you mind just defining it?

Sure. So here's the differences. Private money, you're doing business with individuals and there's two categories of private lenders. There are private lenders in your own warm market that you have some kind of relationship with. The other category are existing private lenders individuals. So when I started out raising and attracting private money, I hired my attorneys, paralegal, to look in public records looking for mortgages of individuals names that were loaning money out on real estate to other individual names. Very laborious. I might get one person in my small area every three or four months. So I created the private lender data feed where now we get all the public records through the software every month and we have the existing private lenders that we see all the transactions that are happening back to private money and hard money. So hard money is not a traditional lender. They are a collateral based loan, but they still pull your credit. Many of them want to see the income. Here's the things that differentiate it I just mentioned. One, you get all the funding up front. Hard money lenders typically are going to advance 80% of the purchase price. Number two, in the world of private money, your credit's got nothing to do with it. Hard money lenders are going to pull your credit. Number three, there is no limit to the number of deals you can do with private lenders. Hard money lenders will have a limit to the number of deals. The big thing is interest rates. National average on private lending right now is 8%. But in the world of hard money, it's 14% on average. Some even go up to 20 and 25%. Another difference is points in origination fees. We're over private money. Zero points, zero origination fees. There's always points in origination fees and hard money. National average right now is four points. Now we're up to 18% first year and then the term or the length of the note. Hard money is typically there six months or a year. Private money is two years, liquid capital, five years, retirement funds. So on average, with points and everything, your first year, a hard money lender is going to charge 20% with interest rate points and extension fees. Whereas private money, just straight across the board, a straight 8% and it's interest only. Payments or accruals, Scott?

Todd, are the wheels turning?

Of course, always, but. Okay, Jay, first I got a series of questions. One, how do I find these guys? How do I find them? What I gotta do, gotta go dig the database. The accounting database?

Well, yeah, the existing private lenders. You do, you got to either look in public records or, you know, use software like I have. But the quickest way to raise a lot of money and I've got a number of techniques. Number one, I recorded a 16 minute video. First of all, let me give you the five steps. Now I'm gonna give you the 30,000 foot view since we have a limited time here on the podcast. But here's the five steps. Number one, make your list. I go to your contact list. Go to your cell phone, right? Everybody that's in your cell phone is either a potential private lender or knows a potential private lender. So I teach my students. Okay? Let's make the first 100 potential private lenders or centers of influence from your contact list, Facebook, email list, wherever you get them from. Step number two, just have a short casual conversation, alright? That conversation can take place over the phone, it can take place in person, and here's how short it is. Let's say, Scott, you and I are friends, alright? We've known each other for a while. I call you up, I say, hey Scott, this is Jay. How's the day going? Great. Golf game still good, you know, whatever your chit chat is. But get to the point, people are busy. So I'm going to say this, Scott, I am now taking advantage of the tidal wave of foreclosures that's still going on. You probably know that I've been investing in real estate for a while, or if I'm brand new, you know, I'm starting to do that. And what I'm about to share with you, Scott, very few people know about because actually the only way that they find out is if I tell them. And here it is. I have a program that may or may not be for you, but I have a way that you can make as much as 20 times in returns on your investment capital. Then you can probably get anywhere else. But Scott, unless you answer yes to the following question, there's no need for me to give you any more information. And that question is, do you have investment capital or retirement funds that's not giving you a high and safe return right now.

All right, so look, I got to play devil's advocate here, right? Like that's what I do. That's great.

However.

I'm an introvert, and the thought of what you're saying terrifies me.

What do I do? Sure. So I've got a very easy to understand 16 minute audio that I can email to you, I can text it to you, or I can hand you the cd. When we see each other, you listen to the audio and if it resonates with you, perfect. It doesn't. That's fine too.

You know, that, that, that really is a good idea, Mark, because, like, there's like. I would have a hard time calling somebody up. I know, like, hey, man, you got some money? I would feel bad about it. But that said, I wouldn't have a problem making a video and then saying, hey, can I send you a link? I want you to watch something and just tell me what you think.

Right? Exactly.

Now I'm like, hey, give me your advice.

Like, tell.

I don't even have to ask for money. But like, hey, this is what I'm doing. I do you think that this video will, like, you know, like, what do you think about this video? And people will be like, wow, it sounds fantastic. I want to do that with you.

Great.

And I didn't have to ask anybody for money. That's genius.

Do you know what, Scott? I have never asked anybody for money. Never. Never. I got a program. Maybe you're interested, maybe you're not. Maybe you know somebody that is interested. Here's the audio. I teach my students the rule of five, and I learned the rule of five from Jack Canfield, co author of the Soup for the Soul series. And so anyway, the rule of five says this works in any business. It doesn't matter, okay? Whatever business somebody's in. Rule of five says I'm gonna do five things five days a week, and they don't have to be big. That moves my business forward. And so this is called working on your business and not in your business. Right? And so when I started out, I started practicing the rule of five. I wanted to send my audio either by email, whatever text handed out, just get five of those audios in people's hands or ears and let the tool do the work. So, you know, and you said something else just a second ago, Scott. My very first private lender. I didn't ask him that question. I didn't ask. I was intimidated. I mean, this was a gentleman I'd known all my life. I knew he was loaded and I didn't want to ask him for money. And I learned from that experience. I never had to ask him about money. Here's What I said to him, I said, actually was at church on a Wednesday night, okay? And I went up to him and I said, and I'll talk, for sake of, you know, confidentiality. I'll call him Mark.

I say, hey, Mark, you can call him dad. Just dad.

It wasn't dad. It wasn't dad. But anyway, I walked up to him and I said, mark, I said, I got something confidential I want to tell you about for a couple of minutes after church, if you've got time. So, closing prayer, the Amen has said on Bible study Wednesday night. I look across the auditorium, he's running to me because he can't wait to find out what's this confidential thing I got to tell him. And so we go off and have a little short meeting. And I told him that I've got this program that gives high rates, returns safely and securely. And I said, so here's what I said to him. I said, I know you know a lot of people. You're really involved in the Rotary Club. You know, you're a pillar of the community. When you run across someone that's not happy with their returns or their certificates of deposit, rates of return, would you mind referring them to me and I can tell them about my program? He paused, he looked at me, he said, well, now, Jay, what kind of interest rate have you got in mind? And so I went on to tell him about the program, and he became my first private lender. I didn't ask him for money. I just asked him to help me spread the word. I've also done what you've done as well, Scott. When I first started giving out my 16 minute audio CD called Stress Free Investing, asked him to give me their opinion of it as, how can I make this better? Because I'm just starting to make my program available to people that I know and trust. And I said, listen to this. I just want you to give me your feedback on it. And you know what, Scott? There's like the first seven people that I asked for their feedback became private lenders. Now, they didn't become private lenders overnight. One of them wasn't retiring for three years. Another one didn't get out of the military for another year. Some of them came on immediately. So that's what I've done. I'm glad you brought that up, Scott, and I'm glad you asked the question.

So, Jay, what's some of the worst advice that you hear given your area of expertise?

You mean as it relates to private money or real estate investing in general?

Either One.

Yeah. Worst advice. I can't say it's advice, but I've seen it happen a lot, and I'm sure y' all will agree. To me, if someone's new to real estate investing, the worst thing, in my opinion, they could do or the worst advice they could hear is try to do it on their own without a mentor that has been down and has been in the minefield, you know, has made stupid mistakes, you know, like I have in the past, and to keep you from making mistakes. So, yeah, so the best advice I can give is the opposite of the worst, and that is just don't go read a book and try to go out and do this real estate investing thing. You know, saddle up, you know, joint venture with, you know, get someone that can really show you the ropes.

All right, great, great. So, Jay, you get a deal, right? What is the order of getting the private lender?

Do you.

Do you find the deal first and then do you go to the private lender? Or do you have a private lender that understands the philosophy of exactly what you're doing and parks money with you and then you go deploy it?

I'm so glad you asked. Excellent question. So some folks out there would teach, and I do not teach this. I don't do it, by the way. The only thing I teach is what I have done. But my lands. I don't want to go get a deal under contract, and I don't know where the money's coming from. You know, some people say, oh, go get. I mean, this is seminar guru junk. I'm getting ready to say, oh, go get the deal under contract. The money will show up. That's hogwash, as we say in eastern North Carolina. So I say, man, I'm glad you asked this question. I say, the money comes first. Get the private money pledged. I don't get my new private lenders or my current private lenders to sign some kind of document that says, hey, I've got X amount of dollars. I'm going to hold it for you for X number of days. No, they tell me verbally, here's what I got. All right, let's go find a deal as soon as possible. Because here's why. Here's why I'm saying what I just said, other than from personal experience. I know. Here's why it works. If I can't, let's say I came to you, Scott, and I'm going to share with you what this world of private money is all about. By the way, 100% of the people in my warm market that I have a relationship with.0. None of them had ever even heard of what private money is or what private money looks like. And zero of them had heard about self directed IRAs. And over half of our private lenders are coming from self directed IRAs. So listen carefully to this answer, Scott. Let's say I come to you. Let's say I have a deal under contract that I want to close with private money and I want to talk to you about private lending. So Scott, I come to you and you know, and I talk to you about private lending. And in that conversation I tell you I have a deal. And here's what it looks like. Number one, Scott, I just asked you to make too many decisions. I asked you to decide if you're, if you're interested in this private money thing, okay? And I'm asking you to make a decision on a deal. Way too many decisions. Alright? So first, Scott, I come to you. Either I give you my 16 minute audio or we go to lunch. By the way, speaking of luncheons, I've raised in the millions of dollars just presenting private mental luncheons. You know, it takes the same amount of time to explain the program to 20 people as it does one. You know, I do webinars as well. But anyway, so I come to you, Scott, I get, okay, here's the order. I'm going to give you my 60 minute audio by either email or text or whatever. You listen to it. Now you raise, you raise your hand. Not me, you raise your hand, Scott, and you say, jay, this audio is really interesting. I'd like to hear more about it. See, the audio doesn't spill the beans. The audio doesn't tell the interest rate. The audio doesn't tell how much money they can make. But it raises those questions. It just gives the overview of private money, what it is, what it looks like, blah, blah, blah, blah, blah. And so then Scott, you say, hey, I want to hear about. So now, Scott, we get together on a one on one that's either over the phone or in person. And I explained to you how my private lending program works, how you're protected. What happens to you if I lose my mind and take your money and go to the Caribbean? You know, how are you protected? What if I die? You know, how are you protected? I die. So all those questions are raised. Now we have the one on one. Now again, I don't ever ask for money. I just say, you know, if you're interested, great, tell me what you got, I'll go Find a deal, blah, blah, blah. Once you're in, you say, yep, I'm in. Now I can come back and bring the deal. Mark. Now, I may already have a deal on the contract, but I'm not telling Scott about it. In that first conversation, not only am I asking Scott to make too many decisions if I bring the program and a deal, but do you think. Am I not compromising my position by. I mean, am I not sounding desperate to Scott that, hey, I got a program, I got a deal. If you don't fund my deal, I'm losing out on all this money. So please, please, please fund my deal. No, there's no chasing, there's no begging, blah, blah, blah. So once Scott gives me the verbal, yep, go bring me a deal. Now, I want to bring Scott back a deal as soon as possible. And here's what Scott wants to know. This is all Scott wants to know. Number one, I'm not going to ask Scott if he wants to do the deal. Of course Scott wants to do the deal because I already told him how the program works. And I'm not going to bring him a deal unless it fits the criteria of the program. Maximum loan to values, etc. So I come to Scott. Scott only wants to know four things. And here's what I tell him. And this is over the phone, by the way. Hey, Scott, good news. Got a deal. The after repaired value is X. The location is on whatever town. He could care less what street it's on. Here's the funding that's required to close on the deal, and I'll need your funds wired by X date. Boom. Scott already told me he's in when he signed up for the program. Now I bring him a deal, and Scott, of course, wants to do the deal. I don't tell him. Ask him does he want to do the deal. I tell him I got a deal. Those are the four things. I need your money wired to the real estate attorney's escrow account by, you know, a week from Friday. That's another big reason for using private money. All my offers, I tell all my sellers I can close. No, I don't have to go get approved on a mortgage. No appraisals, no inspections, and I'll close within seven days.

That's pretty compelling. But, Jay, wouldn't it be simpler just to have a $20 million fund?

Oh, you mean like a private money pool?

Yeah.

Yeah, you could do that. You could do that. But I like to protect my. My people that are loaning me money. I like to protect Them with mortgage in North Carolina, it's a deed of trust. In the private money pools, most of them I've seen, there is no security. The security is a piece of paper. And if the pool goes, investors are out. So in my program, they get a mortgage, they get everything. They act in the capacity of a bank. So if I don't perform, they get the property. In fact, if they get the property, they're going to make more money than the interest I was going to pay them because I always buy them so cheap. So they get the property, sell it, and cash out.

Scott, Todd, what are your thoughts?

I mean, I think it's a good, solid program. Okay, Jay, I got a question, though. I can do this with land.

Can you do it with land? Yeah, I've done it with land. I've done it with. In fact, one of my students has a friend or relative was it. I'm not remembering. Anyway, here in North Carolina. And so they were able to do this deal on a 40 acre tract of land with private money here in North Carolina. So, yes, land works. All right.

Unlimited funds with land. Yeah, there you go.

Well, and wouldn't you. And wouldn't you guys agree? Oh, no, let me. I don't want to ask if you agree. Let me just ask y' all a question. Y' all have got tons and tons and tons of followers and subscribers on your podcast that you know are interested in land. You know, y' all are the land geeks, etc. Do you ever hear any of your followers saying, hey, I'm missing out on this deal or I'll miss out on this deal because I don't have the funding. They won't sell to me creatively. You ever hear that? Yeah. There you go. Well, I think your listeners are going to love this free gift when we get to the end of the podcast that I got for them.

All right, let's not. Let's not tease them. So we are now at that point in the podcast, Jay.

We are already a week.

Yes.

All right, so you do a tip of the week every week. Right?

Right.

All right, so here's what I've got for your listeners. So I've got a free, free online class that is on demand. So I'm going to give out this special website address or URL, and on this free class, it'll be me on there on the free class, ready to go. I'm going to give. What are the five steps in the world of private money in the warm market? And what are the five steps to getting it from existing private lenders. And here's the website, it's www.thelandgeek.com and then all in lowercase private money. So thelandgeek.com private money in lowercase.

All right, great. We'll have a link to that and I think the listeners are really going to be educated on it because it's gonna be a nice feeling to go to bed at night knowing, hey, I'll never have to worry about losing out on a deal because I didn't have the money.

Right.

So I think that's really a special offer and opportunity. So thanks, thanks for that, Jay. So now Todd, what's your tip of the week?

Oh man, how do I follow that? All right, Mark, I know that you're a user of Wistia for your like video hosting, right? Like you host a lot of video.

I do.

And you got like, I think you got like a Mac daddy plan because I think you've been with them for a long time. I think you got like one of those grandfather plans.

And I do.

Great.

But it's expensive.

It is.

So I have been putting videos on Vimeo. Vimeo. So I've been my videos, put them on Vimeo and sharing those with my VA's and it's pretty cool. I mean it's cheap, you know, $7 a month to start and you can, you can scale up and even their most expensive plan is like $75 a month. It's a tool that I've been using here lately. And you know, if you weren't so ingrained in it and had such a sweet deal, I'd tell you to run over there. But you know what, you got a great deal. So this is for the newbies.

Oh man.

All right. Vimeo.com. i like it. I like it. So my tip of the week is. Learn more about Jay Connor. Go to j.connor.com as well. There's a ton of information, his website and you know what he's got on here, Scott? He's got a favorite word on here. An automation system. An automation system. You can go to the private money webinar. There's a 72 hour selling system, the foreclosure system. He's got live events. It's got a lot going on. I love it. Jake Connor. Are we good, man?

We are good. I can't believe the time's already going by, but wow, y' all are fun.

I know, I know. So were there any questions we should have asked you that we didn't ask you? Did we miss out because it's a big topic. Yeah, we try to be.

You know, man, I think you got it covered. I can promise whatever questions your listeners may have, in all probability, on the free class that we just talked about, the answers are probably going to be there. But if they have any other. Any other questions, of course, you know, they can reach out to me as well. You know, I got jconnor.com right there. It's easy to find me.

All right, we'll have links to all this on the show notes. So I also just want to remind the listeners that the only way. The only way we're gonna get the quality of guests like a Jay Connor. If you do us three little favors, you got to subscribe, you got a rate, you got to review the podcast. Send us a screenshot of that review to support@the landgeek.com we're going to give you our passive income launch kit course, which is normally $97 for free. So please do that. Scott. Todd, are we good?

We're good, Mark.

Jay, we're good.

We're good. Thank you, guys.

All right, again, I want to thank the listeners again. Today's podcast is sponsored by GeekPay IO. Get your first note free. TheLandGeek.com GeekPay Scott, you ready?

Let's do it. Let's do it, Mark.

Ready? One, two, three, Let free ring.

That's pretty good, Mark.

It's not bad. I think. I think Jay was like, I didn't know they were gonna do that at the end. Otherwise I would never come on this podcast.

No, I did, though. Here's what we did. Like, the fact that we were counting together allowed me to, like, match up to you, so I'm pretty happy with that.

Yeah. Yeah, it's good. Yeah. Jay, can you see how good his. His video is, by the way?

Yes. He's.

He's got a Mac daddy set up. It's. It's almost like you can touch Scott.

It's like I was. I was wondering what the secret sauce was. I just didn't know what it was.

Yeah, from the Moto.

All right, well, thanks again, and we'll see everybody next time.

Bye for now.