In this eye-opening episode of Play Big Faster, real estate investing expert Jay Conner joins Scherrie Prince to reveal his proven strategies for using private money to fund real estate deals. Since 2003, Jay has been building his real estate empire, and he shares how private money has been the single most impactful element in his investing journey.
What You’ll Learn About Private Money Real Estate Investing
Jay explains the crucial distinctions between traditional institutional lending, hard money, and private money – revealing why private investors might be the perfect funding solution for your real estate deals. As Jay puts it, “Private money has had more of an impact on mine and my wife Carol Joy’s real estate investing business than anything else we’ve done since we started all the way back in 2003.”
In this value-packed episode, you’ll discover:
- The fundamental differences between institutional money, hard money, and private money
- Why private money puts YOU in control as the real estate investor
- How to attract private money without ever asking for it directly
- Why your credit score doesn’t matter when securing private funding
- Essential calculations for finding profitable real estate deals
Demystifying Private Money Lending for Real Estate Deals
Jay breaks down the three main funding sources in real estate investing, explaining why private money offers unique advantages:
- Institutional Money (Banks): Traditional lenders who set all the rules, require extensive paperwork, credit checks, and have strict lending limits.
- Hard Money: Typically a broker of private money who charges higher interest rates (12-14%), short-term loans (6-9 months), origination fees, and generally won’t loan more than 65-80% of purchase price.
- Private Money: Individual investors who loan their personal investment capital or retirement funds directly to real estate investors, creating a one-on-one transaction with no middleman.
The Private Money Advantage: You Make the Rules
What makes private money truly revolutionary is that YOU make the rules as the borrower. As Jay explains, “We make the rules. We are the underwriter instead. Instead of asking for a mortgage, we’re offering a mortgage.” This paradigm shift puts real estate investors in the driver’s seat, allowing them to set terms that work for both parties.
Jay has been paying his private lenders 8% with no fees, no points, no origination fees, and no extension fees since February 2009. This creates a win-win scenario where lenders get better returns than traditional investments (like 3% certificates of deposit), while investors secure favorable loan terms without credit checks or lending limits.
Where to Find Private Lenders for Your Real Estate Investments
Jay reveals three primary sources for finding private money:
- Your Warm Market: People you already know – friends, family, church members, club associates
- Expanded Warm Market: Growing your network through organizations like Business Networking International (BNI)
- Existing Private Lenders: Individuals already lending to other real estate investors
For the third category, Jay recommends attending self-directed IRA networking events, explaining that over 70% of individuals with self-directed IRA accounts want to invest in real estate by lending to investors. These passive investors seek the stable returns private lending offers while benefiting from either tax-deferred or tax-free growth in their retirement accounts.
The Mathematics of Profitable Real Estate Deals
When analyzing potential properties, Jay follows a strict maximum allowable offer formula:
- Determine the After Repaired Value (ARV) through realtor comparables
- Multiply ARV by 70% (for properties under $300,000) or 80% (for properties over $300,000)
- Subtract estimated repair costs
- Subtract additional “Murphy Factor” buffer ($10,000 for properties under $300,000, $20,000 for properties over $300,000)
This calculation ensures investors maintain profit margins while accounting for unexpected costs – because as Jay warns, “not only does Murphy show up sometimes, but Murphy’s cousins and aunts and uncles show up.”
No Experience or Perfect Credit Required
One of the most liberating aspects of private money is that your credit score and previous experience don’t matter. As Jay explains, “Not one of my individual private lenders has asked to see my credit score.” This is because private money deals are collateral-based loans with conservative loan-to-value ratios.
Jay reveals he doesn’t borrow more than 75% of the after-repaired value, creating a 25% equity cushion that protects both investor and lender. This security makes private lending attractive even to those funding first-time investors.
Finding Off-Market Properties at Discounted Prices
To make this strategy work, you need discounted properties. Jay explains that he hasn’t purchased from the MLS in over five years. Instead, he focuses on “off-market” properties – those not listed with realtors in the multiple listing service.
These opportunities often come from distressed situations: inherited properties, financial hardship, job loss, divorce, or properties needing significant repairs. Jay finds these deals through direct mail to homeowners facing foreclosure and through lead generation vendors targeting motivated sellers online.
Final Advice for Real Estate Investing Success
When asked for his single most valuable piece of advice, Jay emphasizes the importance of mentorship: “Don’t go alone. Don’t be out there on an island by yourself.” He shares how he lost hundreds of thousands of dollars in his first six years because he didn’t have a mentor. “Work with somebody for sure when you’re starting out.”
Resources to Accelerate Your Real Estate Investing Journey
Jay has written the comprehensive guide “Where to Get the Money Now: How and Where to Get Money for Your Real Estate Deals Without Relying on Traditional or Hard Money Lenders.” This book reveals his exact private lending program and teaches investors how to fund deals without ever pitching them.
For aspiring real estate investors looking to leverage the power of private money, Jay offers his book plus two tickets to his upcoming Private Money Conference at jayconner.com/book.
Ready to transform your real estate investing approach with private money? Subscribe to Play Big Faster on YouTube, Apple Podcasts, or Spotify to never miss an episode filled with wealth-building strategies from today’s top entrepreneurs and investors.
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