Raising Private Money Without Begging or Selling – with Jay Conner

Bryce
Today we have Mr. Jay Conner. We were chatting a little before the episode, and I’m really excited to pick your brain. I can already tell you’re a wealth of information. And selfishly, we’re always looking for opportunities on raising money for our own lending business. The more you lend, the more you make, right? So, just to give you some context, we’re a smaller, private hard money lender sitting at around $3 million right now. Definitely on the smaller side, but we’ve networked with people who have $40-50 million real estate funds, and they’ve told us it didn’t take long to get there. It starts slow and compounds over time. With that in mind, I know you’ve given me a little background, but for our listeners, can you tell them more about yourself?

Jay
Sure! First, thanks for having me, Bryce. I’m really excited to talk about private money and private lending because it’s been a game-changer for my wife and me. We live in Morehead City, North Carolina, a small town with a population of only 40,000. We started our single-family investing company in 2003. Though we don’t do tons of deals—about 2 to 3 flips a month—but we’ve managed to average $86,000 in profit per deal.

And I’m not saying that to brag, but just to point out that you can make a lot of money in a small market. I’d rather be a big fish in a small pond and dominate it.

Now, when we started, I didn’t know anything about private money. From 2003 to 2009, I was getting funding from the bank. I didn’t know about hard money or private lending. The only thing I knew was to go to the bank, apply for a mortgage, show my assets, credit report, and all that. This worked okay until January 2009.

I had two houses under contract, with over $100,000 in potential profit. I called up my banker, Steve, to get the funding, and that’s when things took a turn. He told me my line of credit had been closed—without notice. I was shocked and asked him why. He said, “Don’t you know there’s a global financial crisis going on?” I didn’t know, but I suddenly had my own crisis. I couldn’t fund the deals. That’s when I asked myself, “Who do I know that can help me with this problem?”

Bryce
That’s a great mindset. So what happened next?

Jay
Well, I immediately thought of a good friend, Jeff. He was investing in single-family homes in Greensboro, NC, at the time. I told him what happened, and he said, “Welcome to the club.” I asked, “What club?” and he said, “The club where your line of credit gets closed.”

He’d just experienced the same thing. I asked how he was going to fund his deals, and that’s when he told me about private money and private lenders. I had no idea what that was, so he explained it to me. He also mentioned self-directed IRAs, where people can transfer their retirement funds into a self-directed account and lend them out with tax-free or tax-deferred returns.

At that point, I didn’t fully understand, but I knew this was something worth learning. I started studying private money, and the first thing I realized was that I needed the right mindset. Most real estate investors chase, beg, and sell when raising money, and desperation can smell a mile away. The worst time to raise money is when you need it.

The worst time to raise money is when you need it.

So, I shifted my mindset and decided to become a private money teacher. I wanted to educate people in my network—people from church, the Rotary Club, business groups—about private money and how it worked.

Bryce
That’s such a solid point! I can see how that shift would make a huge difference.

Jay
Exactly. I focused on teaching my network about private money—explaining the interest rates, the loan-to-value ratios, how to get their money back in case of an emergency, and more. But I didn’t tie any specific deals to the conversation upfront because I knew that could come off as desperate. I separated the conversations: one for teaching the program and another for presenting an actual deal when it was ready. This way, I’ve been able to raise millions without ever asking for money.

People often ask me how I raised $8.5 million in private money. It’s simple: I separate the conversations. I hold private lender luncheons, explain the program, and invite potential lenders. In one luncheon, I raised $969,000 with 20 potential lenders just by sharing the opportunity.

When I have a deal ready, I call my private lenders with the good news phone call.

Bryce
That’s genius! So what exactly does the good news phone call sound like?

Jay
It’s really straightforward. Let’s say you’re one of my private lenders, Bryce. You’ve told me you have $150,000 in your self-directed IRA, and you’re ready to lend it out. I’d call you and say, “Bryce, I’ve got great news! I have a property under contract with an after-repair value of $200,000. The funding required is $150,000, which is exactly what you’ve told me you have available. The loan-to-value ratio is in line with the program we discussed, and the funding is scheduled for next Friday. You’ll need to wire the funds to my real estate attorney’s trust account by Thursday.”

At that point, I don’t need to ask you if you want to fund the deal—you’ve already agreed to the terms and are waiting for me to put your money to work.

Bryce
That makes total sense. So, how do you handle the conversation between when they’ve moved their money over to a self-directed IRA and when you actually have a deal lined up?

Jay
Yeah, well, that’s a great question. The first thing I do is put new investors at the top of the list. I want to prove that I can perform and actually put their money to work. It’s a juggling act—always has been. If you’re a hard money lender, you’re constantly balancing enough money, enough deals, and putting the investors’ money to work.

I want to prove that I can perform and actually put their money to work.

I have a system called the queue. When I pay off a private lender, I move them back into the queue. As we work through deals with the other lenders ahead of them, I can put their money to work. At my live events, I do an exercise that helps attendees figure out exactly how much private money they need to raise over the next 12 months for their deals. I can teach you how to raise a lot of private money, but first, you need to know how much you really need—without raising too much or too little.

One tip I’ll share: If a private lender is brand new, I’ll move them to the top of the list. If I can’t put their money to work within 30 days, I might take their money and use it to pay off an existing lender’s note. That way, I can prove to the new investor that I’m actively working to put their money to use. In fact, I haven’t actively raised new private money in over seven years. I just keep using the funds I already have, and I still get referrals all the time. In fact, next month, a new private lender is coming on board with over $500,000 in his retirement account. And yes, that came from a referral.

If a private lender is brand new, I’ll move them to the top of the list.

So, to answer your question—managing expectations is key. I tell new investors that I’ll likely be able to put their money to work in about 30 days, though it could be a bit longer, like 45 days. The important part is to keep them informed during that waiting period. Once their money is working, their favorite form of communication is receiving checks in the mail. After that, I don’t have to do much else. Some lenders get paid monthly, some quarterly, and some semi-annually. Communication and managing expectations really matter.

Bryce
I love it. Do you ever co-mingle multiple investors on a single deal, or is it just one investor per deal?

Jay
That’s a great question. All the deals we do now are considered one-offs. I’m not talking about syndications or creating a fund for my private lenders. When I say one-offs, I mean that each deal is tied to a single property—whether it’s a single-family house, duplex, triplex, or quadplex. Typically, I’ll have one or two private lenders funding a single deal.

For the sake of clarity, a one-off means each lender gets their own promissory note and deed of trust—basically, their own mortgage. This is why the SEC doesn’t regulate these kinds of deals. Each lender is working on a single deal, and that deal is backed by real estate. If someone is in a second position, I pay them a higher interest rate because it’s a riskier position. If they ever need to foreclose, they inherit the first-position note. We also use total loan-to-value (LTV) to ensure that the combined notes from all lenders don’t exceed 75% of the property’s after-repaired value (ARV).

Bryce
I love it. Are you comfortable sharing the different rates and terms you offer to your investors?

Jay
Sure. I’ve been paying the same rates since 2009. People often ask, “With all the market fluctuations and rising interest rates in recent years, how can you still pay your lenders the same rates as 2009?” So here are the terms, and I’ll explain why I’ve stuck with them.

For a private lender in the first position, I pay 8% interest-only. It’s simple interest, not compounded, and it’s an annualized percentage rate. For example, if I’m using the money for six months, they’re getting 4% for that deal. For lenders in the second position, I pay 10%.

How have I been able to maintain these rates, despite market changes? First, it’s because I created the program and teach it. Out of the 47 private lenders I work with, not a single one had ever heard of private money before I taught them about it. I also introduced them to self-directed IRAs, where they can invest retirement funds without tax penalties.

Here’s the key: I make the rules. Typically, when you borrow money, the lender makes the rules. But when you create the program, you get to decide the terms. I teach the program and share it at my live events. Anyone can replicate it and use it to raise money.

Most of my private lenders are people who have money in a self-directed IRA. They’re looking for passive income, and they’re not interested in negotiating deals. They just want a safe, high rate of return. And because I make the rules, it’s all about teaching and offering an opportunity rather than negotiating.

They’re [investors] looking for passive income, and they’re not interested in negotiating deals. They just want a safe, high rate of return.

Bryce
Yep, it’s literally double the rate. People love that. Another thing I love about your model is the queue system. It creates that scarcity. So if you call a lender and say, “You’re at the top of the queue, I’ve got a deal for you—are you ready?” If they say no or don’t have the funds available, they go to the bottom of the queue. Now they’re feeling the scarcity—they know they missed out. This method reduces the need to sell the opportunity, because they’ll want to be ready the next time you call. It’s a great way to create demand and keep things moving smoothly.

Jay
Yeah, it’s really an interesting dynamic. I got a text 2 days ago from one of my private lenders, who then introduced me to his parents. He had created a trust for them, and they started lending as well. He told me they now have an additional $180,000 that they’d like to invest right away. About three weeks ago, I received a call from another private lender with $200,000 to put to work. The interesting thing about raising private money is that there’s no chase, begging, or persuading. Guess what? The lenders are chasing you because they know they can’t get these rates of return at the local bank.

Bryce
Sure. Absolutely.

Jay
I even have a way in the program for lenders to get their money back early, if needed. I offer a 90-day call option in the promissory note. If they have an emergency, they just need to give me 90 days’ notice. I don’t really need 90 days, but the documentation says so. I’ll simply replace their money with another lender’s funds. The thing is, most lenders don’t actually want their money back. When I cash out on a house, a new private lender might say, “Can’t you just keep the money?” The answer is no unless I have a property to collateralize it.

I do a lot of collateral substitutions, where my real estate attorney drafts the paperwork. If I cash out on one property and have a couple more in the pipeline, I can keep that money for another deal. They don’t want their money back; they want it to keep earning.

I’ve only had two private lender notes called early. Both were small, under $50,000, and were due to medical emergencies. Some people are hesitant about the 90-day call option, worried they won’t have another lender lined up. But, you should always have another lender ready. The most dangerous number in business is 1—whether it’s a single lender, real estate attorney, or contractor. Remember, it’s your program, and you can make the rules. If you don’t want to offer the 90-day option, you don’t have to.

Remember, it’s your program, and you can make the rules.

Bryce
Sure, sure. Absolutely. Have you ever considered setting up a fund, rather than swapping out investors or lenders? We actually have a fund, and it works really well for us. It helps us avoid some SEC regulations and eliminates the scramble to find a new lender when one isn’t available. With the fund, we just have a pool of capital that we can deploy as needed. What are the pros and cons you’ve seen with this model? Why have you stuck to your current one instead of setting up a fund?

Jay
In my opinion, a deed of trust offers more security than a piece of paper. If you’re investing in a fund, you have an agreement—maybe you get a percentage of equity or just an interest rate. But with my model, I feel confident offering lenders a deed of trust or mortgage. That’s the main reason I’ve stuck with it. This model works great for single-family houses but isn’t ideal for larger projects, multifamily, or self-storage. However, it works incredibly well when focused on single-family homes.

I do know friends who have set up funds for single-family houses, but my approach has always worked well for me.

Bryce
The other thing I was thinking about as you were talking is that a lot of people think their market is too small, or too rural. But even living in a town of 40,000 people—relatively speaking—that’s not that small. You’ve got 45 lenders, and I’m sure there are at least 500 more out there you haven’t even talked to yet. There’s far more capital available than people realize.

Jay
You’re absolutely right. There’s way more money out there right now than there are deals. Before Covid, there was $18 trillion sitting in cash on the sidelines in the U.S. After Covid, that number rose to over $31 trillion. People are looking for ways to invest their money. In fact, I’ve had more money chasing me since Covid than before it. Very interesting.

There’s way more money out there right now than there are deals… People are looking for ways to invest their money.

Bryce
Yeah, that’s definitely a good problem to have!

Jay
It is! It’s much better than having a deal and no money to fund it.

Bryce
I want to be mindful of your time, so I’ll keep this brief. If you were starting over now, knowing what you know, what advice would you give to someone who wants to raise private money? Maybe they don’t have anyone in their immediate network with funds but are interested in getting into private lending or becoming a hard money lender. How should they get started?

Jay
If someone has a limited network, they can grow it fast. There’s a direct link between your network and your net worth. One of the quickest ways to grow your network is through an organization called Business Networking International (BNI). It was founded by Ivan Meisner in the 1980s. BNI works differently than other civic organizations like Rotary Clubs. In BNI, members give each other leads based on the type of people they’re trying to connect with. Each chapter has one seat per profession. For example, there’s only one realtor, one attorney, one electrician, and so on. If you join as the real estate investor, you’ll likely be the only one in that seat.

Through BNI, you get to stand up once a week and tell people what type of people you’re looking to meet and what service you offer. You share your private lending program and explain how people can earn high returns safely and securely. In exchange, you give your fellow members leads for their businesses.

I’ve raised millions of dollars through BNI. Another option is to get involved in your local community. If you’re not already part of your local church or a service club like Rotary, consider joining. Those are longer-term relationships where you won’t be talking business right away. But BNI is all about business.

Here’s a “write-it-down” tip: Know your program. Know exactly what you’re offering. Before we finish, I’ll show you how people can learn my program and raise private money without ever asking anyone for money.

Know your program. Know exactly what you’re offering

Let me share a quick story about how I raised my first $500,000. It was January 2009. I spoke with my buddy Jeff, who taught me about private money. I put my program together, and here’s how I raised my first $500,000.

Carol Joy and I were very involved in our local church—the Church of Christ in Morehead City, NC. On a Wednesday night in January 2009, I walked into Bible study looking for a gentleman named Wayne. I knew Wayne well, and here’s what I said to him:

“Wayne, I’d like to visit with you about something confidential after Bible study. Do you have a few minutes?”

After Bible study, we went to the nursery. I looked at Wayne and said, “Wayne, you know everybody in this town.” He did. Wayne was the Zenith television dealer in Morehead City for years. Before Walmart, if you needed a TV, you went to Wayne. He financed the TVs and even repaired them when they broke.

I said, “Wayne, you know everybody here and I need your help.”

I explained that I was starting my real estate investing business by referral only and was offering high rates of return to people who wanted to invest in my deals.

Then, I asked, “Wayne, when you run across someone complaining about the stock market or low bank interest rates, would you refer them to me?”

Notice, I wasn’t asking Wayne for money. I was asking for his help to spread the word. Wayne replied, “Brother Jay, what do you have going on?”

I told him I was paying 8% interest. Wayne said, “Put me down for $250,000.” The next day, I went to his home, explained the whole program, and that $250,000 became $500,000. That was my first big private money deal.

Bryce
I love it! That’s a great story. You just kept going, and it’s grown exponentially!

Jay
Yeah, and by the way, Wayne and his wife ended up referring a lot of private lenders to us after they became private lenders themselves.

Bryce
I love it, Jay. My goodness, you are a wealth of information. This has been great—really, really good. For anyone in my audience who would like to reach out, pick your brain, and learn about raising money, what’s the best way for them to do that?

Jay
Sure! I’ll give a few options. I recently recorded my Private Money Challenge, which is a series of seven videos. Each video is just 15-20 minutes long and covers the foundational steps I take to raise private money. I’d love to invite your audience to join. They can go to www.privatemoneychallenge.com. You’ll get the first video immediately, and then over the next six days, you’ll receive the other six, all at 9 a.m. each morning. It’s a fun, engaging process!

Another option is my book, Where to Get the Money Now. I’ll personally autograph it and send it to you via three-day priority mail. The book is all about how to raise money for your real estate deals without relying on traditional or institutional lenders. You can get the book free—just cover shipping and handling—at www.jayconner.com/book. And, by the way, I’m Jay Conner, with an “er,” not “or.”

Lastly, if you want to fast-track your learning, I have an upcoming live event called The Private Money Conference. You can check it out at www.theprivatemoneyconference.com. Also, if you’re a podcast listener, check out my podcast, Raising Private Money. It’s available on all major platforms and has over 800 episodes!

Bryce
I love it. You’ve made everything so simple and easy to find. That’s awesome! Seriously, Jay, thank you so much for coming on the show. This has been fantastic. I’ve learned a ton and will definitely implement some of these strategies in the way I structure and raise money. I really appreciate your time.

Jay
Bryce, thank you so much for having me!

Bryce
For anyone still listening, absolutely check out Jay’s book, podcast, and websites.

Contact Jay!
www.privatemoneychallenge.com
www.jayconner.com/book
www.theprivatemoneyconference.com
Raising Private Money Podcast

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