How to Use Private Money to Fund Your Rentals

0:00Well Kirby I was actually raised in the mobile home business or manufactured housing business my dad Wallace Connor he actually had the largest company in the nation retailing mobile homes trailers manufactured homes whatever you want to call them and the industry fell out of favor with Wall Street so the financing of the for the product for the consumer actually went away so I knew that if I ever got out of manufactured housing I wanted to get into single family houses and I've done other deals as well condominium development shopping center Etc but the focus has been single family houses well here's the interesting thing Kirby from 2003 until January of 2009 I

0:48Relied on the local bank to fund our real estate deals that's all I knew to do all I knew to do was go to the bank get on your hands and knees put your hands underneath your chin in and say please fund my deal please fund my deal and so you know I begged and chased and you know persuaded and sold and did all that stuff for six years and in January 2009 I called up my banker and it was a very short conversation I'd had a I'd done many deals with this Banker over the years but I called him up I told him about two houses that we had under contract that represented over $100,000 in profit that I was going to get on these two houses and I learned they had closed my line of credit and

1:37My banker's name was Steve at the time I said Steve what do you mean you've closed my line of credit what in the world's going on we've had a great relationship here for six years he says Jay don't you know there's a global financial crisis going on right now and I said no but now you've given me a financial crisis because I don't have a way to fund these two deals so I hung up the phone and I tell you Kirby here's a big takeaway and a writer downer from this story I sat here and you know I had a choice I could have quit or I did what I did and that is I asked myself a very very important question I asked myself who can help me with my problem you know Dan Sullivan and Dr Benjamin Hardy wrote a book not too long ago called who not how and

2:26I asked myself that question who can help me with my problem and you know what these people going around saying oh every problem is an opportunity I wanted to throw up I didn't have no opportunity I had a problem and so I immediately thought of my good friend Jeff who lived in Greensboro North Carolina at the time and I called him up and I told him what had happened losing my line of credit at the bank he said well welcome to the club Jay he said I lost my line of credit last week I said well what are you going to do to fund your deals and he said have you heard of private money have you heard of self-directed IAS and I hadn't I'd never heard of that well I studied private money and self-directed Ira and how that works and how people can take existing retirement funds and move them over to a self-directed IRA company tax free I mean no

3:14Penalties no tax effect and in less than 90 days Kirby I was able to attract without asking anybody for money I was able to attract and raise 2,150,000 in new funding from individuals and you know what's interesting Kirby I didn't ask anybody for money I've yet to ask anybody for money and people tell me all the time they say Jay how world have you got8 and a half million dollars in private money available to you and you don't ask I said well the traditional way to borrow money is you go to the bank and plead and ask and you apply and show you tax returns and all that I said but in this world we're not asking for money what do we do we put on what I call our private

4:03Money teacher hat the private money teacher hat and we simply teach people what private money is how they can earn high rates of return safely and securely I'm talking about with people that you've got a relationship with there's two other categories where you can find private money but I'm talking about when you're going to be raising private money through people you've already got a relationship with I don't pitch a deal I've never pitched a deal in my life we separate the conversation of teaching our private lending program which is the interest rate they can earn how they're protected how they can get their money back in case of an emergency so first we just share the private lending program with them is how they can earn those kinds of rates of return if they've got retirement funds we'll introduce them to our self direct

4:51To the IRA company that we recommend and so then when we got a deal to fund we call them up with the good news phone call I don't call them up and Pitch the deal and say hey you want to do this deal that's the most stupid question in the world I could ask of course they want to do the deal they've been waiting for the good news phone call I told them I'd put their money to work for them just as soon as possible and if they have moved current retirement funds over to a self to the IRA company they're not earning any money until I do put their money to work for them so I call them up and I only tell them four things I got great news I can now put your money to work got a house in Newport they could care less what the physical address is got a house in Newport with an after repaired value of 200,000 the funding required is 150,000 I

5:40Know they got 150,000 they already told me right and I said the closing is next Wednesday you'll need to have your funds wired to my real estate attorney by next Tuesday end of conversation it's all about separating teaching them first what to expect and then give them a good news phone call I love that I love that so I guess the the I mean there's so many different things that you mentioned that I'm curious about but to start with what does that education process look like like if somebody has a deal right now they feel like I need private money I don't feel like I know anyone that's you know you said you didn't pitch anyone just within 90 days you had over $2 million how did that happen like tactically what's

6:28What are the steps to teach someone to be in that position to to give you or lend you the the funding once you need it sure well one thing as far as how do we educate people I I one thing I did is I put on what we call a private lender luncheon I'm sure you've heard of those as well Kirby and so I I reserved space at the Dunes Club so I like to have these lunch at the nicest place I can reserved them fed everybody lunch and thir 30 minutes into the luncheon I then pull up my PowerPoint presentation and I teach how they can earn high rates of return safely and securely either by using investment capital and or retirement funds so in this PowerPoint presentation I teach them what is a private lender

7:17I teach them you know the interest rate I'm going to pay them I teach them how they can get their money back in case of an emergency and so that takes about 20 minutes to you know to go through the PowerPoint well just one of those lunchin I got $969,000 wow just from that one luncheon alone so that's leveraging your time but another thing that I did and I still do it to this day is I recorded a 16 minute audio and this 16 minute now that was back in the day when we had CDs right I don't do CDs anymore but I recorded this 16-minute audio we now have it on an MP3 right and also on on the website and so I would simply just share this 16-minute audio to people that I have on my email list they're in my

8:05Cell phone I go to church with them you know Etc and the purpose of this audio is not to pitch or sell people on your private lending program and what you're offering it's to introduce them to this world of private money that would then lead to say a one-onone or going going and meeting somebody for coffee and talking about you know this this program that you've got I'll tell you another place where I got a lot of private money very very quickly so here's another writer Downer join BNI BNI stands for business networking International now you talk about growing your warm Market growing your hot market like really really fast well BNI is

8:54Different than rotary so BNI is an organization that's in the business to where when you join you're actually giving your fellow members leads of you know of of potential prospects for them to use so it's like having 20 or 30 salespeople on your Force spreading the word about what it is that you're doing so there's three categories where you find these people your own connections your expanded worm Market BNI is a great way to do that and then there's existing private lenders how do you find individuals that are already loaning money out well I hired my real estate attorneys pargal back then and to search for public records of individuals that were loaning money out on real estate secured by

9:42Adida trust it's Adida trust here in North Carolina most people call it a mortgage and so we only found two people in 90 days so I'm here in a small area so we actually then started what we call the private lender data feed that we update every month and now we go out Nationwide and in my membership we go out Nationwide and search and get that updated every month and you get contact information of these existing private lenders and Etc the kind of interest rates they get and their contact info interesting interesting and so when you start educating them what type of terms do you typically discuss in that education process that you would potentially offer sure well

10:31I'm glad you brought that up because I have been paying the same exact thing since 2009 and I pay them all the same now you know prior to covid a 12 month CD actually at the local bank actually got down to paying only a quarter of a percent yeah well today you can get five or five and a half percent in a 12- Monon CD but you know what I've been paying my private lenders the same thing all this time 8% no origination fees no extension fees no points No Junk fees a straight 8% now that's some my private lenders that are in first position that we use for purchasing a property some private lenders and by the way I got 47 and you don't need 47 to start

11:19Out you just need one or two to start but some private lenders some individuals only have you know a smaller amount of money maybe only $50,000 when I started out my minimum that I would accept was $30,000 well I can't buy a house typically without amount of money but I can use that amount of money for rehabbing a property and so I'll put them in second position also known as a junior lean position and I will pay those people 10% instead of 8% and of course they're not loaning this money to me unsecured we're securing all all the notes by the property we also named the private lender on the insurance policy the property and casual the

12:08Insurance policy on that property as the mortgage e well that gives them another layer of protection if you go borrow money from the bank on your house the bank's going to be named as the mortgage e which protects the lender and we name them on the title policy as well for as an additional insured so we never never borrow unsecured money all these notes are backed by the real estate that we're investing in I and private money there's no hurry to pay it back I mean with the way rents have gone in recent times depending on how much you pay for a property you could use the private money for on your rentals right and then once you get that seasoned that way you can close quickly that's another big advantage to using

12:56Private money and there's no limit to the number of private lenders you can have and there's no limit to the amount of private money you can borrow but you can use it to close it if it needs some rehabing to get it ready to go and then if you are renting it out then you can refinance that conventionally pay off the private lender and use their money over and over again on additional projects oh