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How Paul Moore Subdivided His Way Out of $2.5 Million in Debt

Episode 114: How Paul Moore Subdivided his way out of $2.5 Million in debt

The Profit First REI Podcast

September 19, 2022

David Richter

 

Summary:

On this episode of Profit First, we’re going to dive in a bit on “Giving First” with Paul Moore and more!

Paul Moore is a real estate investor and self-proclaimed former serial entrepreneur. His journey started with him jumping from one venture to another, becoming what he calls a “Real Estate Speculator,” owing millions of dollars in debt, before finally finding his footing as a successful investor.

Tune in and hear about his wisdom on real estate investment based on a history full of ups and downs, how he overcame debt with ingenuity and charity, and his key insights to succeeding in investment!

 

Key Takeaways:
[0:46] Paul Moore’s Background in Real Estate Investment

[2:36] Paul on Self-Storage, and Growing Into an Investor

[6:01] On Struggles and Failures Along the Journey to Success

[10:00] How Paul Got Out of 2.5 Million Dollars of Debt

[13:58] Focusing on One Thing and Hiring an Expert for Others

[17:52] Paul’s Keys to Success

[20:22] Why is it Important to Find Your Big Why?

 

Quotes:

[5:24] “You’re taking something that you know is a weakness and you’ve turned it into a strength.”

[10:47] “Hope isn’t a good business strategy.”

[19:00] “Putting it in investment terms, if you’re always playing double-or-nothing with your money, someday you’ll end on nothing.”

 

Links:

5-Day eCourse and eBook on Commercial Real Estate-wellingscapital.com/resources

Profit First Real Estate Investors FB Group-https://m.facebook.com/groups/ProfitFirstREI/ 

Simple CFO-https://simplecfo.com/ 

 

Tired of living deal to deal? 

If you are a real estate investor or business owner who is tired of living deal to deal, and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David 



Transcript:

Paul Moore:

If you are focused on being an entrepreneur, a real estate investor, whatever. And you’re probably not the very, very best accountant or CFO outsource that to somebody else or hire somebody to do that and focus on what you’re really good at.

Intro:

If you’re a real estate investor, who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors, just like you and discover how they’ve completely transformed their business by taking a Profit First approach. This is the Profit First for REI podcast where we believe revenue is vanity profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.

David Richter:

Hey, this is David Richter, your host of Profit First REI podcast here with Paul Moore today, which he’s an incredible investor he’s bought and sold his business before he has been in the real estate game for a couple decades now. And he is also gone through lots of ups and downs. He talks about in this episode, what is one of the biggest hindrances to real estate investors? He talks about the difference between real estate speculation and real estate, actual investing, which is great with his definition. So if you’re wondering what that is, then make sure to listen to the episode. He also gives his keys to success over the years, how he gave his way out of 2.5 million in debt. So yes, you heard that right. Gave his way out of 2.5 million in debt after having millions in the bank years before that. And a lot of the other things as well, too, he talks about his big why.

David Richter:

And the big why of, you know, is like something that could maybe set you on your path for that. It’s a, it’s a jam packed episode of things that will help you get to where you want to be. So I hope you’re ready and hope you buckle up here as we interview Paul Moore, Hey, Hey, here we are. Now we’ve got Paul here on the podcast. Paul, it’s so good to have you on because I’ve heard so many good things about you. It was finally good to meet you because David Phelps, who’s been on our podcast multiple times speaks very highly of Paul Moore. And if you know David, then you know that anyone he endorses is legitimate and is a great person. So Paul, thank you so much for being on today on the show, man.

Paul Moore:

It’s such an honor to be here. Thanks, David.

David Richter:

He, you are the self, you’ve got a lot of self storage. Now you, that’s kind of where you live in that space, correct. Is the self storage world. And you have been in the multi-family world. You’ve been in the residential world. You’ve dabbled in kind of a lot of different aspects of real estate, correct?

Paul Moore:

Yeah. I mean, quick story. I actually wrote a book on self storage. It was published by Bigger Pockets last fall. Awesome. But I’ve actually never operated a self storage facility. Let me explain. Over the years I was a shiny object chaser. I was a, a serial entrepreneur. I was thinking about putting serial entrepreneur on my business card. And now I think that’s a terrible, it was a terrible mistake because I found myself a lot of times. I mean, spending years in startup mode and then either getting bored or it failed or it succeeded. And I moved on to something else and started up again and being in startup mode all the time is like an airplane that’s having to take off the whole trip. If that was the case, it would burn through all its fuel very quickly.

Paul Moore:

And so, yeah, I sold my company to a publicly traded firm in 90, 97. I got into real estate to protect and grow my own wealth. I found out I wasn’t really a real estate investor. I was a real estate speculator. And you know, investing is when your principal is generally safe and you’ve got a chance to make a return. Speculating is when your principal is not at all safe and you’ve got a chance to make a return. And I made a ton of mistakes, lost a lot of money made a lot of money along the way as well. But over the years I was in residential. I flipped houses, flipped waterfront lots at a resort, did a subdivision. I was always trying to figure out how to get involved in commercial real estate. I finally got thrust into it when we built a somewhat speculative multifamily facility in North Dakota for oil workers during the big boom in 29, 20 11 around there, we managed that facility for years sold. It got involved in multifamily wrote a book on multifamily and then came to this conclusion that I was not a good operator. I am not a good accountant. I’m not a good money manager. So in and of myself, I’m not good at all those things, but I always found that when I succeeded really well, I surrounded myself by people who were really, really good at those things.

David Richter:

Okay.

Paul Moore:

And so that’s how we ended up starting the fund model, where we would actually invest with other people who are experts. So we invest in self storage. We invest in mobile home parks, multi-family RV parks, light industrial. And we find experts who are really, really good top of their field in these things. And we invest with them and investors invest with us and we diversify across their assets.

David Richter:

I love that. I love the fact that you’re taking something that you know, is a weakness and you’ve turned it into a strength of like, I know I’m not good at this. So I know I need to partner with people who are good and I’m going to turn that into, this is where, you know, like what I can do with, with what I’ve been given and what I’m good at. So I, I really like that. And you, you mentioned money struggles and you mentioned the struggles that you’ve had, you know, along the journey that you’ve made money, you’ve lost money. And come on right before the show, you told me about the podcast name that you used to have, which I thought was a great podcast name was how to lose money. Correct. That was a, was that the name of the podcast?

Paul Moore:

Yeah, we had a podcast. We had 238 episodes where we interviewed highly successful entrepreneurs, business owners executives about their pain loss and struggles on the way to the top. In fact, we interviewed Mike Michalowicz and David Phelps on that.

David Richter:

Wow. Well, see this ties right in with our podcast because I ask almost every guest, what money struggles have you faced in your life or business along the journey that you’ve taken so far? So I know you had that podcast asking other people, so I’d like to tell, ask a little bit there, what money, you know, like what struggles have you had up to this point?

Paul Moore:

Yeah. So one thing that really was, I think it was great. And at the same time it made things a little complicated was I have a very benevolent mentality. Mm-Hmm <affirmative> I actually believe in giving first, not necessarily a Profit First over the years. And that’s caused some harrowing moments like in 2007 it was the fall of 2007, 10 years to the month before I had a couple million dollars in the bank from selling my company. And I found myself with two and a half million dollars now in debt. And I actually was coming in, we were coming into the great financial crisis. Didn’t have any idea how bad it was gonna get in 2008. And my family and I got together and oh my business partner at the time resigned, he said, I’m sorry, I can’t pay half this debt anymore.

Paul Moore:

It’s yours. And so that’s when I got, went from one and a half to, or so to two and a half million in debt. Anyway, I told my family and friends, I said, Hey, we’re gonna start by giving our way out of debt. And they said, what? And I said, we’re gonna start by giving our way outta debt. So we started on January 1st, 2008, re remember not knowing how bad of the storm we were about to face as a country, as an economy. We started giving a set amount to charities, churches, nonprofits, things we really, really cared about. And we gave that set amount every week, like clockwork and I’m laughing cause that’s another Mike Michalowicz book. Yes it is. But anyway, we started giving that money weekly, and we really believed that we, you know, that God would providentially pull us out of the hole we were in. And four weeks later we came up with this amazing idea that just kind of dropped into, dropped into my mind and used that idea, leverage that over the next 13 months. And I ended up in the spring of 2009, 100% debt free. Wow. And so that’s not Profit First story. That’s a giving first story, but I, I thought it’d be kind of fun to throw it in.

David Richter:

No, and I love that because we’re all about giving. And in pro first, we, with a lot of people we work with, we, they set up a giving account, you know, to be able to give away part of the money because you do, you need to have usually extra funds to be able to give or like for people to see that they can start giving and have it be baked into just a part of their, this is a part of the business. This is what we do. This is what we give. And I, I love that cuz that’s what we do. A portion of everything we make goes right to charities that we set up or that we are partners with. And, and so I definitely love that story and it sounds like that’s a big struggle going from several million in the bank to several million in debt. And I love that other side too, of how you came out of it, you know, debt free, which is absolutely incredible. So then, then from there, what do you mind me asking? What that great idea was that got you out of debt so quick? Was it a real estate exit strategy or was it I have no idea. I mean, I’m very

Paul Moore:

Intrigued, ancient Chinese secret. Okay. I’m kidding. I’m kidding. That’s that’s, that’s a joke from the seventies. So anybody over 50 might get it. It’s still not funny anyway. But no, we had a five acre waterfront lot that we bought for a be I believe it was eight or 800, eight $50,000. And we thought that if we subdivided into five, lots that about four of those five lots would be worth 400,000 each. So we thought, you know, this is worth at least double what we paid. Well, this was a terrible speculation on our part on my part because it was on a non-public road, which means you could not subdivide it legally. Mm-Hmm <affirmative> that’s when we bought it years before in 2000, I don’t know, seven, six. Yeah. I don’t know. Well, we speculated because we really believe the county was going to allow we really believe that was gonna turn into a state road any time. Well, hope is not a good business strategy, right? David? Nope.

Paul Moore:

Well, we hoped it would turn into a public publicly maintained road here we are 16 years later today. It’s still not. But anyway, I be, if I could, that was a lot of my debt right there, you know, 800,000 in debt and I think it was. And so I really believed that if we could subdivide this into five lots and sell those, you know, for, let’s say 1.5, 1.6 million, that would be a huge part of my two and a half million dollar debt. Yeah. Well, I came up with a crazy idea for how to subdivide those. And it was based on this obscure law in PLA rural places like Virginia that allow for a family exemption, a family exemption says that you can actually split off otherwise non sub dividable land to a family member. Well, there’s no way I, I had five family members.

Paul Moore:

I would be able to subdivide this to, and even if I had five family members and I granted an acre each to the other four, yeah, you have to hold it for five years. Okay. And other than that, the law is completely legit. I could have divided into these four family members hands and kept one. But no one said what you, what you could do with the parent tract. In other words, the part I kept, there’s nothing in the law about how fast I could sell that. So we came up with a, I don’t wanna call it a scheme, but we came up with a plan to actually sub to sell the entire five acres to one person. He would grant an, an acre to his wife and then he would sell the other four. Then the next four, he would grant an acre to his wife, sell the other three. And we were able to do that all consecutively in like four consecutive weeks. The miracle of it is that we even found buyers for the lot at all, because it was in the very worst months of the great recession in September through November of 2008. Wow. When no one was buying lots. So it really was miraculous.

David Richter:

Yeah. That,

Paul Moore:

And, and by the way, we, we completely got this approved with the county. The lady at the county shook her head and she said, I’ve been working here 30 years. Nobody has ever come up with a scheme like this. She then she laughed. And she said, but you did. You’re right. It’ll work.

David Richter:

Wow. That’s incredible that I think that is a good template for giving your way out of debt of there’s no, you know, like sound like a miracle basically to think of that. And then that the county was like, okay, like, cuz we’ve heard other stories go the opposite way of like the county’s fighting you, you know, like all the horror stories that you hear. So that’s yeah, that is incredible. So then fast forward, a little bit to where then you have your, you know, your real estate investing business and you’ve had ups and downs there, you know, like with the real estate investing and the recent years or whatnot, and kind of what we were talking about, like what was some of the things that helped turn that around or like tell about that journey of, you know, like that we were talking a little bit before the podcast aired.

Paul Moore:

Yeah. You know, I came to the conclusion, David, that if Michael Phelps would have competed in 10 different sports, he probably wouldn’t have got a gold medal in any of them. I think we can all see why. Right, right. Yeah. Because everybody is, I think everybody should like Gary Keller and J Pappas on told us in the one thing book, we should become obsessively, wonderful and expert at one thing. And so Michael Phelps got 27 gold medals for us and for his, you know, team and for him, us as Americans, I mean because he obsessively focused on one thing and there was a time when I figured out that I could not be an expert in everything. And so what I did is I hired a young man who was an expert in the exact things I wasn’t. And one of those was the Profit First principles.

Paul Moore:

And because he is so obsessively good at that, it would allowed me to work on other aspects of our real estate business. It allowed me to focus on acquiring properties, getting operators. We could partner with raising money, creating education, writing books, by doing that and letting him focus on the Profit First principles. It has been a game changer. And I mean we’ve raised 80 million and deployed that in the last three years. And I mean, it hasn’t been without a lot of struggles, but having that right person outsourcing to that right person made all the difference in the world. I highly recommend to anybody listening, if you don’t have, I mean, there’s no way anybody can be an expert at, at everything. If you are focused on being an entrepreneur, a real estate investor, whatever. And you’re probably not the very, very best accountant or CFO outsource that to somebody else or hire somebody to do that and focus on what you’re really good at

David Richter:

That is that is advice that I think will rain true with a lot of people, because on this podcast, we talk a lot about how you can start it, how you can get it implemented, you know, or like what people have faced in the past. But a lot of people don’t hit on what Paul just said. Like, if you have no prerogative to go out there and do this yourself, there are people that can help. I mean, obviously you’re listening to this podcast and you’ve heard us probably say, we can help you with this. We’ve got a fractional CFO business. We’ve got the Profit First book. Like there’s no excuse now for you not to get some of these principles in place. That’s why, what Paul’s saying is so good because now he can focus on this, what he is good at. And even beforehand, he was talking about when he brought that hire in, like the business just was skyrocketed from there because he was able to focus on the one thing. He, we can’t be all things to all people and we can’t force ourselves to do that too. I think that that goes in line with what you said at the beginning, too, that shiny object syndrome we get into that shiny object syndrome. If we don’t have someone kind of like just steering us in the right direction. Like, no, this is your focus. This is where you need to be. I, I think you would agree. It’s very easy to get the squirrel and like go off and try and do way too much.

Paul Moore:

Sure is.

David Richter:

So Paul, I would say you are a successful real estate investor. You found what you are good at. You’ve outsourced what you’re not good at. So then let me ask this, what would be maybe one or two keys to success along the way, obviously outsourcing that’s a huge one, but what would you say has been maybe a key that has stuck with you, you know, over these years?

Paul Moore:

Well, I’ve already touched on a couple of these. So one is of course following the one thing principles. And if you haven’t got that book, everybody should get that book and read it and, and learn it. Another thing is knowing the difference between investing and speculating. Like I said earlier in the show investing is when your principal’s generally safe, speculating, it’s when your principal’s not at all safe. Another thing would be, you know, to create true wealth. You can do that by swinging for the fences, but it’s more likely that you will create true wealth by looking for singles and doubles and then occasionally hoping for a triple or something better. Yeah. But my my pastor in Roanoke, he was a professional baseball player in one year. He decided he would only focus on home runs. He hit more home runs than he ever had that year, but his batting average was miserable and overall his performance was much worse.

Paul Moore:

And so babe Ruth, you know, he was a strike. He was the home run king, but he was also the strikeout king. Right. And so, I mean, putting this investment terms, if you’re always swinging for the fences, if you’re always playing double or nothing with your money someday you’ll land on nothing. And then what will you have left to double? You’ll have the opportunity to start over again, is what you’ll have. And a lot of our guests on how to lose money experienced exactly that. So I would just really recommend that people take, take the advice of Paul Samuelson. Paul Samuelson was the first economist to win the Nobel peace prize from the us. He said, investing should be boring. Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.

David Richter:

Right. That’s that’s good stuff. Cuz that’s what we see in the business world. It’s not, it’s the ones that are making the money and keeping it are the ones that are just doing the same things, helping the same people, you know, like doing, doing what they know like you had mentioned over and over here is that, you know, being good at what you’re good at and not chasing those rabbit trails, you know that and just going off on the squirrel, you know, adventures there. So, no, that’s, that’s incredible. Just a couple last questions here. Why is it important? Because I, this was one that was on your bio. I don’t ask a lot of questions around the bios, but this one I really liked. Why is it important to find the big why in your life?

Paul Moore:

Yeah. So when I sold my company in October of 97, I woke up the next morning and I actually wasn’t really any happier than I was the day before. I, I mean, technically I was a lot more successful I guess, on paper, but you know, I realized, and I, I don’t know if you’ve heard this statistic, but there’s a study out there that says you’re no happier in the Western world. If you make over you, you’re no happier anything above 95,000. I said that wrong. If your income is above 95,000, let’s say it’s a hundred, 200, 500. You’re no happier than you were at 95. That’s kind of like the peak. Yeah. And so if that’s true and we kind of all know in our heart of hearts, there’s truth in that because we see these really wealthy, really unhappy people, you know, high, messed up family rates and all that stuff. If that’s true, then we really need something bigger to live for. We need, we were put on this earth for something bigger than just making money and being successful at work. And so I recommend that people find their big why before they’re really successful. Now, David, this is shocking. If you took the record profits, not average, the record profits of apple, general motors, Nike and Starbucks added those together and doubled that number. That’s the approximate profits. The us state department says is generated by human trafficking every

David Richter:

Year. Oh wow.

Paul Moore:

And so it’s a horrifying fact, but we have more slaves on the earth than any time in history right now. So I’m recommending that people think about it this way. If you were alive in the 18 hundreds, would you have been an abolitionist fighting against slavery for freedom? Hopefully you would’ve been, if you would’ve been alive or an adult in the 1960s, would you have been fighting for civil rights? Well, hopefully so, well this is a civil, right? This is slavery and it’s happening right under our noses. And so I’m recommending that people consider that if you haven’t got a big, why there’s a good one to consider.

David Richter:

Yeah. That, that is a really good one. And there’s good. There’s good places to put that money to, if you are in real estate, like operation underground railroad or a couple of these other ones that do the, they literally go in there and rescue children. Yeah. You know, from these horrible situations. So there’s definitely the opportunity, you know, to give for something like that. That is so good. And that’s, I always love when people bring up the why and cuz that’s really what keeps you getting outta bed in the morning and helps you, you know, during the tough days and during the really good times too. Right. But Paul, this has been awesome. So I’m gonna ask the last question I ask almost a hundred percent of the guests is you’ve provided a lot of value here on this episode. So how do people get in touch with you or how can they provide value back to you? What have you got going on? You’ve got books that you have written, you’ve got, you know, thing, you know, courses or sure. Or other things. What how can people get in touch with you?

Paul Moore:

Well, David, I spent years banging my head up against the wall, trying to figure out how to get involved in commercial real estate. And I didn’t know where the on-ramp was. So I’ve written a five day free eCourse and an ebook. On this topic, you can get that at our website. It’s Wellings capital that’s W E L L I N G S. wellingscapital.com/resources. And that’ll give you access to that. An ebook on self storage links to buy my other books on Amazon. Everything else you might need.

David Richter:

There you go there. That’s how you could get in touch with Paul and get that course. Or if you want are interested in that commercial side, which seems like everyone in the real estate investing game at some point is inve is interested in that side. So make sure you go there, we’ll put it in the show notes as well too. This has been incredible. Like in this episode we did, we talked about a ton of stuff, the shiny object syndrome that a lot of people, if they don’t, if they just keep going on the squirrel and the rabbit trails, you know, it’s like, you are not gonna be as successful as you can be. We also talked about hiring the best people around you or, or finding the best people, paying them well and doing exactly what they’re telling you to do and, and getting the help from someone else.

David Richter:

Who’s an expert in something that you’re not because you’ve got your own expertise. Love to talk about the big, why love your keys to success about the base hits and not always swinging for the fences for the home runs all the time. That was great, great stuff. And then I love that no happier, you know, at 95 K than anywhere else, but, and then really what is that big? Why in your life, that’ll be a good question for you to write down and, you know, fill that out over the next time you was before you listen to the next episode here, listen, you know, make sure you have that big. Why? So Paul’s been awesome having you on the show. Thank you so much for coming today.

Paul Moore:

Yeah. Thanks David. It was a real honor to be here.

David Richter:

So I wanted to say if you’re a real estate investor and you are tired of living deal to deal, or if you, if you aren’t good at the financial side, like Paul was talking about like, I want, I need the, you need the help. You need the help to keep the money and not just make the money. And if you need to get out of your rat race and spinning deal to, you know, living deal to deal and spinning your wheels, you can head over to simpleCFO.com. We have our fractional CFO service there. You can book a call with us or we can ping it to someone. If we’re not the right fit. I have a lot of people in my network on the financial side, and I’d love to make sure you at least get the proper introductions, cuz I don’t want you having the excuse that you’re not able to make more of the money and keep more of the money that you actually make without those good connections. So head on over there and remember, start making profit a habit in your business.

David Richter:

Thank you so much for listening to today’s show. If you found this episode valuable, could you do me a quick favor? Could you give us an honest rating within iTunes and be honest, you could say whether you liked it or not. And obviously with iTunes, the more reviews and ratings we have, the better it is for other people that are searching for Profit First and a podcast. So we’d love to be ranked on there and that’s thanks to your help. So we would really appreciate that if you would like to go give us a rating. Also, if you’re looking to connect with us further, I would highly recommend checking out our Facebook group Profit First for real estate investors. And that’s literally what, what it’s called. So you can type in Profit First for real estate investors and you’ll be able to find <laugh>, you’ll be able to find our Facebook group right there.

David Richter:

So come join active real estate investors who are supporting each other and growing their businesses and profits together. That’s what that group is all about. The link should be in the description below. And if you’re interested in working with us in implementing Profit First in your real estate business, we offer coaching and guidance. So if you wanna work with someone who’s actually Profit First certified and who works right now currently with real estate businesses, you can actually go start your application process by going to simpleCFO.com/apply or just go right to simpleCFO.com. And there’s an apply button right on there. If you wanna actually start your Profit First journey with someone who can actually walk you through those step by step and help, you know, and grow your cash flow. Thanks again for joining us for another episode of the Profit First REI podcast. See you next episode.

Outro:

This episode of the Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call @ simplecfo.com right now. We’ll see you next time on the Profit First for REI podcast with David Richter.

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Title: “Profit First Strategies with Jay Conner: The Power of Private Money”

 

Episode: 242


There are 15 reasons to love about borrowing private money over traditional money. One of them is making your own rules for your private money.

 

In this episode of Profit First for REI podcast, Jay Conner, a nationally renowned real estate investor and the king of private money. He talks about how private money works.

 

Jay helps you get your money from private lenders and will share with you the mindset that will get you money in the door without you ever having to worry about it. 

 

Listen and enjoy the show! 

 

Key Takeaways:

 

[01:01] Introducing Jay Conner

[05:00] Introduction to private money

[08:30] The Great News Phone Call

[11:23] Why don’t you use your own money?

[13:18] Maintaining relationships with private lenders

[15:40] Private money vs traditional money

[22:05] Things that make them want to recommend you

[25:18] Advice for real estate investors

[29:01] Connect with Jay Conner

 

Quotes:

 

[07:34] “If you are talking about private money and raising private money with an individual and you got a deal for them to fund, you already sounded desperate.”

 

[12:07] “If you want to scale your business, private money is the way to go.” 

 

[16:05] “In this world of private money, we make the rules. We set the interest rate, we sent the length and all of that.”



Connect with Jay:

 

Website: https://www.jayconner.com/book-details/ 

 

Tired of living deal to deal? 

If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David

 


Transcript:

Speaker 1 (00:00):

I got 15 reasons I love private money over traditional money. I won’t share all 15, but the biggest one is it puts you in the driver’s seat. The traditional way to borrow money is you go to the bank and get on your hands and knees and you’re begging and chasing. Well, they are making the rules right? Like the lender is making the rules. But in this world of private money, we make the rules, we set the interest rate, we set the length of the note and all that.

Speaker 2 (00:34):

If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for REI podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.

Speaker 3 (01:01):

We have Jay Connor back on the podcast. I love Jay Connor. He helps you get your money, the money from private lenders and that whole framework and process, but he does it from a passion and a place of heart. And servant Teachership. I feel like he goes out there and is a servant teacher of how private money works. Listen to this episode. He gives the magic question he tells about desperation and private lending, and I thought his perspective was so good, and then ultimately the mindset that will get you money in the door without you ever having to worry about it. So listen to this episode. Can’t wait for you to get value from it. Thank you for being a listener of the Profit First. RII podcast. Have a great episode. Hey, here’s the profit first RI podcast. Really excited to have Jay Connor back because he’s the came of private money. And this is where I love to go into this topic because I don’t care what kind of business you’re in, you probably need help with this, but especially if you’re in the real estate world, this comes up all the time at every event I’m at with every conversation I have. So we’re having the cane here talk about private money today. So Jay, thanks for being on the show.

Speaker 1 (02:07):

Hey David, thank you so much for having me come on here to talk about my most favorite topic. Of course, that being private money. And why is that? Because private money’s had a bigger impact on our real estate investing business than any other strategy that we’ve implemented in our business.

Speaker 3 (02:24):

Why did you go down that road though? I mean, you teach this all the time. You’re helping a ton of people, like anyone I’ve ever talked to that works with you is like he taught me how to do and I got money and it actually works. So I mean, how did you even go down that road where it made a difference on you and then you wanted to get it to others?

Speaker 1 (02:43):

Well, I actually backed into it. I didn’t do it on purpose. So here’s what happened. So my wife, Carol, joy and I, we’ve been investing in real estate, single family houses, other real estate full time here in eastern North Carolina since 2003. And here’s what happened. From 2003 until 2009, David, all I knew to do in my real estate investing business was rely on the local banks to fund my deals. I mean, all I knew to do was go to the bank, get on my hands and knees, put my hand underneath my chin, raise my skirt up so they could look at all my personal financial statements and stuff and actually beg to get my deals funded. That’s all I knew to do. And so I had a big wake up call in January of 2009 after being in this business here in Eastern North Carolina. I called up my banker.

(03:38):

I told him about these two deals I had under contract in Newport, these two single family houses. And David, I learned like that over the telephone that my line of credit had been shut down with no notice. My banker, his name was Steve, and the bank was bb and t at the time. I said, Steve, what in the world are you telling me? My line of credit is shut down. I got two deals under contract. You gave me no notice. Why is the bank closing my line of credit? He said, Jay, don’t. There’s a global financial crisis going on right now. I said, no, but now you just gave me a global financial crisis. Financial crisis, yeah, I ain’t got no way to fund my deals. And I got ’em under contract. So I hung up the phone and here’s what happened, David. I sat here and I asked myself a very important question.

(04:27):

And so I’m going to share this question with your audience right now. This question I’m going to share with you will help you solve any problem you’ve got. I don’t care if it’s business, financial, career, health, relationships. I don’t care what your problem is. By the way, David, these people going around and saying, any problem, you got some opportunity I want to throw up. I didn’t have no opportunity. I had a problem of not funding my deal. So here’s the question I asked myself. The question I asked myself was, Jay, who do you know that can help you with your problem? And when I asked myself that question, I immediately thought of my good friend Jeff, who lived in Greensboro, North Carolina at the time, and he was investing in real estate. And so I called him up and I told him what happened. And he said, well, Jay, welcome to the club.

(05:18):

I said, what club? He said, the club of the bank shutting you down and losing amount of credit. They shut me down last week. I said, well, how are you funding your deals, Jeff? He says, well, have you ever heard of private money? And I hadn’t. So Jeff told me about private money. He told me about self-directed IRAs and how people can use their retirement accounts and funds that they currently have and move them over to a self-directed IRA company and then loan that money out to us real estate investors, either tax deferred or tax free depending on the type of account they’ve got. Well, that just opened up my whole world. I’d never heard of that. And so what did I do? How did raise $2,150,000 in less than 90 days after being cut off from the bank? Well, here’s what I did, and here’s the secret sauce I put on my teacher hat.

(06:10):

So I put on my teacher cap, which is my private money teacher cap, and I just started teaching people in my own network what private money is, how they can earn high rates of returns safely and securely. And what’s interesting, Carol, joy and I, we got 47 private lenders right now. Not one of them had ever heard of private money and private lending. Not one of them had ever heard of self-directed IRA companies and what a third party custodian is. That’s important by the way, to establish a relationship with a self-directed IRA company because over half of my private lenders are using their retirement funds. And if I didn’t have that relationship to introduce them to move their retirement funds over, I’d be missing out on over half of my private money. So how did I go about raising all this money when I was cut off from the banks?

(07:02):

I led with a servant’s heart. I led with education. And here’s a really, really important point. I separated the activity. I separated the conversations of telling people what private money is and how they can earn high rates of return safely and securely and having a deal for them to fund. You see, desperation has got a smell to it. And when you talk about is that not true, David? Yeah, very true. So if you’re talking about private money and raising private money with an individual and you got a deal for them to fund, you’re already sounding desperate and you’re not even trying to sound desperate. So we don’t talk about deals and when we’re first exposing somebody to how they can earn high rates of return, we talk about private money. So how do we separate those conversations? Well, when someone has told me that they’ve got, let’s say they’ve got $150,000 they want to invest and get high rates of return conservatively, I’ll say, great, I’ll put your money to work for you just as soon as possible.

(08:11):

I don’t talk about a deal upfront. If they’ve got retirement funds that they want to get higher rates of return on, I’ll introduce ’em to the self-directed IRA company that I recommend. They’ll get their funds moved over. And so here’s what happens and here’s the magic sauce, David, I give ’em and I call ’em up with what I call the great news phone call. What in the world is the great news phone call? Well, the great news phone call is not a pitch. I’ve never pitched a deal in my life ever since I started raising private money in 2009. I pick up my handset with my cord attached to it here in North Carolina and I call some of your, don’t even know what that is. And let’s say, David, let’s say you’re one of my private lenders. So I’ll put my phone right up here and you’ll answer the phone and we’ll have a little chitchat and I’ll say, Dave, I got great news for you.

(09:06):

I can now put your money to work. I got a house in Newport with an after repaired value of $200,000. The funding requires 150. Closing is next Tuesday. You’ll need to have your funds wired to my real estate attorney next Monday. I’m going to have my real estate attorney email you the wiring instructions end of conversation. Notice I didn’t ask If you want to fund the deal, of course you want to fund the deal. You’ve been waiting for the phone call. I’ve told you the program. I’ve taught you the program, you know what kind of rate you get, what the maximum loan to value is, the program that I’ve taught you. And so now you’re waiting for the good news phone call, which I just gave you. And in addition to that, if you as my private lender, if you’ve moved your retirement funds over to a self-directed IRA company, you ain’t earning any money until I put your money to work.

(10:04):

You moved it at my recommendation. Now I’m ethically bound to put your money to work. You ain’t earning any money until you actually put her to work. So again, we separate conversations, we leave with a servant’s heart, we educate, and by the way, David, these people going around saying don’t just get the deal under contract. The money is show up. I want to throw up where is the money going to show up? Is it just going to rain out of clouds or something? No, get the money lined up and you can get it lined up fast. Just like me. There’s always going to be deals.

Speaker 3 (10:38):

Yeah. Oh man, that’s really good stuff. I love how you went down that road and it helped you personally. Now you’re just teaching a lot of people. I love that magic question. Who do you know that can help me with my problem? It’s that who, it’s not always the how. It’s the who did I know, and in that point it really helped you. I also run into a lot of times, I don’t know if you see this, where there’s someone who’s like, I could save a couple interest points if I just use my own money versus a private lender’s funds. What are your thoughts on that of always taking down your own deals versus going out there and putting the work into getting a private lender?

Speaker 1 (11:17):

Sure, I get that question all the time. They say, Jay, you making all that money? Why don’t you use your own money to invest in real estate? Why are you still borrowing private money? Well, here’s the answer. If you’re just going to do one deal, that’s a great use of your money. That’s a fantastic use of your money. But do you want to scale your business? I mean, right now we’ve got seven different projects going on, single family houses simultaneously. Well, I don’t want my money buried in seven houses or projects simultaneously, which here in our local market can easily be over 3 million with the prices of our homes. So if you want to scale and really, I mean most people have got a bottom of the bucket in their checkbook. So if you want to scale your business, then private money is the way to go. Another answer to that question is, do I want to pay myself 8% or do I want to use my money for something else,

Speaker 3 (12:22):

Right? Yep.

Speaker 1 (12:24):

So that’s a couple of answers to why I use private lending and why I’m still using 47 private lenders,

Speaker 3 (12:33):

Which is great. I love what you said. If you want to scale, it can run out of cash real quick. If you just keep using your own money where a lot of people have to choose between, okay, paying some percentage points or sleeping at night, and it’s like, I think I like your option a whole lot better, especially if you’re looking to grow. But I like how you said that one deal. That’s okay, but if you are looking to be a real estate investor, this is something you’re going to have to go down that road. Now, last time I asked you some questions about the private lending process. I don’t think I asked this one though, is how do you maintain a relationship with that many private lenders? You’ve got 47 people in your network that you call up with the good news call. So is it like how do you maintain a relationship with all those people?

Speaker 1 (13:22):

I mail ’em checks.

Speaker 3 (13:25):

I love that. That’s a great answer. Oh man. No better way to keep a relationship there.

Speaker 1 (13:33):

I mean, they love getting money in the mail, right? Yeah. They love mailbox money, so I mail ’em checks.

Speaker 3 (13:41):

So you mail ’em checks. So you’ve built a good enough business where you can keep 47 lenders busy and their money active.

Speaker 1 (13:50):

Well, to be totally transparent, I mean, it is a juggling act to tell you the truth. I mean, there’s more money than there is deals.

Speaker 3 (14:00):

Yep.

Speaker 1 (14:01):

There’s more money than there is deals. And so we got 47 private lenders. Some of them have got $30,000 with us, some of ’em have got a million dollars with us. I can’t buy a house for 30,000, but I can use 30,000 for rehab money. You can use private money, borrow private money in a junior position, you’ve got to disclose that. But I can put private money in a junior lien. But what comes into play there is what we call total loan to value. So I’m not going to be borrowing more than 75% of the after repaired value. I didn’t say the purchase price 75% of the after repaired value. But let’s say back to that example that we just talked about, David, where if I’ve got a after repaired value on a home of 200,000 for easy figuring, I can borrow up to 150,000. That’s 75% of the after repaired value. But if I buy it for a hundred thousand, which I do all the time, 50% of the after repaired value, I can have a private lender in first position at a hundred grand. I could have another private lender in second position at 50 grand. So add a hundred to the 50, now one 50 divided by 200,000 after repaired value, I got a total loan to value of still 75%.

Speaker 3 (15:27):

Yeah, I love that. And it seems like private money gives you flexibility and

Speaker 1 (15:32):

Options. Does that make sense?

Speaker 3 (15:34):

Yeah, that makes sense. A hundred percent.

Speaker 1 (15:37):

Oh, absolutely. Flexibility is where it’s all at. I got 15 reasons. I love private money over traditional money. I won’t share all 15, but the biggest one is it puts you in the driver’s seat. The traditional way to borrow money is you go to the bank and get on your hands and knees and you’re begging and chasing, well, they are making the rules, right? The lender is making the rules. But in this world of private money, we make the rules, we set the interest rate, we set the length of the node and all that.

Speaker 3 (16:14):

I love that. Flexibility is the ultimate play in real estate. You want to have flexibility and you want to be able to have that. So I love what you teach. Who is the person that you’re trying to teach out there? Is it the person that’s done one deal a thousand deals? Who are you trying to help the most with your business?

Speaker 1 (16:33):

Yeah, that’s interesting. At my live events, which is called the private money conference, and my live events, we have about 60% or so have already done deals. They’ve already done deals. They want to scale their business. They are real estate investors wanting to scale their business, and about 40% are looking to get their very first deal. So I’m helping everybody. I mean Stu and Harriet Baldwin from New York State, they enrolled and joined my mastermind membership community and they already had a portfolio of a hundred houses. They’d already raised over $2 million in private money, but they wanted to see how I went about it. Well, just one webinar that I recorded with them brought in 1.2 million in additional private private money. So I’ve worked with real estate investors that are brand new and those that are also seasoned to help them get more private money ready to go for their business.

Speaker 3 (17:33):

I love that. It sounds like a lot of people out there need private money, and even if you’re just getting started, if you don’t have the funds to do that first deal, like you mentioned, you do that first deal, that one deal at a time, it might be okay, but this sounds like a great spot where if you’re getting into it or if you’ve got lots of stuff going on, this could be another way to make sure your company can keep running without what you ran into with the banks back in 2007, eight or oh nine. Would you say that’s true as well?

Speaker 1 (18:04):

Absolutely. Absolutely. I mean, I’ve met very, very few people. In fact, I can’t even think of one. I haven’t met any real estate investor that says, I got enough money.

Speaker 3 (18:20):

Yeah, me either.

Speaker 1 (18:22):

I can’t use any more private money. However, David, you are looking at one right now. I got about almost $2 million right now, what I call sitting on the shelf waiting to be deployed. And I tell you what, I’ve had new private lenders come into my world that want to invest and just to prove to them that I can perform. I’ll take the new private lender’s money and pay off a current private lender, refinance the deal so I can get their money to work for ’em, right?

Speaker 3 (18:53):

Ah, yep, that makes sense. I like that. As you grow and scale, you might run into that issue and you make one lender a little bit happy. I mean, at least they’re getting paid off, but then they probably come back to you and say, I want you to put my money to work again. Do you have that come up a lot?

Speaker 1 (19:12):

Quite frankly, when I pay ’em off, they’re not happy.

Speaker 3 (19:17):

That’s why I said just a little happy, maybe a little bit.

Speaker 1 (19:20):

But when I pay ’em off, they’re not making any money on that money. In fact, with a new private lender, I’ll get ready to pay ’em off cashing out on a deal and I’ll call ’em up and say, Hey, just want you to know that you’re going to have a check coming in the mail from a real estate attorney’s trust account. We’re paying off this house. And they’ll say, Jay, can’t you just keep the money? And I’ll go, no, I can’t keep the money unless I’ve got your money secured by a property because we do not borrow unsecured funds. Now, here’s maybe a little advanced strategy for some folks, but I do substitutions of collateral or loan modifications all the time. If it’s a small amount of money that a private lender’s invested 30, 40, $50,000, and we use it for rehabbing a property. So when I’ve got another property I’m getting ready to start on, I’ll substitute the collateral and keep that 30 or $50,000 note in play. So they keep earning money on that money, but we will substitute the collateral just to a different project that we’re moving to.

Speaker 3 (20:25):

That’s awesome. So then sounds like you have a good problem. It’s like, I want that. Well, I think a lot of real estate investors would rather the problem, I have too much money versus I’ve got these deals and I can’t fund them. So I really like how you teach people that and where it could snowball into this, where it’s like, I’ve got 47 private lenders, I’ve got to go out there and get the deals for ’em. Absolutely. And I really like that. And

Speaker 1 (20:50):

For goodness sakes, you don’t start out with 47 private lenders. I started out with one, right? I started out with one and then that quickly became two and three and four and five because private lenders tell other people what’s going on. So I haven’t actively attracted private money for years because our current private lenders just keep sending us people. In fact, day before yesterday, day before yesterday, I got a phone call from the mother of a good friend of mine, his name’s Craig, lives in Newburg, North Carolina. Craig had told his mother about this investment thing that I got going on and she had never heard of it, which is really funny. I’ve been doing it now private money since 2009. So she calls me up and she says, Hey, my son’s been telling me about this investment thing you got going on. Tell me about it. So word of mouth gets around very, very quickly when you start doing business with private lenders the way I do.

Speaker 3 (21:53):

Yeah, I like that a lot. So in order to get people to talk like that, what are the biggest things that you do for your current private lenders that makes them want to recommend you?

Speaker 1 (22:07):

Well pay ’em on time.

Speaker 3 (22:08):

There you go. That’s a big one. Sounds like that would be a really great place to start.

Speaker 1 (22:12):

Pay ’em on time. But I also have three times a year I put on a party for our private lenders at the Dunes Club. So we have three times a year a VIP reception over at the Dunes Club on the beach, and it’s just an evening of private lenders getting together and we have a good old time and I feed them and give them all the soft shell crabs they want, and I tell ’em to bring their friends with them.

Speaker 3 (22:42):

Yeah, that’s awesome. So number one though, that anyone can do at any stage is pay people on time. So actually pay, would you say, what about communication? I hear that come up sometimes too. How do you do a good job on the communication with your private lenders as well?

Speaker 1 (23:03):

Well, it must be good enough. They never go away,

Speaker 3 (23:06):

Right? Yeah, that’s the big things I hear.

Speaker 1 (23:10):

Here’s one thing I have not delegated as far as communication. I personally, I mean my relationships with my private lenders are very, very important. So I personally pick up the phone, pick up the phone, and call my private lenders when I have got a deal for them to fund. I do not delegate that out. I could

(23:37):

Delegate that out, but I don’t, when I got a deal for them to fund, I’m the person on the phone keeping that relationship When I’m getting ready to pay them off. I don’t have a check just show up in the mail. Of course they got to sign a payoff instruction letter if a different closing agent is closing it for a buyer. But before any of that happens, I personally call ’em up and I tell ’em that we’ve got that property sold. We’re getting ready to pay you off. Or I’ll call ’em up and I’ll say, Hey, we’re getting ready to pay this property off, but I will keep your note open so you can keep earning money. I’m just going to substitute the collateral. We got some documents we’re going to email to you for you to sign and send back the communication. I’m personally involved in putting their money to work and letting them know when we’re cashing out and where they are on the deal.

Speaker 3 (24:31):

That’s awesome. Then since it’s the profit first I podcast here, I love this concept of the private money because you need your cash in your accounts. So to be able to run your business, do those things, and then setting up a separate account just for your private money lenders, so it makes it easier to do what Jay just told you to pay them back, to pay them back on time to be in good communication with them. So now this has been really good. Do you have any other advice before I ask you? How could they work with you? How can they get in touch with, because I know this is something that is needed desperately, that I send people your way all the time. I know I trust you to help people, but any other last minute advice here that you would give to the real estate investors listening to the podcast?

Speaker 1 (25:18):

Sure. I appreciate you asking that question. It’s going to be very hard to own a lot of real estate

(25:26):

Until you own the real estate between your ears. So what do I mean by that? People ask me, how do I start? How do I start raising money? I can tell you how you start raising private money. You get your heart right, you get your mindset right. So what do I mean by that? Well, what do you do? You lead with a servant’s heart, you lead with education, you put your private lender money hat on, you private lender, teacher hat on, and you leave with education, don’t pitch deals, and you really, really are concerned about the other person and realize, part of this mindset is realize you’ve got an opportunity to change people’s lives, right?

Speaker 3 (26:11):

That’s so good.

Speaker 1 (26:13):

We’ve got countless people that are particularly in their retirement years, that have thanked me and Carol Joy for making a difference in their retirement years to where they can, I mean, they don’t want to touch their principal. They want to live off of their principal investment. So they’ve been able to travel, go see grandkids, do all this stuff that they couldn’t do otherwise until they got involved in our program. So just know that you’ve got a way to really make an impact on other people’s lives. And lemme tell you another part of mindset. It ain’t about reaping. It’s not about reaping. It’s all about sowing. It’s all about sowing. I can’t be reaping all that private money and deals until I have sown and given and led with value first. So how you sow is how you’re going to reap.

Speaker 3 (27:08):

Yeah. Oh man, this is so good. I’m glad I asked that question because I hear the passion in your voice and I hear that you really care about the people you work with, the people that have private money lenders out there, you care about that relationship. I love what you said. Get your heart right, get your head right. I also think, like you said too, that if they don’t have that desperation has a smell. So if you’re out there, you’re desperate and you’re just going out there, then you won’t have people like you have that want to keep coming back, that want to continuously invest in you. So that was, I think, the best advice that you could give right there. Get it between your ears and get your heart right. I absolutely love that. And just to recap too, I love your magic question.

(27:55):

Who do you know that can help me with my problem? Then one day you’re going to wake up and you’re going to be like Jay, and you’re going to be helping other people with their problem. I’ve got money. I want to put it somewhere, and you’re the able to get them to where they can be. Desperation has a smell. I love that. And then honestly, I love that pivot. You are like, it’s not about the reaping, it’s not about the interest that I’m making or the profit I’m making for the deal. It’s more about sowing those seeds and ultimately you’re changing lives. That’s why you get private money, and it’s like that interest that you’re paying them is twofold. It’s like you get to sleep at night, you’re not using all your money and you’re getting to help someone else get a return that they wouldn’t be able to get anywhere else or in someone that they trust as well too, and that’s a little bit more tangible than the stock markets or all this other Bitcoin, some of that stuff that’s floating around out there. So this has been awesome. So how do people then, Jay, take that next step with you? Do you have a book? You talked about an event. What can people do?

Speaker 1 (29:01):

Absolutely. Well for your audience, David, I’ve got two gifts. First of all, I finished writing my book Where to Get the Money. Now, this is not a ebook. This is a book book that we actually send in the mail Autographic where to get the money. Now the subtitle is How and Where to Get Money for Your Real Estate Deals Without Relying on Hard Money Lenders or Traditional Lenders. It’ll walk you through step by step how to get all the private money you would want. Very, very easy to read. It’s $20 on Amazon, but you can get it for free. Being David’s audience, just cover shipping. You can go to www dot j Connor, J-A-Y-C-O-N-N-E r.com/book. So I’m an er, not an or. So that’s j Connor, J-A-Y-C-O-N-N-E r.com/book, and we’ll three day priority mail it out to you. Now, in addition to that, I’ve got an upcoming $3,000 per ticket live event right around the corner. But for your audience, Dave, I’m going to let everybody come for free with a measly $97 registration fee. This private money event. You can check it out at www.theprivatemoneyconference.com. The private money conference.com. That’s coming up right around the corner in June. Get on over there. Registrations are open, and I’d love to meet you in person at the private money conference.com.

Speaker 3 (30:31):

Awesome. I’m excited about that too. I love what you’re doing and you’re solving a big need that we hear all the time. Just like all people always needing to sharpen their acts when it comes to private money, you graciously have also invited me there to speak about Profit First. So I’m excited to get to tell people about that so they can get more private money and be more confident and not be desperate when they go and ask for people. So I’m really excited about that as well. So make sure we’re going to put those links there, but make sure either get his book or go to that event. I cannot endorse Jay Moore because I know how many people he helps, but then he also has the heart. You heard it right here. That’s how he wants to help you too. It’s very much a heart and a mission and a passion for him.

(31:13):

So Jay, thank you for coming on, for sharing your wisdom, your knowledge today. If you are listening to this episode and you feel stuck like, what the heck is going on? Where is my money? I don’t know what to do. I’m a little bit nervous to go out there and get private money. I can’t keep my own house in order. That’s where you could go to simple cfo.com where we can help you walk you through that process. We’ll link you up to Jay too. If you need private money or need to learn about private money, this is who we recommend. I recommend Jay to many people, so make sure that if you need that help you go to simple cfo.com. But Jay, again, thank you for being on the show and sharing your wisdom here today.

Speaker 1 (31:51):

David, thank you so much for having me. God bless you.

Speaker 2 (31:54):

This episode of the Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on The Profit First for REI podcast with David Richter.

 

 





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