Welcome to this week’s episode, where we dive into the world of creative financing in real estate with Chris Prefontaine. Chris is a seasoned real estate investor and coach who has trademarked the innovative “3-Payday System.” This model transforms conventional real estate transactions into avenues for multiple streams of income, all without the hassle of traditional bank financing.
The 3-Payday System: A Game Changer
The 3-Payday System, trademarked by Chris Prefontaine, is a unique approach to real estate investing that has revolutionized the field. By leveraging owner financing, lease purchases, and subject-to-deals, investors can generate substantial and reliable income streams. Prefontaine’s method ensures that you’re leveraging creative financing without risking personal credit or hefty bank loans.
Payday 1: Upfront Deposit
The first payday comes from obtaining an upfront deposit from buyers who are prepared to purchase but cannot qualify for a traditional mortgage. These “deserved buyers” bring cash to the table, providing the initial influx of funds.
Payday 2: Monthly Cash Flow
The second payday is the steady monthly cash flow generated from the difference between your payment to the seller and what you charge the tenant-buyer. This ongoing income stream ensures consistent revenue throughout the term of the deal.
Payday 3: Future Profit
The final payday occurs at the end of the term, with benefits seen from principal paydown and property appreciation. This crucial component makes the 3-Payday System exceptionally lucrative over time.
Effective Marketing for Motivated Sellers
One of the most significant challenges in real estate is finding motivated sellers. Prefontaine uses a combination of expired listings and targeted marketing strategies to find leads.
Utilizing Expired Listings
Non-licensed investors can access expired listings through services like My Plus Leads. These leads are thoroughly vetted by trained virtual assistants (VAs), ensuring that only the most promising prospects move forward.
Direct Outreach and Problem-Solving
Prefontaine’s VAs focus on direct outreach to these expired listings, asking key questions to gauge the seller’s motivation. They ask where the seller was planning to go had the property sold and what the repercussions are if it doesn’t sell again. This strategy uncovers the seller’s real motivation and allows the investor to present viable solutions, such as lease purchases or owner financing.
Financing Strategies: Versatility in Action
One of the remarkable aspects of Prefontaine’s system is its versatility. Whether it’s owner financing, lease purchasing, or subject-to deals, his approach adapts to various scenarios, including commercial properties.
Owner Financing
Approximately 99% of Prefontaine’s deals involve owner financing with sellers who owe nothing on their properties. These transactions offer lucrative principal-only monthly payments, ensuring significant equity build-up over time.
Lease Purchases
Lease purchase deals make it easy for new investors to step into the market with minimal upfront costs. These agreements allow control over a property for as little as $10, providing ample opportunities for profit through structured agreements.
Subject-To Deals
In subject-to deals, the mortgage remains in the seller’s name while the buyer makes the payments. This method is particularly beneficial for sellers needing financial relief, especially those going through life changes like divorce or dealing with the aftermath of COVID-19.
Success Stories and Practical Implementation
Chris Prefontaine emphasizes the importance of practical experience and highlights some of his most successful deals to illustrate how the system works.
Commercial Property Success
Chris successfully applied his methods to commercial properties. For example, he purchased a building in 2018 with a 20-year term and an anchor tenant, later selling it for a $750,000 profit. This case exemplifies how his strategies can be adapted to various asset classes, providing substantial returns with minimal initial investment.
Residential Triumphs
In a notable residential deal, Prefontaine acquired a home through owner financing for $945,000 with a down payment of just $8,000. He sold it for $1.1 million, earning nearly $300,000 through the three paydays. Such examples demonstrate the system’s effectiveness and versatility across different markets and property types.
A Mission of Education and Empowerment
Chris Prefontaine and his family-run company are committed to bridging the gap between academic learning and real-world application. Their approach ensures that students not only understand the theory but also succeed in actual deals. The company’s mission is to provide actionable strategies and support, enabling students to achieve financial freedom without relying on traditional banking methods.
Taking the First Step
For those looking to explore these strategies further, Chris offers comprehensive resources and coaching. By learning the skill sets around lease purchases and owner financing, investors can secure a stable financial future. Visit www.SmartRealEstateCoach.com/PrivateMoney to access free books and additional resources that can kickstart your journey into the world of creative real estate investing.
Investing in real estate through creative financing is not just about making money; it’s about solving problems and creating win-win situations for both buyers and sellers. Chris Prefontaine’s 3-Payday System provides a roadmap to achieve financial independence and long-term success in the ever-evolving real estate market.
10 Discussion Questions from this Episode:
- Understanding Terms: Jay Conner mentions a “no-penalty approach” for private lenders. Can you explain what this means and how it benefits both lenders and borrowers?
- Importance of Documentation: Why are promissory notes and deeds of trust or mortgages critical in securing loans according to Jay Conner? How do they protect the interests of private lenders?
- Flexibility in Lending: Considering Jay Conner’s flexible loan terms since 2009, how does his approach differ from traditional banks and hard money lenders?
- Networking Benefits: How has Jay Conner utilized Business Networking International (BNI) to secure millions in private money? What aspects of BNI contribute to building trust and growing one’s network?
- Community Involvement: Discuss the principle of “givers gain” that Jay and Jonathan highlight. How does volunteering and community involvement lead to investment opportunities?
- Appropriate Borrowers: In what scenarios does Jay Conner suggest using traditional banking or hard money loans instead of private money? What characteristics make someone more suitable for private money lending?
- Educational Role: Jay Conner emphasizes the importance of educating potential private lenders. How does this education build trust and ensure smoother financial transactions?
- Risk Mitigation: What strategies does Jay Conner implement to mitigate the risks for both the borrower and the lender in private money lending?
- Mindset for Raising Funds: How does Jay Conner’s mindset and confidence play a role in attracting private lenders? Why is having an abundance mindset crucial in this context?
- Lessons from Experience: Jay Conner shares his journey of shifting from bank financing to private money. What key lessons did he learn from this transition, particularly during the global financial crisis in 2009?
Fun facts that were revealed in the episode:
- Unique “3 Paydays” Model
: Chris Prefontaine has trademarked the “3 paydays per deal” concept, a unique approach in real estate where sellers get paid multiple times through various methods like deposits, monthly spreads, and principal pay downs. - Low Default Rate
: The strict underwriting process employed by Chris results in a remarkably low default rate (2-10%) on rent-to-own deals, significantly lower than the industry average of 20%. - Remarkable Profits
: In a notable deal, Chris managed a payday 3 deal in Maryland resulting in a profit of $329,000, exemplifying the success of his methods.
Timestamps:
00:01 Raising Private Money Without Asking For It
05:20 Prepare for significant changes in creative real estate.
08:08 Owner financing: Principal-only payments on paid-off properties.
11:39 Subject-to-deals provide financial relief band-aid.
15:00 Higher rent-to-own success due to strict underwriting.
17:20 Family earns monthly income per property, future payoff.
21:14 Six-figure deals with $200k+ homes yield predictability.
25:49 Success targeting small, free-clear multifamily properties.
27:55 Insights on deal structures, updates, and lessons.
30:15 Used RedX when licensed, trained virtual assistants.
33:27 Started alone, hired VA post-deal, minimized overhead.
38:22 Most deals are buyer contingencies; solving problems.
Connect With Jay Conner:
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It is available FREE (all you pay is the shipping and handling) at https://www.JayConner.com/Book
What is Private Money? Real Estate Investing with Jay Conner
http://www.JayConner.com/MoneyPodcast
Jay Conner is a proven real estate investment leader. Without using his own money or credit, Jay maximizes creative methods to buy and sell properties with profits averaging $67,000 per deal.
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Real Estate Investing Minus the Bank: Chris Prefontaine Teaches the Three Payday System with Jay Conner
Narrator [00:00:01]:
If you’re a real estate investor and are wondering how to raise and leverage private money to make more profit on every deal, then you’re in the right place. On raising private money, we’ll speak with new and seasoned investors to dissect their deals and extract the best tips and strategies to help you get the money because the money comes first. Now here’s your host, Jay Conner.
Jay Conner [00:00:28]:
Let me tell you about Chris Prefontaine. As I said, a good friend of mine lives down in Florida. He also coaches real estate investors all over the nation. His coaching is very, very complimentary to what I do, and Crystal, Chaffee, and our team. Very, symbiotic, with a lot of synergy going on. But, what Chris is going to present today is all about terms, and actually, the title of his talk is, The Secrets to Creating 3 Paydays Per Deal. He trademarked that phrase, 3 paydays per deal. And of course, it’s what we enjoy, what it’s all about without using any of your cash or credit or banks.
Jay Conner [00:01:15]:
Chris has been doing this for many, many, many years. He’s a best-selling author, not one time, two times, or three times. He’s got he’s a 4 time, 4 x best-selling author, and he’s also a Forbes Business Council member, 3 time Inc. 5 1,000 honorees for the fastest growing companies. And so, as I said, I wanted to bring Chris on here to show you how he does single-family houses and how it can be so complimentary to private money as well. As questions come to your mind, type them in the chat, and we’ll get your questions answered, at the end of, Chris’ presentation and talk. So, with that, we wanna give Chris the very sophisticated very sophisticated golf clap right here as we welcome Chris to present to the Private Money Academy membership. Chris, welcome to the Zoom.
Jay Conner [00:02:13]:
I’m gonna turn it over to you.
Chris Prefontaine [00:02:15]:
Thanks, Jay. Thanks, Crystal. It’s interesting because Jay is with our community tomorrow night. And, Jay, when you first came on, people kinda said the same thing you alluded to. Okay. I thought we’d we don’t use money. So we marry so well together with our tribes and our techniques. It’s just gonna open up more deals is the bottom line, which is pretty sweet.
Chris Prefontaine [00:02:32]:
Jay, how long do we have before we stop for q and A? I don’t wanna abuse time.
Jay Conner [00:02:37]:
Sure. Yeah. If we can, because I promised people we normally stop around 5 o’clock. So if we could stop about 10 minutes to 5 or so, that would be great to leave time for questions.
Chris Prefontaine [00:02:47]:
Okay. I’ll keep an eye on that. So okay. Good. Very good. What I did is I did a quick video, you guys. In 1 or 2 minutes, I’ll play that because I’m certain except maybe 1 or 2 names I recognize that most of you have not seen or heard this. And I am from New England.
Chris Prefontaine [00:03:02]:
I’m actually in Rhode Island. So I do go a little faster, but my intent is good. I intend to kinda give you guys exposure to what we do here. You can put you all to wait. This is 100% about giving you guys content and giving you some gifts. Right? So it’s all about we’re gonna have some fun and I’ll answer any questions at the end and hang out for you. So enjoy the quick video. Jay, just give me your crystal thumbs up when that plays.
Chris Prefontaine [00:03:23]:
I just wanna make sure it plays fine.
Jay Conner [00:03:25]:
Alright.
Chris Prefontaine [00:04:15]:
Alright. Let’s dive in here. Jay did introduce this as, sort of the 3 paydays that we trademarked. I’m gonna, to go through some case studies. I’m gonna go through some real metrics and show you how the, actually, how the math works, how the money works. One of the misperceptions with our deals, especially in the term space to create a real estate space, is that we don’t keep a portfolio. We’re always spinning out of it, and it’s and it’s not true. We have all kinds of techniques that we once, a member of our community has, say, 5 or 6 properties, and we do what’s called wealth stacking.
Chris Prefontaine [00:04:44]:
And that’s turning some basic lease purchases into long-term deals or taking a lease purchase and turning it into sub-to deals. I’m gonna define each one of those. And for those of you who are more advanced and know some experience here, just bear with me. And for those brand new, when I go higher level, just know that it’s to expose you to it, not to necessarily capture everything tonight. I heard you guys had some great experiences in Jay’s community. That’s why Jay and I love hanging out. I’ve been at this for 33 years, and next month, Pretty scary, to date myself a little bit. But I’ll tell you that, what the impetus to all this that we do today was the OE crash.
Chris Prefontaine [00:05:20]:
And then there’s all kinds of references that even if some of those intros that I heard you guys talking about. So I played in a lot of different spaces. I’m not gonna say all. But when I came through that, there were some super, super big lessons, and I know some of you were around then. And it’s and whether there are younger people on here or not, the fact is that’s not as important as are you prepared to handle what’s gonna take place here in the next year or 2 because it’s far different and it’s far greater potential if you’re prepared. This has been, I think Jay will agree, one of in my 33 years, one of the highest demands I’ve seen for creative real estate, certainly awareness about creative real estate. If you go back to, like, the early nineties, which is when I started, there were maybe 2 or 3% of deals being done outside of banks. And it’s super hard to get my finger on this metric, but it’s up in the high teens and growing.
Chris Prefontaine [00:06:11]:
And there are all kinds of articles to support that now, unlike when we started doing this term niche after the crash. I sort of call it when I went through the crash, I was kinda doing some gut-checking getting back in the business because it beat me up mentally, financially, and everything else. And I said, okay. I don’t wanna do it the old way anymore, which was getting paid once. That was one of the criteria. One was not using banks. There are all kinds of things. But one big one was, man, I feel like every January, I get on a treadmill and then I gotta restart.
Chris Prefontaine [00:06:42]:
You and I had a great year, and I specifically remember being a little bit frustrated every January. Like, okay. I gotta go redo it all again. I feel like I had a big job. So the new way is the 3 paydays. As Jay said, we did trademark that. I’ll I’ll walk you through what that means. I wanna sort of touch everybody here, so I threw this slide in this morning.
Chris Prefontaine [00:06:59]:
If you’re looking for supplemental income sort of like when you’re working with Jay, fantastic. A lot of our members, they’ll come to us and say, hey. I’m looking to replace and they’re usually significant incomes. All of our coaches, for example, had significant 6 figure incomes and have replaced them. Or some of you are all set financially. That’s cool. Some of the stuff I do or we do as a community at Smart Real Estate Coach can be plowed through your, IRA your IRA-owned LLC your Coverdell, or your own home. If you learn nothing else today, maybe a nugget or 2 even if you’re experienced on how you might be able to do this with your own home because I simply refuse nowadays to deal with banks, period.
Chris Prefontaine [00:07:37]:
I don’t sign on loans. I don’t take out anything that has to do with that kind of a guarantee. When I say buying on terms, all I’m talking about is creative real estate. It means no banks, no lodge down payments. And I say no lodge because I’ll never say no money. As you’ll see on some of these sub-to deals, and you guys have experienced it from the from hearing those intros, you are gonna sometimes have to come out of pocket for transfer tax or arrears or something, but it’s not significant. And like I said, no signing, personally. The three ways we buy, not probably not new to you guys, but niche down, we do some neat things.
Chris Prefontaine [00:08:08]:
So for example, in the owner-financing world, 99% of our owner-financing deals are done, with a seller that owes nothing. They’re free inquiry. We specifically seek those out, but a third of the properties in the United States are in that category, believe it or not. And, b, we make sure that we do those on principal-only monthly payments. That’s in the owner-financing category now. So because of that, the principal pay-down component, especially if you get a long enough term, is super lucrative. And I’ll give you a metric to guarantee a 6 figure deal on 3 paydays every single time, and it’s not to say you’re gonna go out and find 5 or 10 of these a month, but I can show you how to go out and find a nice handful of those next year, this year to, go ahead and bring on 6 figures per deal, all 3 paydays. Subject-to, we’ll define these.
Chris Prefontaine [00:08:50]:
We heard you guys talking about it, so I know there’s enough experience here to kinda digest what we’re gonna do here. And then lease purchase. There are all kinds of we don’t have time for today, but it’s all kinds of advanced techniques as I alluded to really where we take a lease purchase, and turn it into a long-term sub 2. Have several of those going on right now. And so this will just wet your whistle again. Not to throw in content tonight, but I wanna make sure it just exposes you, and we can give you some free stuff later to dig deeper. We’ve got about 75 years of experience now on top of my 33 with the coaches, my son, and my son-in-law. We are a family company.
Chris Prefontaine [00:09:23]:
And so we’ve done what I call bridge the gap now since about 2013, and and I know, Jay, she has this frustration. We’ve talked about this on each of our podcasts, and that is a lot of great marketers who are in the education space that can market products to all of us, but they don’t come behind it. So there’s no one doing deals, and we’re trying to bridge this gap. The 2 of us are in our respective, tribes to to bridge what gap? To bridge the gap between when someone takes a course or goes to a seminar and does a deal, actually gets a deal done. That unfortunately for most people is a black hole. And I talk to people weekly who have spent tens of 1,000 of a few 6 figures and haven’t done a deal yet. It just doesn’t work with me. So that’s our mission as a company is to do deals.
Chris Prefontaine [00:10:06]:
That’s what we do. I will always talk so you guys are sort of current with me all the time with what I say, only strategies that we do. And so I’m sitting here in Newport, Rhode Island with my son, Nick, and we do deals just like I’m talking about today and we have for many, many years. It’s nothing in here is theory. To zoom back out again for the basics, and, again, if you have this experience already, just bear with me here for a few slides. Owner financing to us then is the sellers becoming our bank. The power becomes yours. A great, great example is during COVID.
Chris Prefontaine [00:10:40]:
During COVID, I had about 72 single families because this stuff I’m talking about where you can buy any asset class, but I had about 72, and you’re about 3 or 4 headaches. Five different from if we were landlords. Right? We have buyers in our homes as you’re gonna learn that in a few minutes. So I had very few headaches, but those few headaches I had, I had all the leverage. We’re never signing personally, and every single one of our agreements is protective in that. The house can go back to the seller if it has to. We didn’t have to because nobody wants their house back, but the power is yours. And you eliminate all those traditional barriers or headaches that can be out there for bank financing.
Chris Prefontaine [00:11:15]:
Sub 2, the mortgage stays in the seller’s name, unlike a lease purchase that you’ll see next. Title transfers, you make the payments on their behalf. I’m very careful here because a lot of people, even in my community, will say, okay. So we’re gonna assume the loan. And they get themselves in a bit of a pickle because assume the loan means they’re gonna go apply, right, and pledge their credit and do everything else they would do conventionally. We’re not. We’re not assuming anything. We’re just making the loan on their behalf.
Chris Prefontaine [00:11:39]:
Now unlike the free and clear sellers that we speak to all the time who are pretty well off financially or presumably would have already pulled the money out of their property, sub 2 usually does not always lend itself to people that need a fix. They need a Band-Aid. They need some financial relief. And there’s what we call a hybrid deal. A lot of our students now are doing the sub 2 and either bring in private money like Jenny said or sub 2 in owner financing component, who are very well off. They just needed to kinda band-aid one of their many homes. If you look at the mortgage rates, I know you guys are aware of this. I’m just gonna pop them up there and not read word for word.
Chris Prefontaine [00:12:12]:
But the ability for you to buy between owner financing and sub 2 between 0% and 5% right now is rampant. You can almost handpick the deals. Another one this morning we had come on, our mastermind similar to yours is buying 1 at 2.6% interest. Who wouldn’t want that now? 0 to 5% in a market that certainly is not getting there yet. Lease purchase, just one more definition here for you. It behaves the same way as you’re gonna see financially in a minute, but the mortgage does stay in the seller’s name. Titles do not transfer, and you make the payments on their behalf. So this one is simple for new people to get into because our agreements are prewritten with a $10 deposit, $10.
Chris Prefontaine [00:12:52]:
So you can go out there and control. I had a guy, Brian, in Chicago control his first 8 deals with the lease purchase. $10 a deal, and all 3 paydays are about $838. And, again, I’ll show you some numerics on how the 3 paydays work. But you control the property, and you do have a mechanism to control, sorry, to cloud the title with what we call notice of option or memorandum of real estate. Now this has been a hot topic, like, we we surveyed our, database, Jay, and they came out with seller leads. For some reason, it keeps popping up, popping up. There’s nothing tricky here.
Chris Prefontaine [00:13:25]:
There’s no magic formula. We do have a feed that feeds us every day, live feed, But all it gives us is expired for sale by owners, for rent. A niche list would be things like, free and clear. I love personally free and clear out-of-state owners. There are all kinds of lists. There are some of you probably have already tinkered with. But those are where we that’s how we get most of our leads. We’re all about leads.
Chris Prefontaine [00:13:48]:
I’ve seen everything in the owner financing, in the sub-to world, in the lease purchase world from, hey. I just want my price. I can wait. Because remember, we’re putting no money down unless they’re in hot water and we need to bill them out and it makes sense too. Or, in the case of the building I bought, I bought an office building this way. He wanted to create cash flow for his wife and his son. He also wanted to do some estate and tax planning. That’s why he did it.
Chris Prefontaine [00:14:11]:
Because people say, well, why would a gentleman sell you? I bought the building for 5.50. Why would he sell you that with principal-only payments and no money down? Because he wanted his pricing. He wanted a plan. Nobody would give him that in the conventional world. And, of course, divorce, COVID, and all kinds of other reasons that we’ve seen. But all we’re doing is what? All we’re doing is similar to what you guys do, in the private money world, we’re solving problems. It’s all we’re doing. Like, an auto body, an attorney, or an accountant, you go there and have a problem solved or a capture goal that the conventional market’s not providing.
Chris Prefontaine [00:14:41]:
That’s it. That’s all we do when we talk to sellers. If it’s a fit and they can wait for their cash, then it’s it’s a phenomenal way for us to get into the deal. We do exist as far as tonight is involved. I’ll get into advance. We do exit primarily rent to own. This is another frustrating point for me. I know Jane and I have talked about this on our shows again.
Chris Prefontaine [00:15:00]:
Many people who do the rent-to-own have a success rate of maybe 20% getting the buyer to the finish line. We’ve got a default rate of, like, 2 to 10% max. It’s because we are pretty obnoxious at the beginning at the front end with the underwriting portion of this. My son, Nick, handles this and trains the, what we call our associates on this. And we make sure that we’re putting a seller or a buyer in there, sorry, that deserves to be in there. They’re a buyer that needs time, not a renter that wants to have a house someday, but has 40 years of, you know, bad history. So we do have a huge success rate in the rent to own, and then we convert some of those to some other owner financing things and a more advanced strategy. I’m sure you guys are all exposed to this already, but all it is is a program to help buyers who need to become mortgage-ready and need that extra time.
Chris Prefontaine [00:15:42]:
It’s all it is. We have a mortgage broker in our community, and this is recent, Rafael. And he’s in Miami. He writes about 100 and something loans a year, so I thought this was a good sort of microcosm of what goes on right now. He said, Chris, 17 to 18, out of 100 apps are getting approved right now. That doesn’t mean some are not gonna take just 3 months and some will take 4 years. But he’s saying today about 17 to 18 out of a 100. That’s pretty dismal for buyers, especially with this rate change that went on.
Chris Prefontaine [00:16:10]:
So the pool of buyers is huge. The challenge becomes out of that 82% or so per the pie graph here, can we have a system that we do to weed out the ones that aren’t deserved buyers and can rise to the top for the rent to own? So they tend to be self-employed, maybe recently self-employed too. They they just changed over from corporate America to self-employed. It’s a big one now since COVID, actually. So they have great credit. They have a cash. They just didn’t know they weren’t gonna be able to qualify and they need seasoning.
Chris Prefontaine [00:16:38]:
So they’re a great pool of buyers, job change as I said. What I wanna do here, I went through that pretty quickly. So I wanna get to where the math all comes in here with this 3 payday thing. I think this will be an eye-opener and then you can meld this to some of the stuff you guys do as a community. The payday 1 is the deposit. Remember, deserved buyers who were going to buy but couldn’t qualify, so they have a deposit, payday 1. Payday 2, monthly cash flow, the delta between what you’re paying the seller or the underlying debt whether it’s a lease or a sub-to, and what you charge them to be in the rent-to-own program. And then payday 3 is cool because during the term, and long terms are good, during the term you’re getting the benefit of all the principal pay down in any markup you did to the property.
Chris Prefontaine [00:17:20]:
So here’s what the numbers look like for us as a family, team here in New England. Little on a 27 grand payday 1, payday 2 small for us, 300 but that’s per month per property, and then payday 3. So if you picture this model, this model, in my opinion, forget real estate for a second, is a perfect business model. Now money, and when you get that property, you launch a cash flow stream. It’s like out of thin air, you get the $308 per property per month, and then you have a payday 3 at someday in the future, but you know that date within a range. You start to put these all in a spreadsheet and it becomes 5 different quality of income than, say, the 1 payday deals. This was a snapshot. It’s a great example of the quality of income.
Chris Prefontaine [00:17:59]:
This was a snapshot of about 22 deals. It’s a 12-month look back for us. About a year ago, we did a 12-month look back. We created newly created in that 12-month look back, almost 600 grand in payday ones. Payday threes, a little over 800. But the one I wanna point your attention to is the payday twos. That’s a delta, a net 65100 that was created newly created in 12 months. So you guys can do the math when you get off this this afternoon, but how many how much money do you need in the bank to passively kick you about $65100 a month? It’s probably a few $1,000,000.
Chris Prefontaine [00:18:32]:
So I don’t know about you, but I can’t suck that away in the next year, but I can show you how to create the deals that can go ahead and kick that out to you. So that’s the power of the quality of the income here. And I just wanna kinda flash a couple of people from around the country because I know the question that floats out, I’ve been doing this a long time, is what about my price range? What about my market? You don’t understand, Chris. It’s different here. All kinds of things. This works anywhere. Mike’s out in Northern California, very similar to us. It’s a little higher than us.
Chris Prefontaine [00:19:00]:
Rick happens to be in New Hampshire, not far from me, but crushes our paydays. He’s he’s got 6 figure deals. He was, actually in the government for 30 years with about 100 plus employees and was able to leave because he had 4 or 5 heavy deals in the 100k range and quickly replaced the salary. I’m gonna jump in here to a one case study, guys, of each deal because I just wanna make sure we’re okay on our time. This was an order financing deal. And if we run out of time, they all exit the same. However we buy, they all look the same on the 3 payday. So if I get at least 2 of these in, you’ll get a sense of how it behaves.
Chris Prefontaine [00:19:37]:
We got this from an expired listing. Sadly, the gentleman lost one of his twin boys at the second home he had here on the lake and was willing to own a free and clear, willing to do owner financing as long as he got his price. Just wanted closure. So we did a 48-month deal at 3.99. We sold it on a rent-to-own at 4.29 fairly quickly. Our payday 1 was pretty healthy, $80. It was 40 upfront and then 40 overtime. We’ll do that often.
Chris Prefontaine [00:20:04]:
Like, an example comes to mind. We had a state trooper who had retroactive sergeant pay, and he knew that, so he scheduled out payments. It gets them more invested in the home. It gets them set up with a higher down payment to be better qualified, and certainly, it’s better cash flow for us over the term of the deal. So payday 1 was 80 grand. Payday 2, we are paying the seller. Now this is the kicker with these a 1,000-a-month principal. No interest in that.
Chris Prefontaine [00:20:27]:
Compare that to a mortgage if you took that mortgage out today. Payment from the buyer was 1700, not including our insurance. We had a nice spread there about $700. So over the term, this did go full term. This did already cash out. Payday 3 then works like this. You got the markup on the sale that we did, plus all the principal paydown. That’s the power right there.
Chris Prefontaine [00:20:47]:
$48,000 in 4 years. That’s why we like the longer terms on these. And then this behaves when it cashes out on the payday 3 just like any other conventional buy. If you’re buying a home, like, next month, you get credit for your down payment, so there’s that showing. And then because we got so much upfront, we have a negative payday 3, and then we’re getting rent. There’s a there’s a garage. As we look at this house from this view from this angle, there was a garage or the department above it. We inherited a tenant.
Chris Prefontaine [00:21:14]:
So the all total here is 6 figures, 109 grand. Here’s the metric for you guys. Simple. When you find a home in your area, and most of you can do this, $200,000 purchase price and above, at least 4-year terms or longer, in a $1,000 a month payment or higher, you have a 6-figure deal for all 3 paydays, every time. And that’s why now you can see why I like fishing in the pond of free and clear. Because if you do 6 of these a year or 8 of these a year, you have a serious healthy income with some predictability for the next 3 or 4 years. This was a recent payday 3 we had. I flashed it.
Chris Prefontaine [00:21:49]:
It was last fall. I flashed it because if you look bottom left, 77 grand. I give you the averages because that takes into account everything. So our average, all 3, is only about 77, 78. This was the one that was payday 3 along with 77. We had one in Maryland, in February. It was a record. It was $329 paid at 3.
Chris Prefontaine [00:22:07]:
So these anomalies, but the norm is the true average I gave you. Misperception about having some nice homes that whether this works or not, this was an owner-financing deal. Now here’s the punchline. Get this. This woman was a realtor in Boston. So everybody said, well, why would she do this? There’s always remember I said it’s about solving problems or helping them accomplish your goal the market wouldn’t do? Well, this woman had her mom living with her who was ill, and for every buyer that came in, she was trying to buy time and be in the home still. No conventional buyer wanted that. So we gave her what she wanted.
Chris Prefontaine [00:22:40]:
We bought this home. We broke the mold as far as the down payment. We bought this home for 945,000. We put 8 grand down, I think it was. The 48-month deal has already cashed out. We turned around and sold it for 11. I’m just gonna flash the paydays quickly from a time standpoint because they behave the same way. It’s just a much bigger deal.
Chris Prefontaine [00:22:58]:
100 grand down, that’s your one. Pay 2 is a nice spread. 18 grand over the term. But now here’s the, as always, look at the power of the principal pay down. A 126,000 in principal pay down. And, again, 99, almost 100% of our deals are done with sellers, especially in the residential world, not the commercial so much, with principal pay down. 100%. And by the way, what if you had to negotiate and get 50% credit? Still great.
Chris Prefontaine [00:23:28]:
Right? Still way better than a bank. So all 3 paydays here, almost $300. That was the record last February we broke it with with that 329 that came out for a total of, like, 350. So we did have some cost there, transfer tax, and an 8 grand, but that for a $1,000,000 home was pretty was pretty pretty good deal. K. Time-wise, let’s do a lease purchase so we get them all in. This was a referral from a realtor. Some realtors just understand what we do.
Chris Prefontaine [00:23:58]:
They just don’t wanna go down that lane. And let’s face it. I was a realtor back in the nineties. I was I got to a point of 100 homes a year. We can’t sell as realtors all our homes. Right? Some expire. We can’t even take some listings because they won’t don’t wanna pay us so they can’t afford to. So I tell realtors, if anything doesn’t fit in your box, refer to us.
Chris Prefontaine [00:24:16]:
You’ll be a hero instead of letting it go. So this was a referral. I’ll I’ll go through this briefly. This was a lease purchase now. So for $10, we control this deal. We did a 36-month term, turned it around, and sold it to a rent-to-own buyer for 3.299. This has cashed out already. This is a done deal.
Chris Prefontaine [00:24:31]:
Deposit payday 1, 24 grand. Payday 2 spread, a little over $500. Payday 3 behaves like this, the same kind of formula. You mark up the property, principal pays down the credit. Look how small that is because that was an underlying mortgage that somebody had that we’re paying on, that 18.18 a month, not so powerful like the principal pay down component. We give them credit for their deposit. As always, we get a payday 3 of $38 for a total of over $80, all 3 pays. So you can see they behave the same way, and they range in our community from a lower 45,000 to a high of 350.
Chris Prefontaine [00:25:07]:
I’m gonna skip this, sub 2 one. Again, it behaves the same way, but I’ll give you the reason behind the sub 2. This very typical this was a, couple that was getting divorced, not a happy, amicable divorce. One was on the deed. 1 was on the mortgage. They were behind $41100. All the whistles went up. All the bells and whistles told us, okay.
Chris Prefontaine [00:25:26]:
We gotta save this. So we did have to come up with $41100, but for all 3 paydays, there were little under $80. The woman that went into this home, just to sort of give you a type of buyers, I always said they gotta be true, deserved buyers. This woman was an attorney. She wrecked her credit going through law school and needed the rent to own Avenue. So many people now need the rent to own Avenue. It’s crazy, the demand. So I already mentioned this.
Chris Prefontaine [00:25:49]:
It doesn’t matter what price, what market condition, or what area you’re in, and I already think I alluded to several times. You can and should, in my opinion, do this on multifamily and commercial. We pointedly did a mailing twice of only less than 300 pieces, a tiny mailing. We targeted 4 to 10-unit buildings that were free and clear, each time bought 1, each time bought 1 with no money down, and each time cashed out over 6 figures. The strategy is different. The strategy is not, I’m gonna turn around and do a rent-to-own. The strategy is just improving the NOI, letting the principal pay down come down because the tenants do it for you, and then going ahead and selling it conventionally. Both were super, super successful.
Chris Prefontaine [00:26:25]:
This was the commercial building that I alluded to earlier. Bought it in November of 18. You see that in the far left. In the bottom right, we weren’t gonna sell it. I had 20-year terms on this. Last, September, we sold it 3 quarters of a 1,000,000 profit on that one, if you see bottom right. So that was a recent transaction that was where we house our companies, especially pre-COVID. COVID happened, everybody’s all the country.
Chris Prefontaine [00:26:47]:
We don’t need the space anymore, and the profit was rather nice. So you can do it with any asset class. Guys, if you look at books from, like, you know, the Vanderbilt, so any of the old wealthy families, you’ll read about lease purchase and owner financing and some of it before banking even happened, even took place. So if you applied none of this except for, hey. I’m gonna learn how to do this. I’m gonna learn the skill set. Nobody could take it from you. You have for life.
Chris Prefontaine [00:27:15]:
If you just did your own home, you’d be set up quite nicely. Other people just wanna do we have an attorney in Phoenix who runs a very, very busy trust practice. And if he wants his goal is, like, Chris, this one does 1, 2, or 3 deals. That’s it. I don’t wanna blow this up. We just want a few deals a year. That’s great. Or like most, people that come into the community, you might wanna scale this to 1 a month or more.
Chris Prefontaine [00:27:35]:
Your choice. Jay, I did as promised. This is just a gift. I’ve you know, I appreciate you guys letting a a New Englander fly through some slides and be a talking head for an hour, and 45 minutes. You guys get the best-selling books. Real estate on your terms was updated coincidentally during COVID because we’re in the midst of it and then that happened. We’re like, okay. Great.
Chris Prefontaine [00:27:55]:
In advantage to kinda update all this stuff. So that’s fairly updated, and then, deal structure over time is a look behind all the deal structures we have on YouTube. We have almost 500 where we show you deals, but that’s a look behind the scenes, like, all the nuances and all the things about buyers and sellers so you can learn from those lessons. You can go to that link, so we know it came from Jay’s group privately here, or just, scan, the code there. Jay, we can hit, q and A. I want to make sure we stopped in time. I’ll put that link back up. But is there anything that you think I should go back to? That was a lot quick, and we couldn’t cover a lot, but I wanna make sure we threw everything out there.
Jay Conner [00:28:34]:
Sure. You for sure plowed a lot of ground there, Chris. Hey, Crystal, if you would put in the chat, that URL, that Chris, has got right there on the screen, or we can just leave it right there and put it in the chat as well. www.SmartRealEstateCoach.com/PrivateMoney and that’ll give you to, get to Chris’s books. So, any questions for Chris, type in the chat, and I see some questions coming in. I’ll start with 1 question, Chris, and then I’ll get I’ll ask Crystal to read questions that are coming into the chat. Yeah. So one of the ways that you shared here in your presentation that you find, motivated sellers of market properties are through expired listings.
Jay Conner [00:29:25]:
So a couple of questions there. How does a real estate investor get expired listings to market if they’re not a real estate agent or a realtor? Yep. What kind of so it’s 3 part question. How do you get the list? 2nd part, of the question is, how do you market to them? Is it direct mail, etcetera? And then the third part of the question is, what’s your approach to talking to expired listings to where they will sell to you when it didn’t sell in the MLS?
Chris Prefontaine [00:29:59]:
Yep. All awesome. Awesome. Awesome questions. So, as a nonlicensed person, you can get them through my plus leads. They’re it’s on our resource page, but they’re they’re an open company. Anyone can go to them. They’re the only ones that I’m aware of today.
Chris Prefontaine [00:30:15]:
I used to use RedX when I was licensed back in the day. The only one today you can get the expires from non-licensed, I believe. Unless you have a relative friend, you can work something out. That’s what also I used to do in the past. 2nd, we have, virtual assistants who are trained. I know there are virtual assistants all over the country and out of the country, but we have a group that we used to train in-house, Jay. We used to run a VA company, and then we said, well, this is crazy. This is not within our focus.
Chris Prefontaine [00:30:42]:
So we gave it all back to the gentleman that runs it, but they’re all trained in creative real estate. So we just send all our students there. So the VA’s call, they’re not calling us. You know, the wholesales of the flippers that have to lowball because we can pay the market if we get our term. And so they’re always called by VAs. Can you also mail it if you want to? Sure. We dial them, and then the VA gives us the people sort of the cream of the crop. They’ll give us the ones that say, sure.
Chris Prefontaine [00:31:06]:
Have someone contact me. So that’s how we get in the door. And then 3rd, our approach is simple. Going back to solving the problem. My script, I’ll just share some nuggets here. My script is really simple. Jay, if it had sold, where were you going? Because right away, I wanna know where you’re going and how fast, and what if it doesn’t sell again? What are the repercussions? Right? Is there some motivation here? And if they share that with me, I know there’s some motivation, not just, hey. I was gonna downsize.
Chris Prefontaine [00:31:33]:
I’m staying forever now. I don’t need you. If there’s some motivation or some frustration that I think I can help with, my next question is really simple. If you got your price I see you on for 250,000. It didn’t sell. If you got your price, are you open to selling a lease purchase or owner financing, or do you need your equity to move? Some people say no. Like, today, I talked to someone. No.
Chris Prefontaine [00:31:57]:
I already moved. I was empty. I need to fix that. I need to band-aid that. I don’t need the cash. Others say, no. No. No.
Chris Prefontaine [00:32:02]:
No. I need to go buy a home, my family, and I so I’m not their buyer then. So that’s a simple script. You just sift through those. About a third of the people you talk to are gonna be open to that.
Crystal [00:32:12]:
That’s, that’s a pretty amazing percentage there, a third of the people that you’re talking to. So that’s fantastic. Crystal, do we have any questions in the chat for Chris?
Crystal Baker [00:32:24]:
We do. So, let’s see. George Fulk asks, can you use the property or, excuse me, can you use the program to buy and hold commercial property?
Chris Prefontaine [00:32:37]:
100%. So the building I bought in 18 with a tenant in it, an anchor tenant. That anchor tenant paid about 90% of what I structured with the owner, and I structured a 20-year term. I intended to keep it that long. And as I said, COVID came and things changed. And then when I went to lease it, my realtor said, you know, Chris, you might wanna put it on the market. This is 23. I said, why? I didn’t think of anything unique about it.
Chris Prefontaine [00:33:01]:
He said, no. You can almost do anything here with what you have in this zone. So I put it on the market and sold it for cash, like, within 7 days. I coulda held it forever. It’s a great strategy, sub 2 or owner financing, to buy and hold, to do short-term exits. It doesn’t matter how your exit’s gonna be. Yes. You absolutely can and should.
Crystal Baker [00:33:21]:
Excellent. Derek says, how much do you budget on average for mailings per month?
Chris Prefontaine [00:33:27]:
Good question. We don’t, and I’ll and I’ll tell you why. Because when I started it after the crash, I had 0. So I couldn’t even hire a VA. I had to get on the phone myself. And then once I got a deal, I hired a VA, and then I kept that system going because a lot of people that come to us either don’t have the cash like I didn’t back at after o eight or, they just don’t wanna be committing to overhead every month. Now can you do some spotty mailings? I do some spot mailings like I told you how I found those multis. I’ll spend 2 $300, maybe 500 every 2 or 3 months just to generate some variety of leads if I don’t feel like my lead flow is big enough for the VAs.
Chris Prefontaine [00:34:05]:
But, again, I have larger goals too. If your goal, for example, is one deal a month, I promise you within 50 miles of your home, you can do that with ease with ease. And though and with that with those profitable deals, I think a lot a lot of you guys would be happy with that. But you can do both. It’s just not necessary to budget that. The budget to run this business the way I explained it with the VA included my plus leads and a CRM, 550 to $1,000, and the 1,000’s on the high side until you get up to one deal a month. Perfect.
Crystal Baker [00:34:38]:
The next question is, do you have your buyer in place before you get a property under contract?
Chris Prefontaine [00:34:45]:
Really good question. Because some niches teach you have to. We do not. As Jay knows, when you offer a property out for terms because of that pie I tried to show you, the onslaught of buyers is insane. You’ll have a buyers list of 3 or 400 people. Boom. The challenge becomes sifting through that with a system that we teach so that you don’t waste time. Because a lot of renters, regardless of your ad, will call.
Chris Prefontaine [00:35:11]:
Right? And no matter how good you are with the ad that we give you, they’ll call. So you don’t have to have your buyer in place yet. Now a piggyback to that is I didn’t say it. All of our properties, unless you get to the point of cash flow and you’re fine, all of our agreements relative to procuring the property are contingent upon finding a buyer. So you don’t have to commit to someone’s mortgage or the owner’s financing unless you have a killer deal and you want to, but that’s a business decision. Our agreements are set up with a contingency to find a buyer first, usually for 90 or 120 days, so there’s no risk.
Crystal Baker [00:35:47]:
Perfect. Don says, what’s the percentage of rent to own buyers who will find a loan at the term date? If not, do they forfeit their deposit or work with them?
Chris Prefontaine [00:35:59]:
Yeah. That’s done the sort of the inverse relationship to what’s out there in the in the in the world of rent to own now, sadly. We have a default rate of about 2 to 10% because regardless of how strict we are with our underwriting and we are super strict, Life happens. Right? Like, death, divorce. I’ve seen it all. So, we’re gonna we’re gonna convert most of our buyers to 2 to 10% default rate. If they default, 2 during COVID just got up and said, Chris, what was the teacher? I can’t do this to the keys because that was their agreement. They signed it with our attorney.
Chris Prefontaine [00:36:33]:
It’s rare, but that has to and does happen because life happens. Yeah.
Crystal Baker [00:36:40]:
And, Michael Askew asks, how do you determine the deposit for the person moving into the house, and do you have your leasing contract?
Chris Prefontaine [00:36:51]:
2 two applicable questions here. This is a good flow. Yes. We have all our contracts. They’re, like, they’ve been written and rewritten and edited and tweaked because we’ve run into headaches right over the years, for about 13 years now in the terms niche specifically. Those are all available in one of our modules. Every single one of the agreements and checklist. As far as the deposit, so the buyer is is remember I keep saying there’s a system to weed out sort of the renters? The buyers go through a process, and one of the many pieces of the process is to watch a video on how rent-to-own works.
Chris Prefontaine [00:37:23]:
And that rent-to-own video is gonna tell them they’ve got to have 3 to 10%. Because when they get to the finish line, unless it’s a jumbo, they gotta have 3 to 10%, typically. If it’s a VA, we still don’t care. Like, we wanna see 3 to 10%. So it educates them on that. Now our script says, hey, Jay. If you Jay is the buyer, Jay, I know the video said 3 to 10%. We’re gonna take all applicants, and we are gonna heavily wait down commitment payment.
Chris Prefontaine [00:37:47]:
So if you put 3, just know that I don’t want you upset with me. Somebody could come in the door tomorrow with 10%. So it’s up to them, but we do give them a range. And if it’s a jumbo, again, we wanna get them over time up to the 20% range because we don’t wanna send them up to lose on these. Perfect.
Crystal Baker [00:38:04]:
And that is the last oh, wait. Hold on. Yeah. Derek said, do you find some sellers are reluctant knowing they have to wait on your buyer?
Chris Prefontaine [00:38:22]:
Oh, for the buyer contingency? I mean, most of our deals are done that way, so not really. See, remember, we’re doing this with someone that we can solve something for or help them accomplish your goals they couldn’t accomplish. Right? And or there’s a time issue and then it has to happen, and they want closure in their head even if there is a contingency. Now if there’s a deal today, there’s a deal in New Jersey for my student, Abby, and the, payment has to be made Friday on what the bank is calling a trial loan mod for 3 months. And if they don’t miss a payment, the loan mod kicks in. They all there are kicked to the back, and it looks great. Well, they’re getting divorced. So if Ivy wants this deal and he doesn’t wanna pay 30 grand upfront, he’s got a gun and does that right away, and he decided to do it because there’s a lot of equities walking into and he’s solving a big problem.
Chris Prefontaine [00:39:10]:
So these again, are business decisions that you have to make, but for most of them, we can do the contingency.
Crystal Baker [00:39:16]:
Perfect. Denver asked, if the seller wants his price, do you pay full price? Can you give an example of how you did it and what is the highest price you paid?
Chris Prefontaine [00:39:28]:
We can go to the market, for sure. We’ve done a lot. Those deals I showed you, especially the oceanfront, that was on the market for what we bought it for with the realtor. We pulled several 100,000 out of it. She couldn’t even sell it. It’s just because in terms, the market’s entirely different. We’re fishing in a different pond. We can pay the market price if the seller wants to go out, like, the building 20 years, 10 years, I’ll pay an equivalent premium, equivalent to 1 to 3 months where the principal pays down for every year they add.
Chris Prefontaine [00:40:01]:
So they wanna add 3 years. I don’t mind adding a little which equates to 1 to 3 months of principal times however many years because it’s gonna get eaten up right away by my principal paydown. So I don’t I don’t honestly care about price as long as my term is correct.
Crystal Baker [00:40:17]:
Okay. And that’s all the questions right now, Jay.
Crystal [00:40:20]:
Awesome. Thank you, Crystal, for filling those questions.
Chris Prefontaine [00:40:23]:
Thank you.
Jay Conner [00:40:24]:
Listen, folks. This is a no-brainer. Gift, free books here from Chris, Pre. You got the QR code there. You got the URL www.SmartRealestateCoach.com/PrivateMoney, to get those free gifts. Y’all, let’s give Chris Prefontaine the very sophisticated golf clap right now.
Jay Conner [00:40:45]:
Thanks, Chris.
Jay Conner [00:40:45]:
Thank you so much. Thank you so much for bringing on the heat and covering so much in such a, short period of time. Thank you so much.
Chris Prefontaine [00:40:54]:
Thanks for dealing with my speech. Jay, have an awesome night. Everybody has an awesome night. You guys are great. I love the community. Alright. Thank you
Jay Conner [00:40:59]:
So much, Chris. Yes, Chris. Chris, would you have something before I go to the next topic?
Crystal Baker [00:41:05]:
It was it was one last question that came in, but, I think Chris kind of answered it earlier.
Jay Conner [00:41:10]:
Okay.
Crystal Baker [00:41:11]:
So it’s it’s okay that he had a sign-off meeting. The question was, do you find certain areas, sellers are more open in these programs? And I would just say based on what Chris already shared in our experience that, no, it can be done anywhere.
Jay Conner [00:41:25]:
There you go. Absolutely. Of course, you all do know that Crystal’s nickname is the queen of subject 2. So if you ever have any questions about subject 2, Crystal can answer those questions. So
Narrator [00:41:39]:
Are you feeling inspired by the knowledge you gained in this episode? Then head over to www.JayConner.com/MoneyGuide. That’s www.JayConner.com/MoneyGuide, and download your free guide that shares seven reasons why private money will skyrocket your real estate investing business right now. Again, that’s www.JayConner.com/MoneyGuide to get your free guide. We’ll see you next time on raising private money with Jay Conner.
