Episode 139: Buying & Selling Real Estate On Terms with Chris Prefontaine

Chris Prefontaine is the four-time best-selling author of Real Estate on Your Terms, The New Rules of Real Estate Investing, and Sell With Authority for Real Estate Investors. He’s also the founder and chairman of the Wicked Smart companies and host of the Smart Real Estate Coach Podcast. Chris has been in real estate for over 31 years. His experience ranges from constructing new homes in the 1990s and owning a Realty Executive Franchise to running his own investments (commercial & residential) and coaching clients throughout North America. After the crash of 2008, Chris reengineered his entire business to weather all storms and economic cycles. Understanding these challenges, he helps students navigate the constantly changing real estate waters. Today Chris and his family and team run their own creative financing business and are still in the trenches every day. Their main focus is helping students across North America plan their escape from their W-2 jobs by getting in the trenches and doing deals with them. They’ve completed over $100 million in transactions.
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this week on the Prereal podcast Chris
Prefontaine we chatted with Chris a
couple of years ago
uh he has a three payday system that
he's trademarked I want to have Chris
back on because this is the market where
his program really smashes uh I
suspected that was the case and boy oh
boy is it the case a hundred million
dollars in transactions folks give this
show a listen uh he has a ton of free
content and giveaways and it is a a
brilliant system where with very little
Capital you can make the transition into
acquiring real estate deals in any
Market uh and start taking down and
building out your portfolio I was real
excited to have Chris back on uh Wicked
Smart Wicked Smart he's wicked Smart but
he's also the founder and chairman of
wicked Smart uh great system folks don't
miss this one Chris Prefontaine and
we're also going to be making a big
announcement in the next couple of days
we're going live and formalizing the
investment side of the business
something we've worked on for many years
so you'll be able to check us out on
prereal investments.com uh but please
check out this episode and we'll see you
all soon are you ready to bring your
real estate game to the next level my
name is James Prendamano I'm the CEO and
founder of free
25 years I've closed over a billion
dollars in transactional real estate
each week a meeting with outstanding
investors High performing individuals
and Visionaries operating in the real
estate space these are the people that
are actually out there in the real
estate game right now getting it done
this podcast aims at bringing anyone's
game to the next level
this is the Prereal podcast welcome
everyone to the Prereal podcast uh
we're joined today by Chris Prefontaine
he's the founder and chairman at Wicked
Smart we've had Chris on before in a
different life in a different iteration
and he's got a an amazing system uh he's
trademarked I believe it is the three
payday
methodology and considering where we are
on the market Chris I thought it would
be a great opportunity to have you on
and really take a deeper dive into the
program so thank you for taking the time
to join us yeah well thank you because
it just you you're recognizing and
pivoting with the market and I I
appreciate that well it's look it's
we're here to try and give value to the
audience where we can and considering
what's happening out there I I suspected
that the man would be skyrocketing for
your all and it would be a great
opportunity for folks to pick the system
up spot on yeah all right so let's Jump
Right In um I want to start if we can
just going back for a little bit
um
I think it's important to provide
context for the audience and to to come
off as as real right like you you've
done over a hundred million dollars in
transactions
um and people hear that sort of stuff
and they they go oh 100 million in deals
but but it wasn't always that way for
you Chris no no no no no I started by
myself even before my son Nick came in
so this is going back to like post crash
like 2012-ish
into 13 just like everyone else does I
was making the dials to the fsbos making
the Dallas expireds the front by owners
just doing one deal at a time that's
exactly how it's done and that's how we
teach our students to do it so no
different and we that's why we always
say we're in the trenches we don't just
say that flippantly I mean we every
single week we're either doing deals
ourselves or with the students just like
I did day one
and you this was born out of uh you were
a real estate broker first
2008 hit and and it was a tough time
right actually a little bit of a combo
so I was a broker back like 95 to 2000
actively and then I sold to Coldwell
Banker I hung on to my license but I
wasn't going crazy I was doing my own
investments from 2000 to 2008. yeah and
then that yeah all that hit so you're
going deal to deal you're doing all the
traditional things that that most of us
do and you might was it a moment that
you had well you know what was the that
that point where you went you know okay
I've had enough and this is I need to
find a better way yeah it was just post
crash because it was okay let's not
borrow from Banks and sign personally on
bank loans and pledge credit and all
that and it was let's not borrow money
period to do deals and when I say let's
not sign I couldn't after the crash
anyway because my credit was down right
so you had a we had to improvise and
improvise was let's do we purchase let's
do owner financing let's do subject two
those are the only three ways to this
day we still buy but that was born out
of necessity back then right so uh
though that's that's music to investors
ears right not having to rely on
um a third party to provide financing
especially when you're self-employed
it's just utterly miserable uh on
getting harder too it's absolutely
getting harder it is getting harder the
the traditional metrics almost don't
even matter anymore there's there's
little if any Common Sense apply to the
lending guidelines it is it is
incredibly frustrating and it makes it
really hard to scale man yeah it does it
does because people are if they're
relying on that it does and I used to
for the first 18 years this is my 32nd
year in the in the business and I I
forget what years on you and I talked on
your show but we bought our office
building that way too so I don't want
the listeners to think it's just single
or just do you know we you can buy any
asset class and you always could since
the 1600s this has been done it's just
that we've wrapped a support mechanism
around it to stay with people and do the
deals because I think too many people go
to seminars or watch it you know do a
course online it doesn't tell you all
the nuances doesn't tell you what you're
going to hit so we try to tell them all
that and then they go out and they not a
pivot so the the core principles and
then I wanted to take a deep dive into
some specifics but the core principles
of the program is that you're targeting
uh folks who have a problem right that's
Step One is identifying someone else has
a need they have not sold their asset
and they are looking to take the next
step traditional methods have failed and
now what uh let me clarify so you got
like the whole first half of that yes so
what you just described lends itself to
either a sub 2 deal where we're buying
and the loan stays in place because they
just want relief or or a lease however I
just alluded to my building the other
side of this equation is not just
solving problems it's helping them
accomplish a goal that the conventional
Market wasn't able to do I.E my building
was free and clear the guy wasn't
hurting he wanted specifically owner
financing for tax reasons and trust and
planning reasons and a lot of families
do that with uh properties that they
inherit properties that are free and
clear and they just want proper
planning so they're not they don't have
a problem they have a goal they're
trying to solve and usually it's let's
get my Max price as long as they give us
the time we can do that so there's two
edges to that okay so that's an
important distinction now the audience
or some of the audience is going to
think nobody provides owner financing in
my market
they all said I get new students saying
that um our Market that I just described
where I did the building is we're on an
island three town Island it's usually an
active Market I don't care what the what
the general Market's doing and so he was
getting Realtors coming up to him and
with full price offers he didn't want
that he's had to understand what he he
did not want that
um we have students in California to
that point I'm sure that's where a lot
of the listeners might you know hot
markets like that and and the only deals
he's doing he happens to be one of our
coaches now but he started new he was a
gym teacher I mean a basketball coach
he's doing Million Dollar Deals owner
financing
because you got people that just don't
want to deal with the open market or
during cover didn't want people in their
house or have two homes and just want to
just be done and trust someone doctors
attorneys you know these people aren't
hurting Financial they want a better
program uh so yeah you can do it in
every Market you want to here's a stat
all to the people that might be thinking
that a third of the property United
States are free and clear a third and
presumably I think we can at least make
the Assumption if they needed the cash
they would have done a cash out right
they would have pulled some money out so
these people are great with doing their
price your term
and don't do it
and how do you find these folks there's
actually okay so we usually talked with
just like I told you I started dialing
years ago the the expiry that for sale
by owner the for rent by owner you'll
stumble upon some free and clear there
but you can buy lists one of my favorite
lists is out of state free and clear
so they're out you know especially post
Kobe but it was always a great list
might be a second home that's just a
matter of time before someone might look
into that you know so yes that's an
awesome list
so your
your identifying these folks and what's
the program what what's the pitch
um the simple script this would be for
anyone even if they had because you
don't know yet what the underlying debt
is right let's say you didn't know they
were free and clear my simple script to
almost everyone at the opening is hey
James I see your prices x 500 000. if I
can get you to your price I haven't seen
you home yet but just hypothetically if
I can get you to your price I open to
own a financing or lease purchase or do
you need all your cash out now to go buy
something else like if it's a family and
they're trying to go buy out another
home we're not the buyer but about 38% of
the people we talked to James are open
to at least a conversation
and then out of those you get about a 10
to 15% where you have in-depth
conversations and see if you can solve
that you know whatever it might be a
goal or a problem
so
if you are a traditional seller
and you
you need to sell your asset to move on
this is likely not the program for them
yeah unless especially if they have
Equity that they need to get out right
if they want to sell it for debt relief
and move on they don't have any Equity
great program right because they don't
care they just want relief but if they
have equities sitting there yeah and
they want to go buy something for say
for a family home they gotta move to
another town they've got to have all the
equity all right they got to go
conventional then
I can't wait
so
the market is there uh you know a third
of the country I didn't know that that's
an outstanding stat of the properties in
the country are owned free and clear 38
percent uh are willing to have a
conversation 10 to 15 percent uh are
in-depth conversations and then it
probably Falls quite a bit to the deal
maker if they can close or not exactly
okay yeah so let's explain the system to
to the folks if if you will in your
words you know top down you want to
cover all three different ways
uh let's live and then we can see what
you have for time let's live in the on a
financing category for a minute since we
started there yeah uh because we gave
them the stat and if we leave them
hanging so so here's what's interesting
with the owner financing most of our
deals are with the seller getting them
to their top number as I alluded to in
doing so by making monthly principal
only payments not interest
now I say most because just a case in
point the building is a great example
all sellers won't do that forever so
sometimes you do kind of a hybrid where
you'll start I did it on the building
you'll start for about 18 months or two
years with principle only so it hammers
it down it's a Great Recession play
right recession hedge and then after
that you take the remaining bounce and
then you amortize it over some kind of a
schedule or you tear the interest up
over time so you both win that's the
whole idea that gentleman said to me I I
don't do that I I do interest here's
what I want for a rate and I said well
we only do principal and we came to a
happy medium where we split it up we
both won
so the the audience has to be thinking
well if
if it was worth the dollar amount that
they want they would have sold it so
where's the magic happen here what's the
missing piece uh two things number one
they're usually gonna get a premium so
that that but but more important on that
deal I'm telling you about is remember
he didn't want cash for a state in uh
tax reasons that's the usually the catch
with the people that are free and clear
and they get that
and let's picture this uh James let's
say they didn't want a for trust
planning reasons or tax reasons they
that wasn't a goal of theirs they just
want price and so to your point let's
say they're on for a half a million I'll
just use that number
if I'm gonna make monthly principal
payments of let's use a round number so
we can discuss it of two grand a month
do I really care if I pay a premium of
let's say 10 grand on that price when in
five months I'm going to eat that down
in principal payments no
especially if you've got a 10-year term
it doesn't matter what the market does
intent because 10 years is a long time
and then you get five months to eat that
up so now ego wise or whatever you want
to call for their planning they got top
dollar for that property
Okay so
but but where's the second part of the
transaction now that you've got this uh
this parcel it's worth a half a million
dollars or that's the price or 510
whatever it's going to be right two
thousand dollars a month is what they
want in payments okay now what
as far as the exit and the next steps
yeah so okay let's go with the it
doesn't matter the term it's gonna be
five or ten how we exit all these
properties at the front end because
there's an advanced strategy at the
front end is rent to own
and it's very very specific because you
and I can go on a lot of podcasts today
or YouTube today and find Educators
saying oh just put a buyer in there with
rent to own and they don't cash out it's
okay you get another buyer and that
might be okay for their legal agreement
but morally and ethically it stinks so
we set up our buyers it's complete
inverse relationship my son Nick has
done this for years as our buyer
specialist inverse relationship meaning
I will tell you that if you listen to
them right now publicly they'll say that
about 20 of their deals get cashed out
tops if they're good uh our default rate
is somewhere between two and seven
percent tops and that's because people
are still going to have life events
regardless of how good we are at putting
them into a mortgage ready position so
we set them up to win there's a huge
difference in that component right there
without Community than than anywhere
else I see so it is going to be rent to
own now if we have a longer term let's
say it's a 10 or we own the property sub
too forever
I will say we will say to the buyer hey
if you can prove yourself over the next
two years you never miss a late payment
monthly you can get your deposit up
eventually to 20 we will then want to
finance you so now you turned a very
lucrative deal into being the bank and
having a super lucrative three payday
deal
but you should stop with rent to own
so
that would entail I would imagine
extensive vetting
on at the onset yeah all of it does yeah
it does absolutely
yeah so they've got to go through so
okay so there's two tiers here just to
keep it simple the people that need
credit enhancement
we look at everything it's not someone
who had a 30-year problem can't run
their finances that's not who that's not
a good buyer a good buyer is they had a
life event a legit life event that we
can track the third party company looks
at this hey ahead we had a death a
divorce code but whatever it might be
we're back on our feet they get a third
party uh uh credit worthiness and
mortgage ready plan that says hey if
they do ABC they jump through these
hoops they're going to be mortgage ready
in blank months 18 24 36. so we set that
up so that it fits with inside of our
term with our seller that's the people
that need credit enhancement however
post covid there's a there's an enormous
onslaught of entrepreneurs that are
leaving W-2 to go into their own
business there's a record amount right
now as you probably know so they have
credit they have cash they only need
seasoning for two years those are great
rent to own buyers
great rental on buyers
those are the two kind of categories so
what are you selling this property to
the
uh that that exact Avatar you know their
W-2 and uh they've left that now they're
doing their own thing they're not
qualifying for traditional financing or
they're like me and they're just
freaking exhausted on the process and
don't want to be bothered yeah uh how do
you take the half a million dollar uh
option or lease option and convert that
into cash for you guys yep so the then
that's where the three pages come in so
I'll insert this so let's just say I
don't not knowing comps right in the
whatever house we're talking about if
I'm getting in there at five and I know
every month I'm hammering principal down
we're probably gonna be five and a
quarter to 550 on a terms creative
financing uh arrangement for the buyer
and they not only don't argue with that
they welcome that because they they
thought they couldn't buy and we're
putting them in a vehicle they can
actually act like a homeowner now so
payday one is they're coming to the
table with their down payment a lot of
these W-2 people James don't even
realize because they're not in our world
they they don't realize that they they
can't buy a home yet they go to the bank
with their 50 60 100 Grand and the bank
goes oh no no we need two years of
seasoning so they put that down payment
down with us that's payday one
non-refundable
the payment you and I used in our
discussion was two grand so if I'm
paying the seller to a grand I might be
at about 2500 I'm going to look at the
current rates and see what they are
going to pay eventually for a mortgage
and I'm going to try to be around that
uh I actually like to be a smidge hire
so they have incentive to take me out
eventually so that Delta between those
two numbers that's not payday 2.
okay so so just to be clear uh two
thousand dollars a month is going back
to our original seller yeah you're
taking a look and saying okay if it was
a half a million dollar purchase or a
525 purchase and it was a 10 deposit
um at you know if the rates are five
percent at six percent six and a half
percent whatever it is because you're
not a W-2 borrower your payment would be
26.50 a month exactly so we're at 26.50
and now that 650 a month that's payday
number two correct
and then payday 3 is interesting on this
on the type we're talking about
especially because let's say we only
went to five and a quarter on this we
didn't go crazy on the markup so it's 25
Grand sitting there
well every month 2000 came off the
principle so if they had a 36 month term
that's 72 000 that came off a principle
you just picked up another 100 Grand at
most 95 or whatever that comes to 97
Grand on payday 3.
just by principal pay down a markup
so that's why you're insisting on
principal with your initial seller yeah
even if it's short term you know and
then you convert okay so you're taking
their 2000s they're paying you the 26.50
you're taking the 2000 from your tenant
option buyer and you're using their true
Grand to pay your seller back and
because that's a principal only deal
you're actually taking two thousand
dollars a month off of your principal
balance every month yep okay every month
so if you went three years like you say
that's 66 Grand no that's that's uh 72
73 78 000 yeah that comes off and that
was their money so payday 3 is what
appears that you're only making twenty
five thousand dollars you're making
close to a hundred because exactly
you're paying it down with the other
guy's money so I'll give you a metric on
this
um so simple because most listeners this
will apply to
um if you can if you're purchasing a
house that's free and clear for at
least 200 Grand I'll use round numbers
or up and your monthly payments at least
a thousand dollars a month principal or
higher and you get at least four-year
terms just four years
that's a six-figure deal all three
paydays
wow
every time
as long as you plug and play those
metrics
and the deal you're making with your
seller on the first leg
or is that a lease option or is it or
are you taking title at that point how
does that the mechanics of that work and
the one we just discussed we we buy it
we take title yeah and we usually do so
with uh no money down so you'll have to
it's the only time you come out of
pocket so for a new student they might
wait till they get a few deals we'll
have to pay the transfer tax for the
sell if it's a state Most states have it
uh because you can't expect to go no
money down and then they pay their own
transfer tax that would be insane
so we do have a down payment if you will
but it's going to transfer tax
small
Okay so
you're taking title at that point and
it's just a standard note now you have
possession of the home sellers for all
intensive purposes out of the picture
now their Bank Yep they're gone and are
they requiring uh significant deposits
from you no no like most of them are no
money down I'll give you there's always
exceptions the we did a home uh you're
in New York so you know the we did a
home in Cape Cod we've since sold out of
this but it was on uh Overlook on a
bluff Overlook in the open ocean
we actually bought it from a realtor who
worked out of the Boston Market who
couldn't sell it but also had you know a
Neil mother and some other circumstances
that we were able to help her with so
945 000 purchase she was free and clear
2500 a month principle only we put eight
grand down that's like an exception to
how we usually do it but still 945 000
home for less than a percent down
wow but we solved her challenge which
was she wanted to stay in the house a
little while help her mom Etc so again
you all we're doing people say how do
you convince you don't you're you ask
intelligent questions you listen if you
can solve or help them accomplish a goal
great and if not you move on you just
look at Health that's all you're doing
are most of these sellers are turning up
and going through a formal process title
all that good stuff yeah if we're good
question if we're buying on a financing
or subject to existing yes because it's
a transfer when we do a lease purchase
no they don't you know usually it's
simple paperwork
that is that is fascinating and I guess
it's just it's a matter of wrapping your
head around
um and we had talked about this before
you you get into this groove in this
pattern and you're so used to doing
things your way that you forget to take
the time to to look around and
understand that there's what your goals
are are not
your clients right right like that's
that is mistake number one I see agents
make they're constantly projecting their
opinions and their goals onto their
clients and most of the time those
things don't align and it starts to sour
the relationship straight away yeah
because they're looking for you said
agents it could be the agent look at the
listing or could be an investor looking
for a deal and they get in their own way
all you can do is focus on the seller
and you'll be much better off they feel
that they know that
you've done this uh I know your office
building was one case but have you done
this on Commercial properties uh in any
significant measure yeah well we've done
I've done a six I've done a four you can
do any literally any asset in fact right
now there was a just last week in our
community somebody came across a 100
unit building where the gentleman was
looking he had an existing loan so this
would be a sub too but it's a form of
owner financing and it was a like a 2.7
percent rate and he was looking for
someone to take that over and do a sub
two he's a Savvy investor he just was
spent age-wise he didn't want to do it
anymore he wanted to become the bank so
you can do this literally in any asset
class people do with boats and planes I
mean it's not just real estate one of
financing has been around forever
and the the other two scenarios would be
a sub 2 and a lease option correct yeah
exactly do you want to run through quick
scenarios on that as well yeah yeah
right so let's do a quick sub 2 deal
what does that look like I liked that I
was gonna go there next so thank you
because right now rates are wherever
they are six is it let's say well
there's so many loans sitting at the
twos and the threes and the fours that
we're now buying subject two so that
means if you're brand new listener just
let me not go too far ahead means you're
purchasing a home and the deed is coming
to you just like on our financing the
difference is the loan is staying in the
seller's name meaning they're the
guarantor you will never be the
guarantor you're not assuming it you're
just making payments on it until such
time you cash it out
so you actually own that home for as
long as you want and that's a great
scenario for starting as a rent to own
with your buyer and then converting it
to owner financing because you don't
have a clock ticking on a term
no wait a minute
on your sub two deals sub two subject to
folks yep yep your
finding a seller who has a mortgage
you're buying the home from them and
they are remaining as the guarantor of
the note correct that's actually done a
lot more than on the financing right now
believe it or not because remember when
you started the show you said are these
people that have a problem owner
financing no sub two yes they're usually
uh we just did one again towards the
cape that the couple was getting
divorced this is a great scenario life
event happens uh they rehab the home
they ran up credit card debt they were
forty one hundred dollars in arrears so
they needed relief like yesterday so we
purchased a home
we found our tenant buyer got our payday
one paid the small 4100 in a raise and
we still to this day on that home can
you give me just uh if you don't want to
use that exact one that's fine just give
me give me numbers
I'll be close on that one so that was on
the market with a realtor I want to say
for like let me see we sold it in a
forest so it was like
385 or so okay
385 and four yep and it expires or it
expired yep my son-in-law Zach found it
and when it expired they had already
given up so it was 4 100 in arrears
which was literally just one mortgage
payment and then some late fees and
Soft Data built up
okay so you find this expired you call
them up and what what's the pitch how
are we doing this what's the shot Zach
called it but I can tell you the
conversation with an expired is very
very simple
if it had sold where are you going
how soon did you need to be there
and what if it doesn't sell because now
they already didn't sell once right
when you ask those questions I don't
care what status the the seller is you
get the whole scenario
uh where are you going if it sells how
soon do you need to be there and what if
it doesn't what's your plan B
when Zach called them though they jumped
right to we're in a rares one of the
spouses was on the deed one was on the
mortgage you know it's just a mess they
weren't talking
one was out on Block Island and one was
somewhere else out of state and so all
he had to do was solve for that 4100 and
move quickly and we could we also knew
James important to know a lot of these
deals are contingent upon finding that
buyer just so your listeners don't think
oh man I gotta take on all this stuff no
they usually contingent upon finding a
buyer but if we know the market real
well this is in our backyard essentially
and that price range is a very very hot
price range we knew that would pop
before the agreement even got done to
close the deal and it did we found a buy
before that thing even got to the
closing table
so what are the mechanics of this though
because I'm still missing some pieces
they have a mortgage yeah so are you are
you taking title in this instance yeah
we took title uh attorneys run it just
like a regular settlement statement so
picture a settlement statement where you
bring new money to the table and a bank
shows up there right you know XYZ
mortgage company brings new money to the
table the settlement statements
generated the exact same prorations
everything happens buyer and seller side
however where that new money would show
up it says subject to existing loan with
Mr bank and it lists existing balance
right there that day
and that balances out the settlement
statement
are you taking Title Here yes
so how is the bank
um the the bank is essentially losing
their collateral no no because the the
mortgage stays on there with all that
stays in place the title changes the
collateral doesn't change so the
guarantor
stays guarantor stage two everything
stays in place see all the bank would
see let's go there for a second actually
all the bank would see is that perhaps
there was there was some family planning
on trust work done because we're going
to take that in a let's say it's one two
three Jump Street we're going to take it
in one two three Jump Street Family
Trust
it provides a little bit another lay of
um anonymity in in the banks back in
gosh I think it was way back in 82 or so
they they came out with the Garmin St
Germain act that did not trigger do on
sale so you did trust planning and
Family Planning like that so that's why
we do that now you're not actually
putting it in a trust but that's the
name of the entity uh you can do entity
or trust depending on what the attorney
wants to do in that state just so we
don't get too detailed yeah because I'm
not an attorney yep okay
so and by the way that's important to
say James because you can get you can
call I called uh for a student in Jersey
recently right near you
four attorneys four who said oh no you
can't do that here I said guys this is
sound right so I called our attorney who
operates in 32 states and she said of
course you can there's tens of thousands
of them done every every year in Jersey
and New York so we just had to find
someone that does these all the time so
that's for you listeners to know that if
when you find the right attorney you're
fine don't let someone tell you you
can't find something that just does
these and they'll tell you what you can
do what you can't do now is that part of
the program is there a network of
professionals that that we can tap into
Yeah Yeah we actually have a fine
attorney service but then we finally
have to it was a lot of years we found
this one that is in 32 states so it
deals with a lot of our Associates that
we do deals with
okay so you're getting legit Title
Insurance you're oh yeah actually
getting title yeah
um the it's just the the collateral is
remaining the the guarantor is remaining
right it's set up where it is
in a trust maybe not in the trust but
it's set up is one two three Family
Trust yep it doesn't trigger uh a
concern on the bank and to be candid if
the bank's getting paid they really
don't care you just said it I was just
gonna say that they're not they want
they want to get paid you pay you pay
your bills on time and you're fine
that's a big misconception people think
that that banks are you know sitting
back going oh how are we going to take
this back yeah thanks thanks don't want
to own real estate they suck at it right
and uh it it sells and they know they do
to their favor yeah it took a few cycles
for them to get it but they get it now
but they don't want to be real estate
it's too costly yeah it is yeah and it's
a different standard they have to adhere
to it it's it's a lift so okay we we're

gonna buy this deal it was on the market
for 385. what are we paying for it
um we actually took it for just the
existing uh debt this was it was like
367.
uh and the the caveat here was the
husband because they ran up debt
rehabbing this thing
um they may have watched a a home home
network channel special but they ran up
personal debt and the husband said I'm
not signing off unless that gets paid so
what Zach did with them very very
strategically well he said okay it was
like uh I want to say eight grand
uh we'll pay that in installments over
the next I think he did quarterly
payments of like two grand
so that's how we solved dozens problem
the wife just wanted to be done and
that's how the deal came together and
the arrays of course okay now you have
taken title uh you immediately start
paying that note
yeah as soon as we closed it so again we
had some you know the runway right now
with title companies it took at least 30
40 days and while that was happening my
son Nick puts it on the uh on the open
market the rent to own Market the terms
Market is such in demand right now that
this the amount of people that can't get
Bank financing so we had a buyer in hand
with 41 Grand down which was 10 because
we went on the market at 410.
so you by simply putting it on the
market and advertising go back you're
going to provide financing I would
suspect having a victim of this over and
over and over that people will pay
significantly over market price to be
able to get in is that a fair statement
it is very fair now this particular
house where we're right at we were right
at Market we went to market now it's
even higher but yes they would have if
we pushed it higher and here's the punch
line you know who's in the home right
now that bought that and put that down
an attorney
she was going through law school and
unfortunately beat up her credit and
loved what we had
so she's in the home Tickle Pink
property's gone up since then
everybody's happy it's a win-win yeah I
I'm glad you said that because I could
see there being
um a misconception of who your buyer
pool is going to be
that needs owner financing and it's not
what you would suspect folks no uh
oftentimes these are people that are of
means
um there are life circumstances as Chris
said and it's just many times our job uh
because we're not W-2 Banks don't want
to lend and uh I mean it is a it is a
wicked hassle to it is through that
process man it's just grueling it really
is uh the amount of entrepreneurs we
have James on that note
um I can think of so many scenarios
where the buyers come in met with my son
and they own a cleaning business I could
think of one a guy's name was George
this woman attorney uh just this week in
North Providence a gentleman came in he
was almost in tears he got a divorce he
has a plumbing company does very well
but you know to your point they're not
going to finance him today
so you take this deal down at 367 you're

selling it at 410 you had the arrears
and you have the closing costs so what
are we talking about 25 30 grand you're
netting on Payday on the mark up and
then the principal paid on that one
because the loan was pretty well in
place I want to say it's like 480 a
month or so it's pretty good
you know six grand a year okay and and
you're then doing the same thing that we
did in scenario one if the I'm assuming
if the payment's two thousand a month
you're going in at 26.50 you're keeping
that 650 while you're continuing to pay
down that initial note correct yeah the
numbers on this are like 21 and change
Piti and she's paying us 25 and change
or 26 and change it's about 500 Payday 2
every month too okay now in this
scenario it's not a straight line pay
down though because it wasn't a loan
that was already existing existing for
that schedule right and I I guess you
just marry up your terms with the terms
of the node or do you shorten that up
and try and get them out in five years
ten years what does that look like for
you uh good question depends on where
I'll tell you what we do what we did but
depends on where the student is like if
it's their first deal would we try to
keep our friend on the policy and cash
them out sooner probably with us we have
enough deals going on so with her for
example she was one that we offered her
after we accept her and she thought okay
I gotta eventually go for financing and
go through that whole hoop we said to
her look if you can stay on time for two
years the scenario I gave you earlier
and you can bring your payment up from
the 10 to the 20. we will want to
finance you so there's no pressure they
love that
and so then we would have to marry the
terms and and make sure everything works
with the amortization but when they're
in the house prior to that James it's
they're just paying a lease payment they
get no principal credit until they get
financing
so you're not selling this to them now

you're they're signing a lease option
yeah rent to own yep and you're
requiring a portion of the down payment
now oh yeah they can't get in the home
unless they have they watch videos on
our site that that kind of pre-educates
them before they get to Nick they're
going to know that okay if everything
looks great in a solid jobs solid
everything checks out with the third
party
we prefer 10 but you'll get in the house
for three as long as there's a schedule
to get it up to 10. tax refunds
retroactive pay we had a sergeant for
example in the State Police that had
retroactive pain he said hey I'm getting
that in October I'll give you this much
you know so we'll schedule it out so
they get more and more vested in the
home and we're setting them up to win
because at the end they can't have three
percent in the bank tells them oh no
remember I told you you need 10 or
whatever it might be we have to make
sure that's in sync so that we set them
up to win
so those payments are in addition to the
rental payment yep oh yeah they can do
that up front to get in because then if
you don't you're asking for trouble
we've been there you you have a
glorified renter who someday has a dream
to buy and it's just not it's not the
same they don't treat it like a buyer
yeah you want people that are that are
vested that are have a goal they want to
own the home and you're you're providing
a hell of a service here you're giving
them the opportunity to get into a house
they otherwise could not afford
um or not that I couldn't afford it they
didn't have the structure to acquire the
home you're allowing them to get in at a
fraction of what the normal down payment
would be you're taking their rental
payment you're putting it through a
program that is bolstering their credit
because you could report rent payments
now right and it counts to fix your
credit and you're taking throughout the
course of the year two three five
whatever it is events tax refunds like
you said bonuses where you're clawing
one or two percent out every year toward
that initial down payment to get them to
that 10 percent so that within that
prescribed period of time
when they're when you're ready you can
actually get them traditional financing
at that point exactly and that's when
you're being taken out and the balance
of the payment is occurring exactly
so payday one is the few points on the
down payment Payday 2 is the Delta
between the uh pre-existing regularly

amortizing mortgage and the rent payment
and then paid A3 is when they actually
cash you out and they take title to the
home yep spot on yep what percent of
those rent to own folks default two to
seven
in our world which which in the even in
the world of lending is great it's
nothing that's amazing no
and those are usually legit like here's
the thing it's nice when you have longer
terms right clearly because you can add
the paydays up just by what you just
summarized however the longer the term
reality is the longer there is for them
to have a life event and things can
happen so you got to kind of balance
that and make it a win-win that's when
things come up like you know covert I
think out of at that time we had a lot
of properties we had like 60 something
properties and we had two defaults I
think it was two maybe Max three during
covid that's really good now why is that
if you have landlords listening because
they're buyers
so just like when they were paying a
mortgage during covid if they could they
paid it right they didn't try to skip
out whereas renters said oh rent
assistance and they they could take
advantage but if buyer can't do that
because we have to report their payments
when they go to get qualified they can't
say oh I took advantage of that I
stopped paying it's a different
mentality so you guys performed okay
through covid awesome
yeah awesome
wow okay what's scenario three now
that's a just a lease option yep lease
option actually pretty simple so we we
went from the more difficult to this the
the lease option is great for new people
because no title transfers I'm going to
control a home by way of a lease
purchase agreement we provide all these
in our in our forms uh for 10 bucks ten
dollars is built into the agreement
who's my target same thing expire same
thing yeah same thing it just depends on
their scenario so a scenario might be
they're not hurting financially they
have annoying debt they have a little
bit of equity and they're not so Keen to
sign that over to for sub two right they
just they don't know you so that the
trust level is not there so at least
purchase is great for them and it's
simple for the student it's great for
them because they still have all the
accounting benefits and they control the
deed and it's great for the student
because it's little to no risk because
it just internal lease agreement
it's very simple you can't do this in
Texas because you can't be in the middle
of of Elise and rent to own in Texas
what we call a sandwich uh real estate
right now you can
okay so
um let's do another mock scenario real
quick let's take a 350 house yep 350
let's say 350 and let's say let's give
them some Equity let's be nice they owe
300 Grand they have 50 Grand Equity they
either don't want to pay a relative some
people just don't want it they want to
keep all the money or are they for
whatever reason didn't sell in the open
market could be functionality and other
things that the terms buyers don't care
as much about so what do we say in the
least practice we simply say and there's
a clause it's Clause 13 right in the
agreement that says at the end of the
term let's call it 36 months or before
we're going to pay off the the debt of
300 which won't be 300 then it'll be a
little less but we're going to pay off
the the balance of the mortgage
retirement financing we pay and you get
your 50 Grand Mr Mrs sella
so if they can wait they protect all of
their equity
and we're again benefiting from that
principal pay now so that 300 is not 300
it might be you know 282 at the time we
still giving them the 50 but our
mortgage shrunk towards the end as we
paid that off the exit's the same way
that you and I went through no different
buyer
so
they had the market on the how they had
the house on the market 350 they owe 300
for a number of reasons like you said it
doesn't sell you approach them and
essentially you're giving them the
ability to walk away from the asset at
this point right this would be great for
uh folks who have another second home
they're going yeah exactly something
like that right yep okay they don't want
to deal with this headache anymore all
right
um Chris you're going to come in and
you're going to pay me x amount of
dollars a month which is exactly what
their Debt Service mortgage payment yeah
exactly okay Chris you're gonna pay me
The Debt Service and and for the next
three years I don't have to worry about
this headache
um you're paying it for me and uh you
have the option within that three-year
period to pay me the 300 that takes out
the bank or you would structure it where
it's whatever the loan is right that's
exactly right you want that money to
work for you and and Mr and Mrs Smith
you're going to get that initial 50.
you're going to get full full price of
it oh yeah yeah okay now we we've got
that deal buttoned up and we are not
taking title in this instance correct
now we go out and we find a buyer of
similar situations
right same thing yep they want to come
in and rent and then you're using the
same exit in the sub 2 on the lease up
exact same exit with the caveat being
what we kind of talked about both of us
earlier saying hey how soon would you
cash them out well if I'm structuring a
three-year lease purchase I absolutely
want to make sure I'm finding a buyer
that pre-qualifies with a mortgage ready
plan that's 18 to 24. that leaves room
for wiggle room so we can under promise
with the seller make sure we cash them
out on her before their date that's
super important on the lease purchase
and different from what we talked about
earlier we have a little more leeway in
the back end no I would suspect that
default rate is that higher no same
because again we're going to be super
picky and we're going to keep our finger
on the pulse we're going to check the
portal that the credit enhancement
company has so if they have a drop off
the service we know instantly and
they're in default like we keep on this
right through the whole process no
surprise at the end you know all along
the way is this thing tracking the way
it's supposed to track
and how do you know if the monthly
mortgage amount is market for rent how
do you know if you're going to be able
to to pull that off as far as getting
them qualified at the end or just
getting it sold uh so if the the monthly
mortgage is 2500 a month and it's a
three bedroom what if the market for
rent is 2 000 a month for a three
bedroom uh two answers there both
important one is we're going to check
that ahead of time from either
rentometer the number of different
rental comps right just to make sure
we're in sync to your question but
number two sometimes and these are odd
but it happens one of my first deals way
back when I remember happening they if a
seller needs to move on or to second
home whatever some of them will
subsidize that 102 a month as long as
you're that conversation up front number
three
those are always if you if you're
sketchy thinking I don't know if there's
a spread you're going to always make
that contingent upon your buyer I don't
care how good you think it is so you
you're not taking any risks you say to
the seller uh you know what James I'll
take it out to the market I think we're
pushing it but I'll take it to the
market and let's see what we get if I
get someone great and if I don't I come
back to you and say hey you might have
to subsidize this to get this done
because at Market's speaking it's not me
and you I there's nothing I can do about
that there's no demand so how long of a
period uh do do they typically give you
to find if this is going to happen or
not if there's no stress with them
making the payment right if everything's
okay uh usually 90 or 180 Max
we can usually get it done at nine you
know what I tell a seller honestly I say
look I I don't want it that long like a
relative would take it long I'm gonna
know within 60 days the Market's gonna
scream to me whether this thing's priced
right because the terms Market's so big
I'll give you another stat on that we
have a mortgage broker in our community
who does hundreds of loans been in the
business since before the crash of 08
like knows his stuff he said right now
17 of his applicants are getting
qualified for loans 17. so the demand's
there so you're going to know in 60 days
whether you're going to sell this thing
or not on terms and not only is the
demand there I think the demand does
nothing but go up from here you've got
so many things at play the
decentralization right of the big cities
people shifting from W-2 to 1099 Banks
uh you know we're in an inverted curve
now which means rates are going to be
coming down in the future and as rates
come down Banks even further tighten the
reins Banks don't want to lend as the
rates are on the way down it's happening
right yeah it's happened
wow
so we've got communities because of
everything you just stated statistically
and just factually we've got three I
think going on four communities right
now of companies you probably know like
large companies that are doing
wholesaling flipping they have coaching
programs and they're calling us saying
and they're even going to speak at our
events because they're saying okay I
don't know what to do with the students
like The margins are shrinking the
demand shrinking these cash deals so
they're coming to us and saying Teach
our students how to do creative sure
that wasn't the case for a lot of years
so it's this the demand now is pulling
from all directions yeah I mean this is
a perfect storm for you yeah and again
why I thought it would be perfect to
have you back on so I appreciate it no I
appreciate it so when when you're
coaching these students up are you
recommending that they stay in their
geographical Market is this something
that you should only be doing where
you're located or is there
decentralization potential here yeah
great question only because a lot of
niches as you know teach and rightfully
so teach like strategies where they go
in time markets uh we tell them to stay
within 50 miles of where they are okay
unless they're out in middle of nowhere
they might have to expand that but
there's there's enough Dales there James
like picture the ones we were talking
about do you really need to do 15 or 20
a year no there's plenty of deals in
your Marketplace to be quite happy with
the with running your business at
whatever level you want to run it and is
there any Market that you would say if a
student came in you would say this isn't
going to work there
okay it's not a matter of not working
it's a matter of how hard it's going to
be meaning if you're smack dab in the
middle of a of a city that's still hot
Market or like during after the the
craziness of the onslaught of covert hit
and then everything got hot it wasn't
that you couldn't do it it was you had
to speak to marcelos to get the same
deal so I would tell them don't not do
it go on the outskirts a little bit of
where you are that's all just go a
little bit further out so it's not as
much demand conventionally
uh can you talk for a couple of minutes
on
what you what you get in the the
coaching program are there events coming
up I don't know if you're comfortable
talking about pricing if not can you
tell me where we can find pricing yeah
yeah a couple things so the events are
twice a year so no matter when they're
hearing this the wicked Smart Summit
runs at the end of March every year
these events are two day events with a
third day for VIP the people have the
option to for a few in a box to tag
along and they get to hang out with all
our top students the second one is in
September it's qls live that stands for
Quantum Leap system qls live is in
September usually mid both of those in
Rhode Island
so those are live events we do every
week we do free stuff that they can come
to every Thursday at Wicked Smart sit
Downs things like that they're all on
the website though to answer that
question
Smartrealestatecoach.com forward slash
events
because we're big on free James I know
there's a lot of shiny objects in the
industry uh we'll give a free book away
here in a second too but I want people
to go like go on YouTube look at 240
might be 250 now of what you and I just
talked about there's that many deals
posted we whiteboard and we show you the
ends the outs The Good The Bad go look
at all that if it's a niche you want to
get behind great then come hang out but
if not at least you did you due
diligence for free
and this is available they could
actually see those deals on the website
they could see them on YouTube go on
YouTube type in Smart real estate coach
this street playlist mainly deal
structure Sundays 200 plus of them for
the last 200 plus Sundays there's uh
motivational Mondays in this q a
Thursdays three a week every week
and is that uh so if if we want to sign
up are we signing up for those events or
is there other coaching intermittent
that goes along with it or is it packed
into those three days uh good question
no you'd want to so you want to be at
the event whether you're stu whether
you're with us or not right just because
you have a chance to meet the family and
meet the coaches and camp out but to
answer that question there are coaching
programs running from group coaching uh
that runs only 90 days all the way up to
being working with a certified coach so
they're literally calling your buyers
and sellers with you and Consulting you
right through the deal because this is
where people get in trouble they go to a
course and they go I don't I didn't know
all this was going to happen and then um
myself and Brian O'Neal one of the top
students uh coach one level that's sort
of almost the highest level and then I
coach five sort of very very privately
above that level so this thing runs from
you know uh six figures all the way down
to a couple Grand just depends on how
aggressive you want to get
so to put an Roi to that which would be
important actually the ROI on that uh
these deals you and I are talking about
is you've probably already figured out
when we talked through the numbers they
range the three paydays from a low of
say I'll be very conservative low of 40
45 Grand high of quarter of a million
per deal
so you're learning a skill set that
you're having for Life how many of those
do you really need to do to to get a
really cool Roi that's comfortable for
everybody's different but they're very
lucrative
and it's it's an incredibly low bar
like there's no massive barrier to entry
here no it's not like you're buying yeah
it's not like you're buying you're not
you're not putting up massive amounts
for properties
this is fascinating stuff man what's the
uh the website again uh
Smartrealestatecoach.com
and I told you at the beginning if they
want to go I'll give them the so don't
forget that if they don't mind listening
to you and I from New England I spent an
hour with them uh on a free master's
class just go to it and so there's no
one does no one bugging you there you're
watching it on your own it's at
Smartrealestatecoach.com forward slash
masters class that's it just go camp out
you'll get kind of like the A through Z
whereas you and I were going through
case studies we have case studies we
show you the numbers you can follow it a
little bit easier than you know verbally
and is that how we get the the giveaway
for the book uh the book is at Wicked
Smart books Wicked Smartbooks.com
and for your show it's forward slash
free real
all right as always folks all of the
links will be below uh in the episode
guide Chris congratulations on all the
success man I'm glad that you're you're
still smashing and uh I'm gonna try and
see if I can't make it work March is is
too tight but September I want to try
and make it out there I'd love to
connect with you and I think this is a
fascinating uh another tool to have in
the tool belt man this is a a great way
to help achieve that Financial Freedom
that we're all all running down I
appreciate it I will see that the team
gets you a few VIP tickets and if we can
help it any other way obviously let me
know I appreciate you having me on I
really appreciate it man Chris
Prefontaine
Wicked Smart folks this is uh real stuff
and a real story our field guy is out
there crushing it in a in a really
creative way congrats again thanks buddy
appreciate it thank you as always
everyone please stay safe
foreign