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The 3 Paydays of Buying and Selling on Terms with Chris Prefontaine

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In real estate investing, the more you understand about different deal structures, the more you can accomplish. In this episode, Jeff interviews Chris Prefontaine of Smart Real Estate Coach. Chris is one expert on buy and selling on terms, and is the author of multiple books, and a podcaster. In the conversation, Jeff and Chris discuss what it means to buy and sell on terms, what it means to be a transaction engineer, how you get paid three times with terms deals, and so much more. Grab a pen and paper and settle in for an interesting and informative conversation!

Episode Transcript

Chris Prefontaine 

Now one of the three paydays: Payday one is we exit most of our deals at least the beginning on rental. So payday one is a non-refundable down payment that we collect from our buyer, their buyer than our tenant wants to be buyer, their buyer, they just can’t especially the COVID get there yet; Payday two is the spread between the annoying debt or the seller payment and what I’m collecting from my buyer monthly until they get their financing as piti to cumulates over the term; And payday three is really neat because payday three is at the end of this rental term, our buyer who needed more time perhaps because the COVID now gets a loan, and they cash us out when they cash us out. All the principal pays down throat that deal and underlying debt accrues to us and of course any markup so that is a big Penny three is a big one. That’s tends to be half of the three paydays typically, you know, so my pain is 80 grand and probably 40s in the back end.

Jeff Stephens 

Welcome to Racking Up Rentals, a show about how regular people those of us without huge war chest of capital or insider connections can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans nor are we posting We Buy Houses signs are just looking for “motivated sellers” to make lowball offers to you see we are people-oriented dealmakers we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Thanks for joining me for another episode of Racking Up Rentals. Show notes for today’s episode are going to be found at thoughtfulre.com/e69. Please do us a big favor, it’s like really personally doing me a big favor. And I would appreciate it so much if you would hit the subscribe button on that podcast app. It really does help the platform’s spread the message about this podcast to other thoughtful real estate entrepreneurs. Onward with today’s episode.

In today’s episode, I’ve got a real treat for you, I got a very special interview with Chris Prefontaine of Smart Real Estate Coach. Now, if you are a fan of doing creative deals, if you are a fan of the idea of deal structure and thinking outside the box to use a cliche, then you are going to get a lot out of this episode. Chris is an expert on what can broadly be called buying and selling on terms. Now we talk a lot about seller financing in this podcast, obviously. And this is going to be a slightly different flavor of those topics. Chris has written books; he’s got his own podcast as well. We’ll talk about all of that in the episode and the interview. In fact, be sure to stick around towards the end, because towards the end, he makes a very generous offer to get one of his books for free. And you definitely are going to want to take advantage of that. But in this episode, we talk about what it means to buy and sell on terms how you get paid three times when you do that, what it means to be a transaction engineer and ultimately how you can control real estate and make money without necessarily being the owner. Exactly. And the landlord. So here’s my advice to you. If you are driving right now, or walking the dog or taking a run, thank you for listening First of all, but plan to maybe listen to this episode a second time. If you are in a place where you can grab a pen and a notepad. I think that’d be really wise. Because we’re going to talk about some advanced strategies, some new concepts and things that you’re going to probably want to go back over a couple times in your mind and re listen to so get ready to learn some exciting new things get exposed to some new ideas about ways that we can do creative, entrepreneurial real estate investing with Chris Prefontaine. Let’s dive right into the interview.

Okay, Chris, thank you so much for joining me. Welcome to Racking Up Rentals.

Chris Prefontaine 

Yeah, I’m excited to be here, Jeff.

Chris Prefontaine 

Yeah, sure is. Well, the first question is we are a family-owned entity. It’s myself, my son in law Zach and my son Nick. So we operate in Rhode Island as you know a chatting off here. We do buy and sell every single day in the trenches still. It’s a big part of keeping our finger on the pulse. In addition to doing that in our area, when I say that we buy everything on terms I know your audience loves this type of stuff. We buy everything lease purchase, owner financing or sub to subject to and then we Go out Jeff and teach that exact same thing. So it’s like no different, you know, protocol for us. We do that with students around North America, mostly United States. And when I say it’s the exact same, we teach the exact same methods, the only difference is we’re doing it with them in the trenches. I think there’s a huge gap in the industry that you know, they can sell your stuff. Great, but how do we get it done? How do we do deals? So we do deals with people all around the country?

Jeff Stephens 

Awesome. Wow, that sounds that sounds great. And can you tell us a little bit about how did you get started with terms were you? Were you born with a, you know, predilection for terms and face to face negotiation? Did you did you learn that?

Chris Prefontaine 

No, I mean, I’ve been at that real estate in general, from 91, all the way till 2008. Crash after the crash is what spawned off everything we do now. Because after the crash, we learn things the hard way, like don’t sign personally guarantee and bank loans, don’t use banks period. don’t overload properties don’t bring investors on unless you absolutely have to do a cash out or you can have a big back end. So all that was because of everything that went on in a way. And then we said, All right, if we were to build this box, again, if we were to go back in the market, what would it look like? And what it would look like is everything I just said, don’t do that again. And so that’s how we built all this. And we built it to one of the storms not knowing COVID, clearly, but we built it. And then it was tested during that and absolutely cranked and thrive. So I’m super happy about it.

Jeff Stephens 

Yeah. You know, one of the things that I have, I’ve thought about a little bit that I think it’d be great to discuss as I imagine that you just like I am thinking, thinking ourselves now. Now that something unexpected, like COVID is hit right, which is its own totally unique thing. And different, of course, then the 2008 crash and different I’m sure then whatever might happen in the future. But there are definitely some reasons why I’m thinking myself for doing things in this sort of off market way directly with real people, non-banks to a large extent, what are some of the things that you are just really thinking yourself? Your you know, your five years ago, version of Chris, that today, you’re really reaping the benefit of that. So it makes sense.

Chris Prefontaine 

Yeah, so in other words, what do we do that that’s reaping now?

Jeff Stephens 

Yeah, yeah. Like what? Where are you glad at this exact moment that you do business the way you do especially?

Chris Prefontaine 

Well, first and foremost, I’m glad that the mind the model that we built to weather storms, weather, the storm, you know, dried, it didn’t work either. But more importantly, on the people side to your earlier point, a couple things come to mind. One is the banks are turning on and turning off a switch, like did not even people involved. We think about it. So up rates down, but I pushed the bar so high that I just pushed out jumbo buyers and every other buyer that was borderline credit or reserve or down payment did. And then when things if things change back again, they flip the switch, it just doesn’t seem fair to the buyers and sellers debt can just flip switches like that. So I love the fact that most of the national market, the amount of transactions being done outside of banks, is growing dramatically. I don’t know what your prediction will be. But I know in the 90s it was two or 3% of total transactions were done, you know creatively outside of banks, owner financing and things of that nature like we do. I don’t know the percentages now. I think it’s creeping into the teens, and I can’t wait to go higher and higher.

Jeff Stephens 

Wow, that’s great for you.

Chris Prefontaine

It’s great. For me, it’s great for the audience. Yeah, it’s gonna be really cool.

Jeff Stephens 

Wow, that that’s great. I’ve actually often wondered what that number is, I mean, my instinct, my intuition says it’s probably becoming more. But that’s, that’s really great to hear. I have this I don’t know about YouTube. But I have this fundamental belief that that the greatest likelihood of both parties, a buyer and a seller, coming up with something that is truly as good as it can be for both is going to be infinitely easier when those two people are just talking to each other, instead of with all these other parties and intermediaries and lenders and stuff involved. Do you I mean; do you share that perspective?

Chris Prefontaine 

Yeah, I couldn’t agree more. I saw John always think of storage as you ask. And this one’s easy that so there was a gentleman that sold us our office building so the office that houses us and some tenants we did on terms just like we teach, right? We just we live so he said to me, we didn’t have attorneys involved until the very end to close it. We didn’t have relatives involved he said to his relatives Look, I’ll give you for free we got this because he was a large landowner and he wanted to owner finance people say how do you find it you just look for people that you help them solve their challenges or their goals. It wasn’t a bad challenge. So he said to me why was this easier? What we just we talked to the table literally two meetings at his desk, then got the information over the attorneys and said Just do it. It’s so much easier to your point then hiding not hiding but being stuck behind attorneys and banks. Yeah,

Jeff Stephens 

Yeah, absolutely. So okay, I want to I want to jump into a little bit of the meat and the nuts and bolts of what you do. So you know in on this show, we talk a lot about accurate We’re very acquisition focused. And I know you know, from doing my homework and reading some of your content, listening to some of your episodes and stuff that you were both buying and selling with terms. So can you give us a sense for what is kind of the big picture of the idea of buying and selling with terms? And what does it mean to be a transaction engineer?

Chris Prefontaine 

Yeah. Okay, so buying and selling on terms goes back to just those three that we do it. So as you know, late 1800s, people buying and selling the terms, this is not new, all we did is wrap a ball around it and develop a system and more importantly, put some support behind it. So people know how to get it done with you. Right. So that’s the terms of the owner financing, lease purchase and sub two. But there’s always deals at the deals at the deals, it’d be like another whole show just to talk about all the nuances with that second party question, Jeff, from me, then was one that I’m doing the terms?

Jeff Stephens 

Yeah, it being a transaction engineer. So when you use that expression, what do you what do you mean by that?

Chris Prefontaine  Yeah. So that’s being in the seat, so to speak, as a transaction engineer to be able to pivot on on any deal, or in the middle of a deal. So you go into office building, good example. I go into the deal thinking free and clear, I’m going to make monthly principal payments. That’s how I like the structure, he came to the deal saying, well, I want a down payment on interest, complete opposite what I do. So what do we do? As a transaction? j, we said, how can we make that work? And I know you’re big on this. We said, Okay, how about I do principal only all the way for the first year, and then I amortize the balance, then you get your interest? We both one? Yeah, that’s a hybrid of two different ways to do things. And so that transaction just means you have the wherewithal to do that. Now, how do you get that overnight? No. I said to one of our coaches say we have certified coaches that we’ve taught that coached by me, and they’ll go through all these nuances in this deal, not great, just all kinds of what I said perfect, and they sort of be perfect. I said, your next deal that comes out you like that you’re going to know all these things for your students. Now you become that transaction engineer by having some seasoning.

Jeff Stephens 

Yeah, yeah. So I find that this idea of being a transaction engineer is not terribly common in the mainstream real estate investing world, even though there are people who have, you know, like, like Ron Legrand, who have had and still have a really big following and really advocate for this idea. But why? Why do you think this idea of being a transaction engineer is still not the mainstream? Why is it still all about buy low, sell high, find distressed people and all that kind of stuff?

Chris Prefontaine 

And now, that’s a really good question. Because I went for essentially 18 of my first years in real estate, not knowing this, like new pieces of it, but not really knowing it. Why I I don’t know the deep-down answer. I wish I had a magic bullet for you on that one. But the fact that banks want one reason might be you. And I could surmise that banks have a lot, a lot, a lot of money and a lot of stake. So they’re just plowing through the media, right? Whereas we’re not going to get mainstream, but we are going to slowly grow grass roots organically. So questions happening.

Jeff Stephens 

Yeah, yeah. I wonder if sometimes if it’s just some of these concepts are take a little bit more energy to digest and to really understand and then figure out how to apply. And I wonder if that deters some people, but I just feel like, gosh, if you’re going to educate yourself enough to get into real estate investing, you already have a learning curve, why not put you know, another 20% of that effort into it to learn some of these? Some of the they’re not tricks or tips, but just strategies about structure that can be so much more, so much more powerful, or can actually, you know, this is a nice segue to another question, I want to ask you, you talked about getting paid three times on a deal, right. So back to my kind of questions like, I wish, why don’t more people take the time to really realize how they could get paid three ways. So what do you mean when you say that?

Chris Prefontaine 

Yeah, so that I was gonna go there before you even said to tie it together. So thank you. The so when you because when you talked about why don’t they take the time? I think this is probably as far as other people’s not real estate related. It’s, it’s a mental piece. I really do. And here’s why. If and I’ll go back to the three paydays to tie it in if we teach the same exact skill sets, which we do we have it’s a base foundation course if we teach the same thing. Why then does some people why do some people come out of the gate in 41 days most recently and do that first deal, but others most recently, it took 365 or so. Same course, same everything. The mental peace is a major, major part of the game. So we bring that component into our training. Because I always say to my personal coaches and students you are the only thing stopping you. So I think that’s some of it to your point. Yeah. Because if they knew beyond a shadow of a doubt that they sat down with you and I and they said I get it. I know it’s certainty and predictability that I can get to the three paydays which I’ll explain Then they would do it right everybody would do it because here’s why they’re worth a lot of i three paydays and I’ll explain what they are as a family company about 75 grand per deal, all three paydays. But I have students that dwarf that, like I have students hitting 180 I just 10 minutes ago got a call from one of my more practice students. And I say, what’s all three paydays bill? He said, close to 200 200 grand on a deal one deal? Yeah. So once they get their head wrapped around that what now one of the three paydays? payday One is we exit most of our deals, at least at the beginning on rental. So payday one is a non-refundable down payment that we collect from our buyer, their buyer than our tenant wants to be buyer, their buyer, they just can’t especially the COVID get there yet. Day two is the spread between the annoying debt or the seller payment and what I’m collecting from my buyer monthly until they get their financing as piti to accumulate over the term. And payday three is really neat, because payday three is at the end of this rental term, our buyer who needed more time perhaps because the COVID, now gets a loan. And they cash us out when they cash us out. All the principal pay down throughout that deal, and underlying debt accrues to us. And of course, any markup. So that is a big payday three is a big one. That’s tends to be half of the three paydays typically. So it’s my pace at grant and probably 40. In the back end.

Jeff Stephens 

I see. Okay. Okay. So I want to I want to step back and just break it down. I want to make sure everybody can follow. So yeah, well, we just talked about there were three paydays on the sort of disposition, so to speak of, of a property. So what did it look like if we take that exact same deal that you then sold to a tenant buyer, right, with a lease option, I track that correctly? What did the initial either acquisition or taking control of that property look like on the front end before you found that tenant buyer.

Chris Prefontaine 

So if it’s a sub two, or an owner financing, deed transfer, so let’s go instead with first option simple for a new person to and that is the lease purchase time. So in all states, but Texas currently, with some nuances, you can be in the middle of you tying up the deal with your seller in a lease purchase, and then you rent to owning that’s what I call a sandwich cannot do those with some nuances in Texas. So given every other state, and frankly, the other two methods of more profitable so Texas is great, too. But how it’s tied up as a simple lease purchase agreement. And the lease purchase agreement gives us the option to cash that out, buy it from the seller or assign that to our to another buyer or tenant buyer. It’s very, after eight years of doing terms deals, I can tell you that it’s been tweaked and massaged and every which way. So it’s a very cool when you’re never as an investor, if you use enough forms, you’ll never pin down to any term. There’s wiggle room and there’s flexibility in the dates always if you if you’re treating it properly. So the short answer is lease purchase agreement. ties it up.

Jeff Stephens 

Okay. All right. So you, you tied up with a lease purchase agreement and you are exiting at essentially with a lease purchase agreement as well. And you are you so your initial option consideration on your acquisition side is recapitalized to you by the option consideration paid by the tenant buyer. Is that right?

Chris Prefontaine 

We actually we have built in $10 to all our agreements 10 bucks, so we don’t put down payments down. We had the room. Jeff, this is this is a good one. So we had the whole room stand up right before COVID last live event. And we said okay, we represent about 80 million in deals and students are in that room. And there wasn’t 120 500 spent on all of those deals for now. Bam. That’s funny. Pretty, pretty cool.

Chris Prefontaine 

We actually we have built in $10 to all our agreements 10 bucks, so we don’t put down payments down. We had the room. Jeff, this is this is a good one. So we had the whole room stand up right before COVID last live event. And we said okay, we represent about 80 million in deals and students are in that room. And there wasn’t 120 500 spent on all of those deals for now. Bam. That’s funny. Pretty, pretty cool.

Jeff Stephens 

Yeah, I see. Okay, so you’re shelling out you know, lunch money to get the get into the deal. But your tenant buyer is actually making a more significant option fee payment to you on the disposition. Super.

Chris Prefontaine 

Yeah, super important. Because without that you have and some people teach this it’s public. So not talking to school, they’ll teach just doesn’t matter. collect a deposit, they don’t cash out. It’s okay. Do it again, some really well-known mentors do that. Okay. Legally, that might be okay. But morally, ethically, it stinks. So we collect that down payment from buyer only after they’ve been through mortgage screening. So there’s some true underwriting going down. And then they say, okay, you need more time or you need to fix your credit or you need this, this or this fine. We’ll give you enough time. It fits within our parameters. We have a mortgage ready date, now we’ll accept your your actual buyer, you just need more time.

Jeff Stephens 

I see. Okay. So now are all of your purchases and your students? Are they doing the sandwich lease option? I you know, I think of like a coach on the sideline with a big binder of laminated pages and are running plays. So I would think of the sandwich lease option either as a play or it’s two plays put together, you know, back-to-back kind of the acquisition through lease option and the sale through lease option. Are you running that play for them? As part or are you coming into each new seller? You know, relationship with more of kind of an open mind and saying, well, maybe this one’s gonna work out better as a trustee, we’re actually going to take ownership. This one’s better as a sandwich lease option, this one may be better is just a signing a lease option or something like that, or are you saying no, we really like to run these plays when we can run these plays?

Chris Prefontaine  Yeah, good, good way of putting it. It’s the piece that you said, We’re open. Because there’s a myriad of examples, as you know, let me just give you some short ones. So if you come to me and you have some underlying debt, your current and you got some equity to protect, probably sandwich, you know, you probably have no reason to give me to transfer the deed, you come to me, and these are real scenarios I’m giving you come to me, you’re going through a divorce, you’re a month or two behind and going, Oh, like, we got to do something here, you’re probably gonna be a sub to purchase, and we’re probably gonna pick up a lot of equity, but we’re gonna fix that situation you have that you’re probably going to have a mess with. If it’s free and clear, my radar immediately goes to owner financing because we make monthly principal payments, which hammers down the principal, which puts you in a great spot to kind of be recession resistant. So it just depends on their situation math wise and their situation motivation wise.

Jeff Stephens 

Okay. So then, on that note, you know, something we talk a lot about on this show is is actually interpersonal dynamics, negotiation strategy that is about rapport building and listening well, and stuff like that. Yeah. So what are some of the clues maybe the insights that that we should have our ears pricked, listening for? When we’re sitting in that seller’s living room? If we’re thinking I’d really love to run the sandwich lease option play here? Yeah. What are some of the things that we should keep our ears and eyes open for that would be indications that that might be inappropriate play?

Chris Prefontaine 

Yeah. So absolute, most importantly, just understand fully from the human level? Why are they selling? What’s their motivation for selling? And then the data attached to that? super important. So if I get a lead sheet for my virtual assistant, I don’t go to the math yet. I don’t go to his note yet. I go right to a reason for selling. Because if it’s upsize, downsize, and no dates, not really something I’m really anxious to chat with tomorrow. But if it’s I got to reload a state, I have this date, a divorce, I got any debt, really, you just got to listen to the reason, first and foremost. And then can you solve it? Can you help them because it’s not always negative, sometimes very positive, they just want the most money over time. The next thing for us and these deals would be if there is equity. So it’s not a distressed situation. It’s just say, hey, I want the most out. Can they wait for? Or do they have to go buy a home with that equity for their family? That’s the only thing. My opening script in the living room or on the phone is? Hey, Jeff, one quick question. If I got you to your full price, I don’t know you. But if I got you there, could you wait for that equity you have that you’re trying to protect that you didn’t get perhaps as an expired listing or whatever? That’s a key question after understanding the motivation of the dates. Okay, those three things.

Jeff Stephens 

Yeah. Okay. Yeah, that makes good, that makes really good sense. Okay, and I’ve also I’ve heard, or I’ve seen written in some of your content, this expression of the perfect triangle, would you mind explaining to us what the perfect triangle is?

Chris Prefontaine 

It kind of came about through at the very beginning of COVID, I started talking about it and put it on my thriving and chaos series and on the podcast, because I forget who I learned it from it was a series of different people, but one side of the triangle was drawing a few would be to attach yourself to some kind of a movement doesn’t matter what yet, then you can go for Actually, I would that just attach yourself to movement, second piece of triangle as a result of being in that movement or with that group effect lives, including your own, so better lives. So back to the human aspect, you and I talked about helping a lot of buyers and sellers that thought they would like they thought they couldn’t go any further because of what’s going on. So by removing it affecting lives positively including your own and as a result of those two things. The third piece is being financially rewarded. Because your furniture reward in in that whole human aspect is directly related telling people you can help. And so we’ve got that going on now in the terms niche. So that’s why I started talking about back April one I remember because we had to pivot to a virtual event. And then this whole thought process came about that’s what I mean by the perfect triangle it really Jeff I who knows how long right? But I am telling people now you have nine months, in my opinion, maybe 12. But you have nine months to create a decade of income and three paydays The way this works if you get after, and not everybody will. But if you get after it, you’ve got a chance to really parlay about 10 years or so of three paydays pretty cool.

Jeff Stephens 

Yeah. Yeah, I can. I can definitely see how that would be the case. Okay. All right, great. Well, I know that you’ve got you’ve written a few books, but you have a one that’s pretty fresh, right kind of fresh off presses. Can you tell us about that one?

Chris Prefontaine 

Yeah. So we did real estate on your terms, kind of what you and I just touching upon here, back in 17 became a best seller. And then before quote, like a good year before co we said this needs a refresh, like the terminology because real estate changes rapidly. So we started refreshing it. And then we’re at the final stages during the COVID. endemic hitting. And so we finished it, we added a chapter for thriving and chaos. And we’ve added 50% more content to the book. And so it’s real estate on your terms, Revised Edition. My son and son in law have chapters and then a couple of our students do it’s pretty deep. It’s current, current, you can’t get more current than that. It was released last month. Okay. All right. We can give it to we give a free copy if you want. And you can print the show notes or I can give you a link, but we give him a free copy electronically. Oh, that would be amazing. Okay. Great.

Jeff Stephens 

And should we mention the link verbally? Here? Just put it in the show notes or what?

Chris Prefontaine 

Yeah, we can do both. So just go to freesrec — that stands for Smart Real Estate Coach; So freesrecbook.com, and they’ll give you a chance to get those electronically. If you’re big on “Hey, I gotta have the hardcopy”, Amazon has it now. It is shipping now.

Jeff Stephens 

Wow. That is fantastic. Thank you for sharing that. very welcome. Yeah. Okay. everybody listening, you’d be you’d be crazy not to go grab. Grab a copy of that. And you have a podcast as well, right?

Chris Prefontaine 

Yes, https://smartrealestatecoachpodcast.com/, where we kind of expose not just the terms niche, I’m big on love chat with people like yourself, just in the creative space, and other niches so new people can come in and not so naive to think, Hey, you got to do what we do know, let’s expose, everything is free. And then you decide which niche you’re gonna go into?

Jeff Stephens 

Yeah. Okay. So, to wrap up, I want to ask one big picture question. Because I think, you know, you’re talking to an audience of people who are, they’re predisposed to like the idea of, because I hammer on them every week about, you know, going off market and thinking more creatively and doing a lot of things kind of under what I would consider a very broad umbrella of creative financing. I think that includes a lot of things, and this is one of those. But even though our audience here is predisposed to liking this, this, this might be a more advanced, kind of an episode for a lot of people. So if you just zoom way, way out, and you just think about the big picture, help us understand why an investor would really like this type of approach over you know, actually owning rental properties and managing them as rental properties and things like that. I think, I don’t know if I’ve heard this in your content, but it isn’t one of the expressions Ron Legrand is famous for is like control without ownership.

Chris Prefontaine 

Yeah, he does that on what he what I call like an assignment. So I don’t I don’t like that, you know, you only get one payday. But it’s a cool little option for new people kind of like wholesaling to get one payday. Okay, so a couple things, too. This is a really good question, too. So I’m gonna, the first answer is, there’s two answers to it. But then I want to kind of qualify the staying in the deal thing. Because like my office building that many deals that we have, we’re going to be in for 20 years. Yeah. So you don’t have to spend on them. So I’ll talk about that. But two answers. One is ease of entry. If the sandwich lease allows you to put $10 down, and we’re doing 25 or $30 a month around the country with students, you can do it in your market period. If you’re in Texas, you revert to the other two options, it’s okay then more lucrative anyway, sometimes for its ease of entry for a new person. That’s why I like the lease option. 10 bucks. Secondly, the flexibility and the adaptability in a market that’s ever changing. I don’t think at the COVID all of a sudden, I’m gonna flip the switch and things are great again, it’s it changed that just changed a lot of things and so it’s thrived during that why it was built that way you know, wait to thrive all the all the storm so you have flexibility in an up down in a flat market. That’s pretty cool. That’s some niches you could say that but not all. So ease of entry flexibility, adaptability in all markets. And then third, I’ve done not all but almost all but big apartment buildings. And I can tell you most of my paydays were either I was either acting as a landlord or I was getting one payday one or the other. And they were good paydays. But they were one payday. So January rolls around, I got man, I gotta go do this again. I gotta go create all that again. With three paydays, you create today income, which everybody wants, you create monthly income to pay bills everybody wants and you create long term wealth. Well, that’s, that’s a combination in any business model, the best three things you could possibly do. And then to just wrap this up to your point of holding. So on our sub two properties, we do hold some not only do we hold some keep as rental if you want like my buildings a 20-year deal. We can also take a rental and buyer and those guys advance but we take our rent down by on a property that we own long term and if they prove themselves and we give a prior period It isn’t hoops to jump through, we then convert them and we own a friend’s house for them. So we’re that deal for a lifetime. Unless they catch us out.

Jeff Stephens 

Yeah. Okay. Okay. So for investors who are doing this, they are kind of building a portfolio without exactly all of the responsibility of building a portfolio. But they’re, they’re creating those. To your point. There’re paydays that serve them now in the future and in the long term future. But without necessarily, yeah, I guess all of the full responsibility or some of the potential downsides of actually being on title and managing on a day-to-day basis.

Chris Prefontaine 

Yeah, because even if you’re on title, think about that. When I just told you that was a real deal. Every time I said something, there’s a real deal I have in my head. So you’re, you’re a tenant buyer, you come in, I own the house subject to so I have no clock ticking. And I say to you, hey, Jeff, you make your payments on time for a year and you make all your deposits you that you promise, instead of going to the bank, which you thought coming in my door, I’m going to want to find out to give you a 20-year 30-year mortgage. Now, the difference between you being a tenant buyer and acting like a buyer and you then being a real buyer on a financing with us, compared to a tenant, it’s a different animal. They are entirely different behaviors, because they act like behave like and pay for things like they wouldn’t get a mortgage already. Yeah, totally different.

Jeff Stephens 

Yeah. different mentality for sure. Yep.

Chris Prefontaine 

Yeah, that you don’t get my toilets leaking my light bulb, you just don’t get that we the conversation at the beginning is Hey, Jeff year by here, buddy. You just don’t have a mortgage yet. So we’re gonna treat you like that.

Jeff Stephens 

Yeah, yeah. And in my understanding, to at least, maybe this is old data. But I’ve heard that there’s, there are actually a pretty fair number of those people who enter into an agreement as a tenant buyer, but then ultimately don’t really exercise their option. And so all along you’ve, you’ve had somebody who has been taking care of the property with an owners mentality, they’ve made a down payment, but then they don’t choose to, to close it out, I guess and exercise the option. Is that your experience?

Chris Prefontaine 

I was so glad, because I forgot. I tried to bring it up every time and I’ve had to ring up. So thank you for that one. So here’s the deal. A couple mentors, one of which you mentioned would that ratio is usually like 95, five 5%. cashing out I’ve done numerous shows with that’s the ratio as inverse, we have about a two to 5% default rate. Why? Because when you come in the door, Jeff, as a buyer, you are going through underwriting like your if it smells or shows a paper that you’re not a true buyer, you just want to be buy or rent, or rent a rental, hey, I have a hope device and a no plan. You know, I get in the house. Because I know what’s going to happen, you’re going to fall and that again might be okay lately, but just stinks because you set these people up to lose. Yeah, so we set them up to win we got 95% success rate in sometimes higher some years.

Jeff Stephens 

Yeah, that’s obviously that’s great overall, but I’ll tell you for our audience you know, we call ourselves stoppable real estate entrepreneurs and, and things like ethics and integrity, even if someone chooses not to exercise their option. That’s, that’s still ethical and with integrity, but I can tell you, in the heart of most of the people listening to this and the people who are in this community that I’m part of, that will make them feel good knowing that most of these buyers are able to proceed. And it’s actually truly a mechanism not only for maximizing our own, you know, cash flow and, and mitigating our risk, but also truly getting more people into homes, as well. So I know that’s gonna matter a lot to our audience, too.

Chris Prefontaine 

It’s just awesome yet like next week, the end of the year, we have to wait what I call payday threes. And they were accelerated because of the low rates. And because for two or three years, they’ve worked hard on the program better than they would if they’re out on their own, because people don’t realize rates are great, but it’s tough. You know, and so these are early cash outs, which is really cool. It’s such a win-win. It’s such a healthy thing.

Jeff Stephens 

Yeah, that’s really cool. I like that a lot. Okay, so we we’ve got freesrecbook.com, I would encourage everybody to grab a copy of that. Everybody should go listen to Chris’s podcast as well, smart real estate coach podcast. And if somebody wants to be able to connect with you in some other way, besides those two, what’s the best way to do that?

Chris Prefontaine 

One of two ways, Jeff and I, the staff will love me for this, but I’ll give you two things. One is they can just go to smartrealestatecoach.com That’s easy. There’s a free webinar like a lot of free stuff, because I want you to get to dip your toe in. If you want to free call with there’s only three ways to do them. And I’m one of them myself, my son in law and our strategy expert just go to smart real estate coach comm forward slash action that can be brand new or well-seasoned, and we’ll do a call with you for about 15 minutes will cost you 10 cents and I promise you leave with a nugget.

Jeff Stephens 

Awesome. That’s a great offer as well. Okay. Well, thank you so much. I mean, I think everybody’s gonna find this super interesting. I think if everybody listening this is this might be one you want to listen to a couple times and with the pause button and a notepad, because this is gonna open up some new ideas, but I think it’s really exciting not just because you can get more deals done and optimize them in better ways. But to me, this just proves the very simple point that there’s a million different ways to do things in real estate. I mean, it could be almost overwhelming to think about how I just how many different avenues there are to accomplish anything. And this is probably a whole kind of category of things that a lot of listeners haven’t thought of before. And so hopefully, that’s, it’s encouraging and inspiring to want to learn more about these plays in the playbook.

Chris Prefontaine 

You know, I agree, I agree. And that, that just screams don’t get caught up with shiny objects. And because of what you said, they did a lot to learn in each niche. Take one and run with it for three years.

Jeff Stephens 

Yeah. Love it. All right, Chris, thank you so much for joining us on rat camp rentals. We really appreciate it.

Chris Prefontaine 

Thanks for having me. Hope I gave you some nuggets.

Jeff Stephens 

Well, there you have it. And I don’t like to be that guy who says I told you so. But you’re probably gonna want to listen to this one again. Am I right? I listened to it a couple times myself too. And I’m excited to continue going through Chris’s materials himself. So I really hope you take him up on the offer for his book and check out his podcasts and everything. I hope that this is really open your mind to lots of new things that you want to look into. And understand because you can really do Chris’s business model with a thoughtful real estate entrepreneurs approach.

So that’s it for today’s episode of Racking Up Rentals. Again, show notes for this one, are at http://thoughtfulre.com/e69, please do us a massive favor by hitting that subscribe button in the podcast app. If you wouldn’t mind taking about 12 seconds to just rate and review the show wherever you listen to it. That’d be so helpful.

Did you know that we have a Facebook group for thoughtful real estate entrepreneurs? Well, if you didn’t, we need you in there because we need your thoughts and it’s a nice vibrant community. It’s called Rental Portfolio Wealth Builders. You can either search for that on Facebook, or just type in group.thoughtfulre.com into your browser and you will be taken right there. If you liked this episode, and I really hope you did please take a screenshot of that post that screenshot to Instagram and tag us, we are @thoughtfulrealestate. I will catch you in the next episode.

Until then, this is Jeff from the Thoughtful Real Estate Entrepreneur signing off. Thanks for listening to Racking Up Rentals where we build long term wealth by being win-win dealmakers remember solve the person to unlock the deal and solve the financing to unlock the profits.

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