S2E29 Chris Prefontaine How to create 3 income streams from 1 property

S2E29 – Chris Prefontaine – How to create 3 income streams from 1 property

Chris Prefontaine

Chris Prefontaine – How to create 3 income streams from 1 property.  My next guest has been a real estate investor for 31 years. If you’re looking to create recurring revenue through real estate, this episode is for you. We specifically discuss how his investment strategy compares to flipping, how you get started part-time, and realistic returns. Please welcome Chris Prefontaine

Payback Time Podcast

Payback Time is a podcast for investors. The goal of this podcast is to help make investing approachable and easy to understand. We will interview beginner and experienced investors and ask them to share stories on how they got started, what challenges they faced, what mistakes they made, and what strategy works for them today. The overall objective is to provide you with a roadmap that helps you become a better investor.

key timecodes

  • (0:51) – Background history

  • (01:53) – His real estate business model

  • (04:34) –  How does he make money?

  • (07:41) – What are his financing sources?

  • (09:46) – How to create a part-time business to create residual revenue

  • (11:37) –  Strategy to build long-term savings

  • (16:06) – The importance of his support team

  • (17:05) –  Numbers that matter to his business model revenue

  • (19:54) – The worst investment advice he ever received

  • (20:23) – The best investment advise he ever received

  • (21:34) –  His book and his contacts

Transcription

[00:00:03.430] – Intro
Payback Time is a podcast about building businesses wealth and financial freedom. We try to uncover the challenges our guests faced, the mistakes they made, and the steps they took to achieve their goals. The overall objective is to provide you with a roadmap that leads to your own success. Sean Tepper is your host. Are you ready? It’s Payback Time.
[00:00:33.030] – Sean
My next guest has been a real estate investor for 31 years. If you’re looking to create reoccurring revenue through real estate, this episode is for you. We specifically discuss how his investment strategy compares to flipping, how you get started part time, and realistic returns. Please welcome Chris Prefontaine. Chris, welcome back to the show.
[00:00:53.290] – Chris
Thanks, Sean. Good to be here. I’m honored to be back.
[00:00:56.830] – Sean
Yeah. So 80 listeners out there. If you want to hear more about Chris’s backstory, we’ll do a quick recap here. We’ll keep it short, but I know we went more into detail last time. So you listeners out there, you can certainly go back in time to the episodes in our podcast, but why don’t you kick us off, tell us a little bit about your background, then we’re going to dive right into creating some residual income or some passive income with real estate. Why don’t you take it away?
[00:01:22.300] – Chris
Yeah, thank you. To your point, super brief, because they can go back to the episode. This fall is 31 years in the business, september to be exact. So I’ve touched a lot of niches in real estate. The crash caused me to redirect to creative financing, or what we call and selling on terms that is basically ranging my whole life in business, and when I say we, it’s myself, my son Nick, my son Zach, and a great team now. So we do that locally, and then we go teach that around the country, actually, all around North America.
[00:01:53.790] – Sean
Nice. All right, so let’s dive right in here. So first question is, how does your type of real estate investing? Because we got a lot of stock investors here. We want to learn, what do you do and how does it compare to, like, flipping, rehabbing and wholesaling?
[00:02:08.430] – Chris
Yeah, so as I said to you before the show, I literally just was on a zoom call with 35 high end meeting experienced investors who wholesale and flip. And I’ll tell you the end result of that, but let me define for those that might not understand terms. So creative real estate in terms is nothing more for us than buying properties without utilizing banks, without signing personally on bank loans, which could be a nightmare if things go sideways, and without putting your own money up, for the most part, minimal to none. So with that said, you reference wholesalers and flippers. So everybody probably knows what flippers are because they watch or heard of HDTV. Okay, so in wholesale is nothing more than tied up a contract and flipping it. I’m just being very basic for the listeners.
[00:02:54.810] – Sean
Thank you.
[00:02:55.420] – Chris
So to answer your question, it’s super appropriate right now to ask that because the market is changing, right? And so this group we just addressed was a gentleman who is as experienced as me. I think he’s almost the exact same. He got beat up in a way and he re engineered his business and he’s got an amazing tribe of wholesales and flippers. But he said to me and Zach, my son in law’s when I met him, can you guys come teach my tribe how to do creative real estate? Because we’re passing up on all these deals because of the way the market is. So literally, they know how to flip a house or flip a contract for one check. They don’t know how to create three paydays, which we do on every deal, three income streams on every deal. They don’t know how to create that on a deal that they think has no money. Let me give you an example. The gentleman on the screen said, I have this couple who can’t afford their mortgage. I remember the numbers. It was 2 hours ago. They owe 118. The house is worth about 150. By the time they get done negotiating and relative fees, they’re going to come out with a bottle, break even.
[00:03:51.640] – Chris
This is what they realized. How do we do that, guys? I can’t see how I can flip that. I said, you can’t, but you can buy it subject to the existing loan staying in place. So in other words, Sean, if it was your house, let me keep it basic. You owe 118. I’m buying your house because you need relief. You’re out of here. You’re either relocating or something is going on, but the loan is staying in your name. You literally remained the guarantor, but I just bought your house. That’s how we buy them, especially when they need immediate help from us. So as a long answer to how does it differ? It differs because you can create on a thin air. Literally, almost any deal can be had unless someone is terribly upside down, like a year they haven’t paid or something crazy. I don’t know if that helps you at all if it’s not detailed. Yes.
[00:04:34.880] – Sean
Let’s dive in a little bit. I like that scenario. Like, let’s say you were buying a home for me, but it stays in my name. How are you making money in that case?
[00:04:43.280] – Chris
Yeah, this gentleman got on zoom. We were supposed to just be introduced and my son in law said, give me the numbers. We did it, live with them. So how it works is we would put that house that he says is worth around 150. We’d put it on for 170. I’m just going to use round numbers for you and let’s call that 118, 120, because round numbers are going to be better for my brain. So we’re going to put that house in the market for 170. We’re going to turn around and put a rent to own buyer in there who needs time to get qualified for a mortgage. That is enormous right now because rates just doubled in the last five months. Like enormous buyer pool that needs this path. They’re going to come in with 10% down, so that 170. We’re going to get 17 grand upfront. That’s payday one, because in our pocket, pay two is on that 120 loan. He told us the payment was 899. Piti principal, interest, taxes, insurance, all in. He told us, he did his homework. He told us that we could get thirteen hundred dollars a month.
[00:05:35.280] – Chris
Okay, that tells me I have a $400 a month spread, right? That’s the delta. Okay, that’s payday two every month. Currently that’s just one property. Yes, every single month. So I got my now money. Boom. I get that somewhere between five and 90 days. That’s how quickly these go. Then it kicks in, the $400. Now the back end is really cool on that 120 mortgage. Let’s call it for a round number. About $200 a month is coming off a principal. Now we’re going to do this for about 36 months, let’s just say.
[00:06:04.750] – Sean
Sure.
[00:06:05.150] – Chris
So you get $200 a month coming up for principal. You get a $400 a month spread and we mark the house up 50 grand. So all said and done, that deal was about an 80 grand deal, if I remember from this morning. And keep in mind, we bought the house for 118 or 120 in this case, and you got 80 grand in that deal. So flipper goes, what do you mean I didn’t make it up 80? Like they just didn’t know how to structure it. So we’re going to have a fun field day with this group who we can help do deals. Because the demand right now, Sean, in this market is crazy for creative real estate right now.
[00:06:39.110] – Sean
Yes. And actually the previous guest, we’re just talking about how 2008 home market did slow down, home building slowed down. But one thing that did not slow down is people making more people. So where are all these people supposed to live? Right? So there’s a lot of renters, a lot of people looking for homes. So you’re in a great spot.
[00:06:59.310] – Chris
I got a nugget for your audience. So this is just some metrics to know for the third time in about 50 or 60 years, to your point that you just made, what just happened is with all these buyers, all these people looking for places, what just happened is it’s not really a supply and demand issue right now as much as it’s an affordability issue. Rates just doubled. Like families that thought I’m going to get this cool house five months ago. Now we’re in tears. They literally just got flushed out of the market. So it’s an affordability issue. Yet interest rates around the 50 year average is around 7.7%. So we’re not astronomically high. Can you imagine? They go a little higher. Affordability is crazy. So again, demand for creative real estate.
[00:07:40.510] – Sean
Yes, right on. Now, you mentioned earlier about your financing source not using a bank. So how would somebody like, let’s say I’m kind of coming under your wing and I’m like, all right, I found a couple out there, John and Jane Doe. They want to sell their home for 120, and we’re going to come and buy it. Where do I get the funds from?
[00:08:00.560] – Chris
Okay, this is good. So in that same house for 120, like this little bit, we told the guy’s name is Barry. Barry asked the same question. He said, Barry, this is the exception. The subject to existing loan buy is the exception of zero money. Because you’re saying to an owner, I’m not going to put any money down on your property. I’m just going to take over that loan. But there’s a transfer tax in most states, right, when you sell a property, so you might have to come out of pocket for that. Whether it’s like in that size house, 120, I don’t know, it might be like somewhere between 900 and $8000. So where could you get that? There’s a source we use for credit lines, non secured business credit. You could easily just do that. It’s a couple of grand, right? You could put on your own credit card if you wanted to. I mean, you’re not talking a lot of money. Borrow from a partner, put the partner in the deal. You get any greater profit there to invest a little bit of transfer tax money. Other than that, no money comes to the table.
[00:08:52.680] – Chris
So picture when you bought a home, all the listings. If you bought a home, there’s a settlement statement, right? Who’s what right? Buyer and seller. Well, for the buyer, it will show a new loan coming to the table. Let’s say you want to rocket mortgage. It’s going to show rocket mortgage and whatever they’re loaning you. In this case, the settlement statement says existing loan, 120. There is no new money coming to the table. It’s a way to buy houses right now with rates going to six and seven. That house that we looked at this morning, 3.75%. So you’re taking on houses that have 3% interest. It’s going to be half the interest rates eventually. This is an interesting time. I keep saying very interesting time for demand. This is when Sean people understand this in stock market, too. This is one of those times where you go, I can work for the next year hard. I’m not saying it’s easy. Work hard for the next year and create a decade of income. That’s pretty cool.
[00:09:46.530] – Sean
I do like that. Let’s dive into that a little bit. So we have a lot of the listeners, they have either they own a business or they have a full time job creating reoccurring paycheck, whether it’s every two weeks or once a month, and they’re sending a percentage to their brokerage account to invest in stocks, which I’m a big fan of that model. Now, let’s say they don’t want to go full time with your model, but they want to just do this part time to create some residual revenue. How would they do that?
[00:10:17.690] – Chris
Okay, first of all, most of our students, that’s the good news. So very applicable question. There’s not too many people that can do full time right now. So the part time is this. I can’t be very generic and loose because I don’t know everybody’s kind of baggage. And I mean that in a nice way. I had baggage. You have to wait. Everybody has stuff because that’s the mental game. But generally speaking, you’ll have a strategy call. We’ll find out what pockets we can find in your week. Everybody has the same time. I’ll figure it out with you. This is what we do. And then we’ll figure out, is this something you want to just tack onto to your point and be supplemental and keep it supplemental because the profits range from 45 to 50 a deal. How many of those do you need? Or is it in your strategy call? You saying, hey, Chris, Mike in California comes to mind. You say, hey, I want to exit my job in 24 months. Can you give me a plan? We did it in like 26 months, John, so we can get super close as long as they do what we say to do.
[00:11:11.830] – Sean
Right.
[00:11:12.650] – Chris
So the issue is, let us help you structure a schedule that matches your goals so it’s not unrealistic expectations. That’s all. There’s too many marketers in real estate. In the stock market, yes, we’ll say get rich tomorrow in the stock market. No, you’re not getting rich tomorrow, but I can show you a plan in real estate and you can list it in the stock market. That will make sense and it’s predictable. Yes, I can do that.
[00:11:36.500] – Sean
Yes, I do talk to people about this, and thanks for saying that, because there is no get rich quick scheme, especially with stocks. With stocks, we tell people, especially in younger ages, twenty s. Thirty s. Forty s. You’re probably still going to have a job or some source of income, and you’re using that compounding momentum. Whatever gains you make in the stock market reinvest until you’re ready to start paying yourself and, quote, unquote, be financially free or retire. I always say if you do want the residual, like, let’s say you can’t stand your job, you want an exit strategy, you probably want to go towards real estate. And we do have a few more customers. They love talking about this because they’ll use gains from real estate to go back in the stocks, but they’ll also use it to replace their income. So it sounds like you can get pretty close. I love that example of the I’m going for 24 months I went out of my job and you landed on 26. That’s awesome.
[00:12:31.070] – Chris
Yeah. You just made me think of something else, though. Really cool. So if they were doing a real estate deal, payday one, two, three, and they love the stock market, then they could just allocate like, we call it stacking. You can stack these deals and say, okay, pay day one, I’m going to put in the bank for safekeeping. Pay day two, I’m just going to funnel that over to my stock portfolio account or vice versa. All my payday ones are going to go in there and my two are going to pay my personal bills. The point is you can allocate these and what happens when you stack three or four or five of these three payday deals together? Well, now you have this cool spreadsheet and you take some time off, get off the treadmill. That’s the whole point of why we create not why, how we create the system and trademark.
[00:13:10.180] – Sean
Right on. Love it. Let’s take a quick commercial break. Hey, this is Sean. I just want to say thanks a lot for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for checking out this one. Could you do me a quick favor if you haven’t done so already, could you leave us a five star rating on either Spotify, Apple, Podcasts, Google, or any other platform you use to listen to podcasts? What this will do is help us rank higher in the podcast search engines, you could say. So that would be much appreciated. Also, if there are any questions you want me to ask the guests for a specific topic you want me to address, please go to our Tykr Facebook group. You can leave a comment there and I’d love to hear what you have to say. All right, back to the show. You’ve got a good question here. We’re talking about offline a little bit, which is what is one of the biggest lessons you learned from 2008? Right now we’re kind of facing what could be recession. I know there’s debates whether it is or is, who cares, right?
[00:14:10.850] – Sean
It’s a down market chaos either way, right? Exactly. What did you learn from that time period?
[00:14:17.310] – Chris
Just in hindsight, the first thing, the simple one is the don’t sign personally on loans. And I know people get credit because my credit is good again. Now it’s very tempting to go I can go get a loan. No kidding. But don’t there’s no reason to unless you just have this place you’ve got to buy for your family and you can’t find it on terms and you got to be in this. But then that’s one lesson. Don’t sign first sale loans because bankers and God love them, I have friends that are bankers, but they have to do their job too, guys. So they’re not going to have any love for you if the market goes down and you sign personally, they come and knock it, and your assets are gone. Second lesson is bigger is I dwindled for four years, John, february of 8th to February 12 in the mental space of, oh, I must suck or it must be me. No, it’s a national crisis. But I just blamed on me. So the conference went down. So the biggest issue was I didn’t reach out soon enough to seek mentors who already had gone that way and came out of it.
[00:15:16.520] – Chris
And when I did, it was like 2012 fall. I flew my dime to go see someone. I called them. So can I come see you? Sure. Like most people will accommodate you if you call them up. I would if you call me. And I went to see him, and he literally said that’s nothing compared to what I went through when he started to list the multi millions that he got hit and how he got out of it. And I walked out of there thinking I got nothing to worry about and I should have done this three and a half years ago. So seek out I don’t care if you do it on Google, if it’s a book, if it’s just a search. Seek out someone that has your headache or had successfully came out of it and is still charging in the lane that you like and just model that behavior like it’s not brain science. The problem is many people won’t pick up the phone and do that, and that’s all you got to do. Pick up the phone or email or reach out.
[00:16:05.940] – Sean
Sure. What I really like about your business is a few key takeaways here. One is 31 years experience. You have a team around you, almost like a coaching network, if you will. And so if they don’t find somebody else out there that maybe doesn’t live near them, hey, you’re a zoom. Call away, you could say so I like that.
[00:16:28.290] – Chris
Yeah, we had a call today. Just I was driving here to get in time for this coming from the early meeting I talked about, and the gentleman called me. He happens to be from Connecticut, but he called me and said, Love your stuff, got your book. What I do next? I said, Show up to that. We have a free, what we call wicked smart sit down every Thursday. I said, Come with your deal at 04:00. We’ll help you structure it live in front of everyone. Like, that’s just what we do. We want to do deals. That’s all we’re about.
[00:16:50.260] – Sean
That’s awesome. And I love that you don’t give them a hypothetical. Tell me what you got. What property are you working with? Unless runs numbers?
[00:16:59.700] – Chris
Yeah, right. That’s what we did this morning with that guy Barry. I mean, that was a real thing. I gave you numbers.
[00:17:04.190] – Sean
Yes. Awesome. Now, you mentioned the numbers a little bit on how big these or how lucrative these deals can be. Did you say like 45 and 250, meaning 45,000 up to 250,000?
[00:17:16.580] – Chris
Yeah, sorry. Thanks. Yeah. What comes to mind is 45 grand a deal is like, lower end. I have a student out in Arizona. She’s out in the outskirts. Lower end, 250. Mike in California. Russell, La. Also New York City, miami. The higher price range, because our paydays are usually at least payday one is the percentage of right. Down payment. So you are going to have a massive price payday increase with the higher.
[00:17:44.230] – Sean
Price and with, like, a payment amount. You mentioned 36 months. Are we talking like, that dollar amount over a time period of 36 months. Got it.
[00:17:54.350] – Chris
Yeah. So payday ones now and overtime. So, example, you come in and see me and you go, chris, I had a life event. I covet my credit, cut in the toilet, but I’m on the men. I have 6%. And I say, Well, Sean, by the time 36 months comes, you’re going to need 10% to look good for the banks. So why don’t we schedule a plan? So payday one can be overtime payday, too, as we know, is monthly and payday three is in two or three four or five years.
[00:18:19.700] – Sean
Yeah. So the listeners out there, you can run the math there. If you’re looking for a salary replacement strategy, I could phrase it as 36 months, roughly, time period. And those are some tangible numbers. You get a lot of customers with experience there between 45 and up to 250. So that’s great. One more question I’d like to ask before we jump to the Rapid Fire Round. Is there a question I should have asked but did not ask you?
[00:18:46.890] – Chris
No, I’m good. If you get the consultant towards the end, I’ll throw it out.
[00:18:51.600] – Sean
Yeah. And we’ll talk about your book at the end. We’ll let you promote because I think that’s a great first step for the listeners. But let’s dive into the Rapid Fire Round if you can. You know the drill. Trying to answer each one in 15 seconds or less. Ready?
[00:19:05.150] – Chris
Yes.
[00:19:05.710] – Sean
What is your favorite podcast that you.
[00:19:07.390] – Chris
Listen to right now? Probably at my late. I like a lot of his guests.
[00:19:13.450] – Sean
Okay. All right, what is the recent book you read and would recommend?
[00:19:18.150] – Chris
I am in what am I in right now? I am in broken handoff. If you’re in this mode, if you have a business that you’re looking in, my case, family, trying to hand off type thing, that type of thing, or sale could be.
[00:19:32.770] – Sean
Got you. Okay. All right. That’s an exciting transition. This is a fun one. What is your favorite movie?
[00:19:41.710] – Chris
If I go into my archives, I’d say the whole Rocky series. Still.
[00:19:46.250] – Sean
All right.
[00:19:46.880] – Chris
Because I’m old enough. I like his story. Like, he has a crazy story, how.
[00:19:50.580] – Sean
He did that one of the best underdog stories I ever told. Yeah, right. Two business questions here. First one. What is the worst business or investment advice you ever received?
[00:20:04.030] – Chris
I remember I was like, I don’t know, maybe 19 or 20 years old, working for my dad, and some broker called me for penny stock. I remember like it was yesterday. I literally had like three grand, and he talked me into spending 2500, and I saw it go to a grand, like in a day. I was screaming. It was just stupid. Penny stock.
[00:20:21.910] – Sean
We’re all in there. Well, let’s flip that equation. What is the best business or investment advice you’ve ever received?
[00:20:29.110] – Chris
I’m going to be very broad here in the short 15 seconds and say every six to twelve months, it’s whatever that mentor the time tells me to do next. And I’m saying that because it varies in where my growth is.
[00:20:43.510] – Sean
We all hit seasons in life, and it’s just you hear the right comment at the right time.
[00:20:48.100] – Chris
Yeah, if you seek it.
[00:20:50.210] – Sean
Yeah, exactly. And last question here’s the time machine question. If you could go back in time to give your younger self advice, what age would you visit and what would you say?
[00:21:00.130] – Chris
You know, I have grandkids now, Sean. Remy’s turning five in November and Belleny three in October, and I think he’s at an age where he’s almost at age. So let’s pick six where every year someone could tell me, go seek a mentor, like I know now, or that age would just be, hey, go seek a coach for this thing you’re working on. And constantly say that until they’re like twelve years old, there’ll be a machine.
[00:21:28.480] – Sean
Because there’s always no can you imagine by age 18, they’re ending high school with all that knowledge in contacts from all the coaches?
[00:21:36.530] – Chris
It’s crazy.
[00:21:38.470] – Sean
Well, last question here. I’m really turning it over to you. Talk about your book a little bit and where can people reach you?
[00:21:45.730] – Chris
Yeah, I don’t know when this is this airing soon? Sorry to have to ask publicly.
[00:21:50.950] – Sean
We turn around pretty quick, so hopefully in the next two weeks.
[00:21:54.210] – Chris
Okay, so I got a couple of thoughts. We created a link just for your tribe for the free book. And as I say on every show, it’s not free book. Oh, by the way, put $12 on a credit card so I can ship it. You just pay for their book. It’s free, it’s totally free downstairs and have a fulfillment room. You’ll get it. Go to wickedsmartbooks. Compayback and you’ll get the Amazon bestseller, and you’ll get the Deal Structure overtime book, which goes into deals and nuances and all kinds of good stuff because it’s airing soon. Sean, I didn’t tell my team this, but we have an event coming up and since Covet, we haven’t been in the ballroom since 19, I’m going to give you a link that will give them 90% off if they want to come. So for $20, because I’d rather have them come if they’re from your tribe. We’ve talked twice now. Go to smartrealestatecoach. Compodcast 20. I’ll get you a ticket for $20. I’d love to meet you. I know you’ll love it.
[00:22:45.470] – Sean
Nice. Well, thank you again, Chris, for stopping by. Really broke things down here. I think this is an excellent path. I love the three revenue streams you can get out of these deals.
[00:22:56.210] – Chris
This is awesome.
[00:22:57.390] – Sean
All right, we’ll see you.
[00:22:58.720] – Chris
Thanks, buddy.
[00:23:04.550] – Sean
Hey, I just want to say thanks for checking out this podcast. I know your time is valuable, and there’s a lot of other podcasts out there you could be listening to. So thanks for taking the time to listen to my guest story. If you did enjoy this podcast episode, could you head over to itunes and leave a five star review? That would be much appreciated. Thank you. And last but not least on this podcast, some episodes we do talk about stocks. And please keep in mind, this podcast is for entertainment purposes only. So if you did hear any buy or sell recommendations, please don’t make those decisions based solely on what you hear. All right, thanks a lot. See ya. You.