Lessons From a Master of Creative Financing With Chris Prefontaine

Chris Prefontaine: [0:00] So a lot of the fix and flip and wholesales have to get in, we all know it, like $60.70 cents on a dollar, right? Mhmm. I'm on a call with a seller and I can feel the energy drop, meaning come go away, the wall breaks down because I say, Look, look, no, I'm not trying to lowball, can actually get you your price as long as I get my term. And they have a discussion, and so a third of the properties in The United States right now are debt free, they're free and clear. Well those people are excited to talk about greater real estate. They want their price. Call it ego, call it financial savvy, call it whatever you want. They want their price. I can give them their price if I get the right term. I'm sitting in my building right now talking to you guys. I own this building, and I bought it from a seller who was free and clear, and I bought it with owner financing with no underwriting, no huge down payment, like, just what we teach.

Speaker 2: [0:46] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Chris Prefontaine: [1:10] What's going on, guys?

Mike DeHaan: [1:11] In this episode of the collecting keys real estate investing podcast, we have Chris Prefontaine who is, like, I don't know, for lack of a better word, an absolute wizard, a magician, like a freaking warlock god, whatever you wanna call him when it comes to the seller financing world. Like, honestly, this guy has been in the real estate business for so long. It's like over thirty years, which we don't regularly have guests that have been in the business for that long. Usually, after thirty years, people have kinda moved on to something else. They've gone broke. You know, they've just gotten sick of dealing with properties and sellers, everything in between. But this guy has gone through the full process. He lost it all in 2008. He came back just and just started crushing it and got really into the seller financing zone. And in this podcast, he drops just so many nuggets of absolutely incredible knowledge about, you know, carries, subject to, seller wraps, and how to, you know, do these things legally with the lenders, how to pitch them to both sellers and to buyers in ways that make sense and that can get people on board. And I feel like I'm relatively educated when it comes to real estate personally, but he dropped so many things in this episode that, like, I had never heard of before. And, like, at the end of the show, at one point, we actually have, like, this super awkward silence where I'm like, man, I am just stumped with what you've told me, because I was just wrapping my mind around the insane stuff that he was saying. And we actually go on a tangent, we're like, man, we gotta get you into, you know, come do a lesson for our instant investor program students because the stuff that he was going through is like just like next level, not only just in what it is, but also the way that he explains it is so tangible. So this is a great podcast to make sure you're taking notes, and you take what he talks about and go and, you know, try to apply it, you know, or reach out to him and get some assistance. He has his own program.

Mike DeHaan: [3:00] He was gonna be super open about helping people, coaching people, and, you know, helping navigate situations. But this is absolutely one you wanna listen to, take notes, and go and start applying the knowledge that you gained from this episode into action right away. Because, like, otherwise, it's it's kind of a waste. You know? But because this guy what this guy's teaching is going to be key for investing in real estate in 2023. So, anyways, guys, if you enjoy the show, please share it with anyone who might find it interesting. Anyone who's even slightly interested in real estate will find this interesting, so, you know, share it with all your real estate friends. Also, please leave us a five star review where you're able to listen to your podcast. If you do that and you take a screenshot and you send it to me on my Instagram at Mike underscore Invest, I will send you a free t shirt, a free collecting keys t shirt. I've been getting more of those recently, which has been super fun, and I'm happy to send out free swag. So please take a screenshot of that five star review, send it to me, I'll send you a shirt. And then on top of that, guys, if you wanna start getting opportunities to use all of this knowledge from Chris, go to collectingkeyspodcast.com/free. You can get our free five step guide to start generating off market leads. It will give you a little bit of a teaser about what we go through in the instant investor program. If And you don't wanna join the program, that's cool.

Mike DeHaan: [4:13] You can take, like, the very base knowledge that we give you in the guide, and you can go and start applying it yourself and pursuing these different deals that you can use as creative financing knowledge on. So, anyways, guys, enjoy the show with Chris Prefontaine. And I mean, if you don't enjoy it, I don't know what to tell you because he drops the next level stuff here. So thanks for listening, guys. Enjoy. Alright. Chris Prefontaine. Thanks for coming on the show, Excited to meet you. For people who haven't heard about you or the things that you're doing, I guess give us a little bit of information on your background and what exactly your business looks like. So I'm really excited to hear about what you have going on.

Chris Prefontaine: [4:51] Yeah, so at the risk of dating myself, this is my thirty second year in the lovely real estate world full time, so that runs the gamut. What we're doing now, and we can go back to any piece of this, but what we're doing now since the two thousand and eight crash, is we buy everything creatively, we call it buying on terms, so we don't use banks. I learned the hard way when you sign your name personally, what happens if there's a headache with the bank or the market? And so I don't do that anymore, very simply, I mean ever. We buy everything on our financing, to existing financing or lease purchase, so we control anywhere between like 75 or 100,000,000 in property at any one time between us and our students, because we rev share with our students, and those are never bank loans. So I put my hand on the pillow at night, you know, a little different than it was 'eight, 'nine, 'ten, when we had all those headaches going on. Nice.

Dan Austin: [5:40] Wow, that was really cool. So any relation to the famous runner Prefonte? That's a unique name.

Chris Prefontaine: [5:45] I still I gotta one of these days, Dan, find out, but I I don't not not technically, don't know.

Dan Austin: [5:50] But You gotta go to ancestry.com and

Mike DeHaan: [5:52] Well, that would be a really distant relation because I'm pretty sure he died what when he was like 25?

Chris Prefontaine: [5:57] In the seventies? 24? Yeah. But I also think he was French Canadian. I'm pretty sure he was, which we are.

Mike DeHaan: [6:02] Yeah. Yeah. Yeah. Yeah. But, no. That would be like distant cousin or something. No. That's cool. So you've been in for a long time. Thirty two years. I will say that it is rare to find people that are still actively, I guess, in that, like, hustling in the real estate game that have been around for that long. I feel like most people who are doing real estate or they're not innovating, they're definitely not doing anything new. If anything, they're, like, retired or they are just like have their narrow buy box that worked for them thirty years ago, and they stay in that.

Chris Prefontaine: [6:31] I agree.

Mike DeHaan: [6:32] Yeah. How did you initially get into it? First off, so long ago, because it wasn't, you know, nearly as common as it is now to do real estate investing. And how did like, what does that evolution look like? Because you've seen so many different changes in the market, the economy, everything.

Chris Prefontaine: [6:47] Yeah. I'll I'll give a 10,000 foot view. Again, if we're gonna peel back the onion at any point, tell so me the '91, my dad I grew up in a welding supply business. It wasn't even real estate. Welding supply and industrial gas, but he built his own buildings. So I saw him do that, and he'd bring me to him when I was young, then he explained to me once, I think I was like 10, he explained to me that he builds these and he leases them to the company, the welding supply company, and I'm like, What are you talking about? They're both you, I didn't get it when I was young. But as I get older, I understood what he was doing, and then he would hang out with people that dabbled in real estate on the side of their businesses. And so that was what I was around. So even during college, I was in college, yeah, but I was always tinkering and reading and wanted to real estate. Did my first deal in 'ninety one, he sold the company, I supposedly had a job as a general manager, and I got fired in three weeks. My kids were like two and three, I had Zippo. So that was my foray into real estate, been full time ever since. After that, had a brokerage, sold out to Coldwell Banker, and then ran up through the crash by coaching people around US and Canada, and that was realtors back then. I had a realtor hat on back then, a broker hat on, and of course now it's all investors, but that's what we did right after the crash, and as I said earlier, that that the crash made us reengineer the entire business to what it is today, so you couldn't have convinced me that in o '8, but looking back in hindsight, best thing that ever happened, because what we've got going on now is totally different in the industry, and we'll talk about it a little bit, but we we are out in the trenches doing deals with students, which is dramatically different than just marketing and selling stuff, you know, and not supporting that.

Mike DeHaan: [8:19] Yeah. Awesome. Yeah. So you kinda cover the full gambit. So, I mean, you teed it up a little bit there. You said that what's happening right now is completely different than what happened in 2008. I mean, I feel like most people who are active investors feel that way. Right? They sort of understand the basic economics of real estate. But also to most of us that say that, this is us included, we weren't around investing in 2008, so we don't know for sure. We're looking at the fundamentals, but I guess from you having gone through that, what makes you say that? What are the key differences do you think?

Chris Prefontaine: [8:50] Yeah, so a lot of that was, and listen, I don't get into the media and the economics and all that crap because the billionaires don't know what's gonna happen, so certainly you and I don't, but just my opinion is, you had a major major banking slash foreclosure issue then, you don't have that same capacity, that same issue right now. There's some high points that no priority order. This is the third time in fifty years right now where it's an affordability problem exists. And if an affordability problem exists already, and the interest rates maybe to some people are obnoxious, but they're not, because the fifty year average is like 7.7, or I'm close with that. So if we're not there yet and there's already an affordability problem, that means that screams loudly that the buyers especially, and so likewise the ripple effect of the sellers, they need creative real estate more than they ever did. When I started in the 90s, about 3% of the transactions, ballpark, nationwide were done outside of banks. That number's up in the teens now, and I don't I I search high and low to find a hard stat, and I get different stats, but it's way more. In the next three to five year window is gonna be rampant demand for creative finance. And here's why I know that, Mike, and I'll toss it back to you. We have it's interesting.

Chris Prefontaine: [10:03] Our community is kind of a microcosm of society in a way because I've got people from West Coast to East Coast. And so when I get on a weekly call on Zoom, I'll get the feedback from all the markets. Okay, that's interesting, so I see what pockets are slowing down. So when I start seeing that all over the nation, people are just coming out of the woodwork now that thought the market was fat and happy, you know, sellers and buyers, who need our help more than ever. So it's an interesting time right now in creative real estate, and there's a lot of fix and flip. Big companies that are calling us too now, there's two more in the works, that are calling us going, look, we realize our limitations. Can you help our community learn how to do creative real estate because we're kinda stuck without it. That's telling me big time that there's a demand for what we got going on here, and I knew that, but it but that's proof.

Dan Austin: [10:49] So a kinda quick question then. You're talking about for the that there's an affordability issue and that rates aren't crazy high, which you're I agree. They're not that crazy high. They're not compared to what they could be. So how does creative financing help with that affordability issue for the buyers?

Chris Prefontaine: [11:04] Yep. So, okay, let's just paint a a micro scenario in there that that does hit a lot of people. So the rates, let's just say nine months, whatever it was ago, I have a son of Laura and daughter with two grandkids, and they were looking at houses back then when rates were

Dan Austin: [11:19] in the threes, right? They sold and then

Chris Prefontaine: [11:20] they were looking, all of a sudden, wham o. Now they could afford it still, luckily, but there are a lot of families, I'm gonna say hundreds of thousands of families, that sadly got pushed to the sidewalk, so to They can't buy, they think they can't buy. So now they can buy with creative real estate, because what do they need? If they have a down payment, and they were qualifying the three or 4% range, one of the things they need, if everything else, credit's good, all that, is they need a bigger down payment if they want the same exact house. Well we give them that opportunity to get into a house, take their time to save up more, and then cash it out when they're mortgage ready. While that's going on though, all these sellers that had the demand, they don't have the same demand. Mean, that's playing right across the market a flat to a 20% decrease in most markets that I'm seeing in my community. So a lot of this, that's where the sellers, when I say they come out of the woodwork, they're not getting the same demand, and the press is helping us, you and I and everyone else that invest because in real they're screaming recession and all this other crap that they don't know is gonna happen, and the sellers are panicking. And so they're calling us, going, help out. So that's helping us, but it's just a bunch of nonsense in

Dan Austin: [12:21] my eyes. Long answer. Sorry, Dan. I think no, that's great. It's in alignment with an article I recently read from NAR, the National Associated Realtors, where they talk about something Mike and I have been speculating about too is like 2023 is gonna be kind of like this stalemate because of what you said. Like, the the sellers, their demand's gone, but they thought, like, last year, we could, hey. I can just sell a house for whatever I want, and maybe this year they're ready. And along with that, like, stalemate is that, you know, they think there's gonna be, like, 14% less sales next year, depressed sales because of that, because sellers don't have an outlet to sell their property and buyers don't have they have an affordability issue. And so, what you're saying, this is kind of that solution that helps keep moving things along.

Chris Prefontaine: [12:59] Yeah, and here's where we come in too. So, a lot of the fix and flip and wholesales have to get in, we all know it, like $60.70 I'm cents on a dollar, on a call with a seller and I can feel the energy drop, meaning come go away, the wall breaks down because I say, Look, look, no, I'm not trying to lowball, I can actually get you your price as long as I get my term. And they have a discussion, and so a third of the properties in The United States right now are debt free, they're free and clear. Well those people are excited to talk about creative real estate. They want their price. Call it ego, call it financial savvy, call it whatever you want, they want their price. I can give them their price if I get the right term. I'm sitting in my building right now talking to you guys, I own this building, and I bought it from a seller who was free and clear, and I bought it with owner financing with no underwriting, no huge down payment, like just what we teach. Yeah. Yeah.

Mike DeHaan: [13:47] Now that's super cool. And one thing that stood out to me too from what you're saying there before is you're talking about making the it more affordable for like the general population. I think that that's a different so that's that's obviously your exit, right, is how you are, you know, selling the properties or putting, you know, lease to own or whatever else, like, in place. But that's a different view than I've heard from other people who preach creative where everyone else who leans on that creative stuff, it's always like, here's how you can get super good rates for yourself so that you can make a spread as a rental. So that exit strategy that you're looking at where you're making it more affordable for the general population, what exactly does that look like? Like, I'm I'm very intrigued by that. Because, like, especially when we talk about sub twos, you hear about selling people being able to buy a property sub two or, like, you know, doing these wraps and things like that. But, ultimately, the people that are priced out to cover the equity gap that currently exists with the inflated market, even with the lower monthly payment they're seeking, they're gonna have to have a huge down payment. Like, you know, 40% of a house that they couldn't afford to begin with. So I guess how are you solving that?

Mike DeHaan: [14:51] Like, what exactly does that look like?

Chris Prefontaine: [14:52] Couple things. Tell me if it answers it, Mike. So, the buyers, because you're talking about the buying, and let me tell you how it works, and see if it leaves any holes. We, when you talk to people, and you guys have probably seen this publicly, this is not like a secret, you go on a podcast, sometimes I go on a show, like I'll go on yours this morning, I listen to some episodes, I'll go on to shows and I'll hear these guys, guys or gals, in the creative space going, Yeah, I do rent to own as an exit, and I don't care if they cash out, because if they don't cash out, I'll put another one in and collect another deposit. Man, I just cringe because, number one, you're setting up the buyer to fail, in a lot of cases. The ratio's like 80 to 90%. Ours is real simple. Our metric, I'll tell you, is two to 5% default. Why is it an inverse relationship? My son is the buyer specialist for both our properties and the students, but he's big on, okay, we're gonna get them qualified, we're gonna get them a mortgage ready plan. If their mortgage ready plan, and if they're a legit buyer, fits within the terms that I have with the seller, okay, we can put them in the house. They're not getting in the house without that work up front, and they're not getting in the house without three to 5% down, and if it's like a jumbo loan, or we know they only qualified for their mortgage ready plan with 10% eventually, they're gonna get in the house at three to five, but they're gonna, throughout the term of their rent to own, they're gonna up their deposit, so that we get them strong and super ready for that mortgage, and maybe even a better rate, because we're getting them stronger and stronger through the term. So we look to cash them out, for sure. Now, some of them, because people say to me that, that begs the question, okay, well you cash all your deals out soon, why don't you stay in some of these? We do.

Chris Prefontaine: [16:21] I call it wealth stacking. Once somebody has a portfolio, we'll look at it. If the term's long enough, we'll say, all right, the buyers behave properly, now we will sell them, you know, sell it to them on owner financing, they don't have to go to the bank, and we'll stay in the deal. Gotcha. So now we go from collecting what we call three paydays to maybe four or five or six, you know, down the road for years and years and

Mike DeHaan: [16:41] years. Interesting. So on those sort of exits, are you doing like second position around your existing mortgage or do you actually own them outright at that point?

Chris Prefontaine: [16:51] If we sell to the buyer meaning on owner financing? Yeah. Yeah. So say we bought sub two, we're gonna sell to the buyer. It's gonna be a wrap. Mhmm. And we might do it for contract for the year land contract or we might actually do a recording of the title.

Mike DeHaan: [17:04] Okay. So you're saying that you buy it sub two initially, do you like the rental on process, you're gonna sell it again in a wrap. So now you have this sub two that has transferred to different individuals. Yeah. We I wanted to dive into that because that is always the biggest question is, like, the due on sale clause and, like, the lenders now seeing two title transfers. People get worried about one, but now you're going to the second one, which is going to be probab well, not probably. Definitely a less qualified person than you. Like, well, here's how

Chris Prefontaine: [17:34] we do it. And let me just qualify this because this comes up a lot. This is a good topic to to bat around the three of us. This is not for your listeners. This is not legal. This is not accounting advice. This is how we do it. Okay? And I will also say this though, I have banged my head against the walls recently as three months ago with students, because we'll call and help students, in a state not far from me, New Jersey, where I had to go through three or four attorneys who told me flat out you can't do that in New Jersey. So then I found an attorney who now operates in 32 states, and they do thousands of these. You just have to find the right attorney. And I say that for the listener who might go to one attorney and get all thrown off, but they can't, no, you can do it. So, couple things. My local attorney here, the senior partner's probably early 70s. His junior partner back in twenty twelve or '13, he had him start doing our deals, creative deals. And at one time the junior partner went to the senior partner, Rich, my friend, who I've had deals with, and said, I can't do these. And he sat him down, and I'll just, in a nutshell, summarize it. He basically said, Look, there's no illegal thing about it. This is a contract issue. This is a contractual issue between a banker and a seller.

Chris Prefontaine: [18:38] Period. That's it. There's nothing illegal, anything about it. It's a contract. Now, when we buy the home, the seller signs multiple disclosures built by those attorneys that acknowledges that there is a due on sale. The fact is, I have never had it in my thirty one, going on thirty two years, a loan called, why? Because we do what we say we're gonna do, pay the bill. You start not paying the bill, there's investors that have done this criminally, and just bought a bunch of properties and took off. Okay, well that stinks for the industry. If you pay your bill and do what you're supposed to do, this should not be a problem. That's been my experience. Now, title issue. So again, this is not legal basis, this is how we do it. We take title. Mike, if I buy your house, and your house is 123 Yellow Street, I'm gonna put that in a trust, and that trust name is 123 Yellow Street, DeHaan Family Trust. That's what's being titled. Is that a fix all? No, but the Guyman St. Germain Act in the '80s allows you to transfer property and family and for estate reasons without a due on sale being triggered. That's our attorney's logic to have us do it that way. Now, so it's sitting in that trust. When we sell it to the buyer, we can do a number of different things, we prefer a land contract, or contract for deed, different states call it different because that deed does not get recorded, it sits in escrow. Definitely. So they don't see a second recording. You see the first recording to a trust situation, can you also, I get a little advanced and crazier, but can you also, if you were the single person that had to do a sale happen, I haven't yet, but if you were, could you maybe change the beneficiaries?

Chris Prefontaine: [20:15] Could you go on deed with this? There's all kinds of things you can do. Your attorney will help you with that. But that's a long answer. I hope that helped a little bit. Oh, did it confuse things?

Dan Austin: [20:23] No. It makes sense.

Mike DeHaan: [20:24] Yeah. Well, I think it helps us because we're pretty versed, I guess, on the terminology. It's there might be some listeners whose brain just exploded. But, know, if you if that if if you need some help, you reach out to Chris after the show or you can show me a shoot me a DM on Instagram too. But no, I mean, that all makes sense. And I mean, ultimately, it sounds like at the core, what you need is a good attorney to help you navigate all this stuff.

Chris Prefontaine: [20:43] 100%.

Mike DeHaan: [20:44] Yes. Spot on. And and that is, I think, the biggest challenge too with a lot of people is finding those professionals that actually know how to navigate these sort of things. Because like you said, it is a contractual issue. There's always ways to get around it. And especially once you start getting bringing legal structures and that sort of stuff. Like, I know a super common thing with very high net worth individuals. They don't want to pay taxes, like, you know, short term capital gains tax on on properties. We see that a lot here at Lake Coeur D'Alene, which is a very popular lake where a lot of really, really big names have houses. They'll buy the house with like an LLC. And then when they Sell the LLC. Sell the LLC. Exactly.

Chris Prefontaine: [21:18] I brought a call in over here from a guy that is a very large real estate guy around here, like, third generation, and he sold me, yeah, the LLC instead of Exactly.

Mike DeHaan: [21:26] Yeah. Interesting. So by, like, what you're describing is almost the same same basic concept with the trust where you're never actually having the title change because you're doing it through that contract to to purchase deal.

Chris Prefontaine: [21:38] Yep. One of many ways. But you nailed it, Mike, when you said the attorneys because I'm telling you, when I found this attorney, she's actually local coincidentally, but she operates in 32 states with her title company, is a savior. Like she has saved so many deals for our students that you can't imagine, so you gotta get one and be able to go through the pain of banging your head against all the ones that don't know what they're doing, instead of saying I'll refer you to someone, say you can't do it, it's just they're protecting themselves, and if you're not community, we'll help hook you up. We've painstakingly gone through that with a lot of the states.

Dan Austin: [22:07] Yeah, and regardless, like you mentioned earlier, Chris, there's no actual law. There's no federal law or state law that has anything to do on sale. This is a contractual issue between basically the note holder and the bank. 100%. Right? Like, that's what it is. And the the interesting thing about it is is it never says that it will be due on sale. I've actually, I haven't found any mortgages that say that. They typically say that it could be or it it might be. Those types of, like, soft language. I don't think that I've ever read one that says, like, we will 100% take this if you transfer title, it just says there's some possibilities.

Chris Prefontaine: [22:40] You know what else, guys? Whatever works. You're spot on, Dan, what else is the VA loans, I don't know if people understand this, you go read the VA loan, go online right now, there's a mirror mortgage, it's like a it's a wrap, there's a mirror mortgage language built in where you can buy that house, they allow it. So people call me and go, can I do this with the VA loan? Yes, they actually allow it. Interesting.

Mike DeHaan: [23:02] Yeah. No. That that that's super cool.

Dan Austin: [23:05] Yeah. I do wanna ask a question just for our listeners too, because I think the pieces that you're talking about, the sub two, and then when you talk about seller wrap, when you're exiting it, can you talk through, like, what that means? Kind of the process of the paperwork from a sub two to a seller wrap on the exit?

Chris Prefontaine: [23:22] Yeah, if you do it that way, I'm gonna try to do this real simple, because you can do this when you buy too, if you're a seller, we bought from a school teacher once, I'm sorry to divert a little bit, Dan, but it's gonna be a similar answer, you're good. So we bought from a school teacher once, who, his credit was good. So unlike most sub twos, it wasn't he had a divorce, he just wanted out of the house. So he, A, wanted to protect his credit, so we had to pay the bill, right? B, he wanted to go buy another house. So most sub twos go, Just take my house, I'm out of here, I'm going go rent. And they don't care what you do to protect them. But when you know they're going to go buy a house like that, they want an errand put on the house so that if I go, whatever, go to Tahiti and take off and don't pay the bill, my family doesn't pay the bill, then he can foreclose and get his house back and not be naked out there. So I said to my attorney, Can you structure this wrap? And it's the same answer if you do it with a buyer. So what he did was, you just, they caught a mirror with the VA loans, but all you're doing is you're making the amortization schedule on the wrap mirror the underlying debt so that at the end there's no differential, the exact same principal pay down, the exact same everything. You're putting that structure on just to protect the individual if you default. Does that make sense guys?

Dan Austin: [24:32] It does, and the wrap would be like a document, or what does that, I guess legally look I guess that's what I'm trying to get at so that our listeners understand

Chris Prefontaine: [24:39] Yeah, that because that gets confusing. All it means is you're recording another mortgage on that property. It's what most people consider a second mortgage. It just happens to have the qualities that describe it now as a mirror or a wrap, but it's a second mortgage going on that property by date. Yeah. So I I so

Mike DeHaan: [24:55] I'm not entirely tracking. So you say when you're doing that mirror, basically, it is it's there's not actually additional debt tied to that, like, financially, but it is like a security for the sub two seller. So that way if you default on the sub two on on the mortgage that you're buying subject to, they have the ability to take the house back without having the penalty themselves.

Chris Prefontaine: [25:18] They could foreclose and get their house back. Yeah. Fascinating. So if they're gonna go buy something, you can imagine the bank's conversation. So they go to buy another house, and I didn't give them a wrap to secure them. The bank will go like, okay. So on your credit, you have this house. Well, I sold it. Really? Okay. So other than the closing paperwork, where's your security? I don't have any. So if they stop paying, your credit goes out of

Mike DeHaan: [25:39] the toilet? Yeah. But if

Chris Prefontaine: [25:41] you put that wrap on there and you show that to the bank you're going for the new house, I'm not saying they all finance, but what I tell my sellers is shop it. Yep. Some banks will finance you, some will want a year of ceasing, some will cover 75%, like, you just have to shop it, but yes, you need that instrument to secure it, and to prove that you're secure.

Dan Austin: [26:00] That's a really key point for our listeners from a sales standpoint, because that's, like, if you have a seller that you wanna go sub to with that is, like, really nervous of, like, you taking it over, I mean, that right there is a great sales pitch from a standpoint of protecting that that seller.

Chris Prefontaine: [26:12] Here's the other way to protect them, guys, two ways. On that note, Dan, I've done both. One was a student had me on the phone with a seller in Pennsylvania, and he said, well, that's great, but what if you guys default? I said, we don't. I've been in business thirty two years. Some people are okay with that. He said, okay, sounds great, but I don't know you. Yeah. I'm going to Texas, and I want my house to be I said, Okay, here's what we'll do. We'll put a default agreement. Your attorney can draw it up. It's a paragraph. And it basically says, in essence, if we default after thirty days, no hard feelings, no foreclosure, you go record the deed, we sign a deed back to you with a default agreement, it sits in escrow, we screw up, go record it, you get your house back. No foreclosure expense, no nothing.

Dan Austin: [26:50] It's already sitting there, basically they just go there to escrow, basically I want that, and you take the house back without having to call you or anybody.

Chris Prefontaine: [26:56] Yeah, now you can't, I found out there's like one, maybe two states that you can't do that, don't ask me why, maybe some investors screwed that up too. Yeah. But you can't do it in a couple states, so the other way around that is do the contract for deed or the land contract. Because then again, that attorney can, their attorney can sit on it in escrow until you fulfill your agreement, it sits in escrow.

Mike DeHaan: [27:13] Yeah, That's awesome. Dude, dude,

Dan Austin: [27:15] you're shooting fire right now. This is like honestly like some good detail technical stuff, man. This is cool.

Mike DeHaan: [27:21] Yeah. It's super cool. Yeah. I I appreciate all the all the openness too, Chris. Yeah. Because like, I mean, selfishly, we have a situation right now that we're looking at where we're looking at buying a small portfolio from an investor here in town. And, you know, sub two is the only way that it really makes sense. And the number one question that he asked was, is this gonna show up on my debt to income, like my personal debt afterwards? Which, know, I said, yeah, it will. And so we've been trying to figure out how to navigate that, but it sounds like this mirror second position might be the solution at least a little bit.

Chris Prefontaine: [27:51] Yeah. What kind of deals if you don't mind? Let's walk through it if you if if you want to. Is it a single family multi?

Mike DeHaan: [27:57] It's a portfolio of duplexes. Portfolio. Yep. So it's several duplexes and the They all have individual loans. They all have individual loans, all with the same bank.

Dan Austin: [28:06] Yep. All the bank we use.

Mike DeHaan: [28:08] Yeah. It's a bank that we use coincidentally, which does help. But basically, for it to make sense from a cash flow perspective for us, and I guess just for a deal in general, with current rates, like, we would not be able to pay him the amount that he needs

Dan Austin: [28:21] to get out of

Mike DeHaan: [28:22] the deal for it to make sense for him to sell. Yeah. The only way that it does is for us to buy basically sub two at the current market rates. Right? So, you know, we would bring and we'd raise money to bring for the the down payment to get his equity out of it, and then we would take over his 4% mortgages, which are way better than the 8% that we would get now.

Chris Prefontaine: [28:40] Are they all separate deeds? Yes. Yes. Okay. So the only thing that comes to mind, obviously, have all separate deeds, number one. But number two, that's good because there's no blanket. But the only other thing I'm thinking of is if it's that local and you both are dealing with that bank and it's kinda like the local bank, you might definitely wanna think about putting that it's up to yes, but put it in a with a contract for deed or a lien contract so you're not raising red flags.

Mike DeHaan: [29:00] Sorry. Say that one more time. Put that in a

Chris Prefontaine: [29:02] Yeah. So buy with a lien contract or a contract for deed, installment contract. In other words, if the deed sits in escrow. Okay.

Dan Austin: [29:08] So the bank the bank we've talked to are banker, and they're saying that they would be cool with us assuming it. Because we both have a really good standing record with them. So, like, they know.

Chris Prefontaine: [29:18] Yeah. But assuming it means I can tell you, unless I'm wrong, that assuming it means gonna take your credit, and you're gonna sign on it. Mhmm.

Dan Austin: [29:25] Oh, yeah. Yes. That's what that's what we initially talked about. Yeah. I get you.

Chris Prefontaine: [29:28] Yeah. VA VA loans are like that too. They'll let you assume. I I don't wanna assume anything. I don't wanna go on

Mike DeHaan: [29:32] the Because you're basically taking

Dan Austin: [29:34] that loan as your loan. I see what you're saying.

Chris Prefontaine: [29:36] Yeah. You're gonna be on a personal effort. Okay. And I again, because of the crash, I don't care how good it sounds. I don't care if you have 840 credit or whatever it goes up to. Don't do it.

Dan Austin: [29:46] Yeah. That's fascinating.

Mike DeHaan: [29:47] Yeah. See, I I guess we haven't been bit yet because we have, like, $10,000,000 worth of debt that we're, you know, we'll sign down at this point. Yeah. Not to work. We'll wait from that guy. Just another drop in

Chris Prefontaine: [29:56] the bucket, I guess.

Mike DeHaan: [29:57] But So so I guess on that, so with doing it with a land contract, so basically, it would stay in escrow, the deed would. And then doing that, do we still get like the tax benefits, like depreciation?

Chris Prefontaine: [30:08] Yeah, ownership benefit, good question. Very good question. But see, Mike, what's interesting about that is that's like the attorney thing. Like our CPA, Paul, Paul deals with a lot of our associates, lot of our students. He's read my book. Like, he understands everything about what we're doing, so just make sure you have a good CPA. That's Okay.

Mike DeHaan: [30:24] Because in that situation, we don't take title. Or do we take title?

Chris Prefontaine: [30:29] It technically you you everything gets signed, it sits in escrow. It doesn't get recorded. Fascinating. My kids just gears are turning, I love it.

Dan Austin: [30:36] My tune is I'm

Chris Prefontaine: [30:37] like What's fading you in? Yeah, what's that?

Dan Austin: [30:39] Washington, we're in Washington State.

Mike DeHaan: [30:40] Washington Washington

Chris Prefontaine: [30:42] State, So we have students you can, when we get off the air, I'll give you my cell, you text me, I'll give you the local attorney, and I'll tell her there's no fee or anything. Just take these guys on as a client, and she'll talk. That that would

Mike DeHaan: [30:52] be awesome. I'd really appreciate that. Yeah. Because it's it's something that has definitely been on our mind, I'll I'll talk to you afterwards too. We'd love to have you come and maybe do a a talk with our instant investor program. You can Yeah.

Dan Austin: [31:04] That'd be Talk about

Mike DeHaan: [31:05] the course and stuff that you run as well, the group that you have, that would be cool.

Chris Prefontaine: [31:08] Happy to myself or my son-in-law, Zach, who also owns the company with me, we'll be happy to. We'll talk

Mike DeHaan: [31:13] Yeah. About That'd be awesome.

Dan Austin: [31:14] So anyways, like, talk about this, Mike and I feel pretty versed, like, understand this creative stuff. We're not experts, but like, you're taking to another detail level where like, know, there's a lot of confidence when you're speaking about this that there's just because there are always, when you see some of the gurus online pitching this, there's always these little gaps, or always some things that you're like,

Chris Prefontaine: [31:32] I don't know what you're saying there is legal. Yeah. You know? Of course there is. Here's the thing guys, it's because, and I'm sorry to, I'm not poo pooing anyone in particular, they're probably all my podcasts as my guests, but a lot of the people in our industry are great marketers.

Dan Austin: [31:47] Yes, that's great.

Chris Prefontaine: [31:48] So I talked to a guy that you guys would know, I won't mention his name, but he said to me after a show, we got off air, I said, Hey, how about we refer your coaching clients to me? He said, coaching clients? He said, Chris, I'm not a market. I sell 7 or $8,000,000 a year in in in courses, and I don't care what happens after that. He literally said, don't care. All we care is the opposite. We suck at marketing. We wanna do deals. Right? Yeah. So yeah, you'll be careful. They

Mike DeHaan: [32:11] they leak gaps. I'm pretty sure I know who that is. I will call about there's a certain individual that we do like to hate on because he lives a lot of gaps and he's all smoke and mirrors, and we've talked a lot. Yeah. There's a

Dan Austin: [32:23] few Yeah. There's a few of them. Under review.

Mike DeHaan: [32:24] But no. So that that's yeah. Like like the stuff that's working on is, I guess, a little sorry sorry for the lull in the conversation to your listeners. He's actually All good. I think this is the first time that we've had a guest that's had me pondering to the point that I'm I'm falling behind the conversation.

Dan Austin: [32:39] Yeah. You're stoked.

Mike DeHaan: [32:40] Yeah. No.

Chris Prefontaine: [32:40] It's it's super, super

Mike DeHaan: [32:42] cool, though. So I guess one more thing I wanna talk about on this, and this is something that we find. So, like, our main business, we're direct to seller. So we do a lot of wholesale, you know, fix and flips, like all of our stuffs are bought at huge discounts. And the nature of direct to seller marketing, we typically end up dealing with people that are, I would say, less than sophisticated. Right? How do you pitch this to people who you know, they're not necessarily, like, bad financially or they are, you know, their their houses can be okay. They're just not, like, financially minded enough to be able to this to them. So, like, what does this pitch look like to a lot of sellers? Like, what sort of basic tips do you have for that?

Chris Prefontaine: [33:26] Okay. So maybe surprising you guys, but it's not a pitch, and here's why. It's a well, me tell you what it is for us and not what it's not. It's a truly listen and find out what the seller's challenged by, by way of the market not bringing them, like my building, because he wasn't challenged financially, it was debt free, this building. So why'd he sell it to me? Because he wanted it for tax and trust and planning estate reasons, and he wanted full price. Or, listen intently for not just what they can't get accomplished, but what their pain is. Divorced, I got a second house, we just bought a house in California where the guy had a $6 payment on a new house, and this one was $4, he's bleeding. So my student bought it. But my point is, he didn't pitch him. He found out what the heck was going on and can we solve it. There's some calls where price doesn't come up. The first call, my students go, could we share calls? Hey, I heard you call my cell phone, you didn't talk about price. I said, we're not there yet. I gotta find out what the problem is first. And if I can't solve it, I'll tell them. So we're solving problems or helping them accomplish a goal that they otherwise can't accomplish. When you do that, trust me, terms goes away. Yeah.

Chris Prefontaine: [34:34] Well, yeah. And and I guess I

Mike DeHaan: [34:35] understand that because that's our big focus as well as solving people's problems. Like because, like, on the wholesale side, very rarely are we, like, getting a house like, oh, 60¢ on the dollar. Like, it's an easy transaction. There's always, like, title issues, divorces, squatters, like, whatever. But it's more the, like, how do you put that in layman's terms? What you're trying to do.

Dan Austin: [34:54] Can you use sub two? Can you use the word wrap assuming all

Chris Prefontaine: [34:57] these things

Dan Austin: [34:58] that maybe gets them too complicated?

Chris Prefontaine: [35:00] Guys. Okay. No. You can't use the vernacular. Like, I'll hear my students, we critique calls to help them get better faster, and one of I'll hear them say something like sandwich lease or a wrap, like, oh, I cringe. No. So here's what you say this up to, ready? Hey Mike, so you have pain and you need it solved. All right Mike, then what I can do is I can buy your house, and let's say you're a month behind, I catch up your arrears, can buy your house, and the loan will stay in your name though till I cash it out. Some don't, but some will say, When are you gonna cash out? When I cash my buyer out, I don't know, my intent is a few years, but I'll just keep you posted along the way. Like, I solved their problem first and foremost, the rest is nonchalant. I got your problem solved. Now, what do we need to move on? What do need to know to move on?

Mike DeHaan: [35:41] Too simple. Like that. I think that's the problem is, you know, that's how I know you're good at sales too, because you keep it simple. You don't say a lot. And that's something that we're always working with, like our sales guys, even with their own sales pages, tend to talk too much. You're trying to explain it and justify what you're saying when realistically

Chris Prefontaine: [35:57] They don't wanna know. They don't care. They don't care. And the

Mike DeHaan: [35:59] more that you say they feel like they're getting lectured. Right? And that's like the easiest way to turn off enough market selling. Exactly.

Chris Prefontaine: [36:05] The worst thing you can do is go this again, I hear hundreds of calls. Let me tell you how I buy. They don't give a shit how

Mike DeHaan: [36:11] you They

Chris Prefontaine: [36:12] how about ask them a bunch of questions and find out why they need So simple.

Mike DeHaan: [36:16] Yeah. Yeah. Right. No. That that's super good stuff. Awesome, man. Well, do you have anything else from from you, Dan? Like, I mean, I I could keep going on random questions all day, but then we're just gonna get into a, like, sow

Dan Austin: [36:28] in the weeds. I know we're gonna get I

Mike DeHaan: [36:30] wanna get sow in the

Dan Austin: [36:30] weeds right now. But I think that's a different conversation for us. Yeah. Oh, This is I also wanna get stuff.

Mike DeHaan: [36:35] Well, that would be great. But, yeah, so anything else from you, Dan? No. For wrapping up? Okay. Awesome. Well, thanks so much, Chris. This has been really, really good. I guess, really quick, before we go into the end of show questions, talk about your education. You've talked about your students, those sort stuff. What exactly is that, and what does that look like?

Chris Prefontaine: [36:50] It's interactive, meaning I alluded to the fact that we just wanna do deals, We don't market a bunch of crap. So, but I'm big on free, you guys, like there's a lot of nice, cool niches in real estate. I'm not so naive to think it's only creative. I'm biased, but So I wanna give you guys your tribe, a couple free books of our best sellers, and it's not one of those offers that says put in $5 for shipping or $10 It's free. Gonna ship you a hard copy book. Just go to wickedsmartbooks.com/collectingkeys. You'll get a free set, just give us a couple weeks. It's free. You'll also get a free ticket to our event, so it's pretty cool, you'll get that as part of the books, they'll come physically. Yeah, I think that's it, as far as that goes, and then there's a free master's class, you guys can put it in the show notes, if you can deal with listening to me with my New England speed for another hour, go to smartrealestatecoach.com/mastersclass. That way, it's all free. You decide if you wanna go forward. If you do, great. If you don't, great.

Mike DeHaan: [37:43] Yeah. That's perfect. I'll say, dude, thanks for

Chris Prefontaine: [37:45] all the

Mike DeHaan: [37:46] books that you sent as well.

Dan Austin: [37:47] It's awesome.

Mike DeHaan: [37:47] Yeah. I got them all. Someone's running a job. They're good stuff. I've I've flipped through them a little bit, but actually high quality books as well, which I appreciate. Sometimes we get free books from guests. I'm like, you know, this looks like it was made. So a little bit scotched.

Chris Prefontaine: [38:01] So thanks for showing. Yeah.

Mike DeHaan: [38:02] So yeah, go go check us

Chris Prefontaine: [38:03] out on YouTube, guys.

Mike DeHaan: [38:04] You can see the handful of books he has get all sorts of them. So I'd recommend it for sure. Awesome, Chris. Well, good stuff. So go to the end of show questions here as we wrap up the show. First question, which is always the fun one. I'm sure you have some good ones you've been in real estate for so long. But what is your craziest real estate investing story? And this can be a, you know, crazy situation with like a tenant or sellers can be a big win, be a big loss. The only rule is it can't be anything about like, you know, finding dead people at the property because we had a bunch of those in a row and it just got super bummer, yeah, depressing.

Chris Prefontaine: [38:39] Well, knock on wood, I haven't Okay, so I don't wanna do a win because that's all fluff and people do that all I'll the tell you a story that I haven't told in a while. So we had a portfolio of college properties at one time, buddy and I, he's a plumber, he did the field work and we got up to like 13 over by Holy Cross College in Massachusetts. Super, super lucrative, we had it dialed in. I got a call one night, maybe one or two in the morning, he's a plumber, keep that in mind, and then he said, Hey Chris, I went to the house today. This house we have in the basement had two feet of sewer.

Mike DeHaan: [39:10] Oh, jeez.

Chris Prefontaine: [39:10] And if anyone finds out, this place would be shut down. We have three floors of kids in it. Oh my So he said, you're coming with me, we're gonna start shoveling the shit out of the basement.

Dan Austin: [39:21] Oh my gosh.

Mike DeHaan: [39:22] So we

Chris Prefontaine: [39:22] wrapped our feet with bags and put towels around our head and we began. Now, my wife said, It doesn't smell. I said, Yeah, I can smell it for like two weeks, it's in my nose. And then two weeks later, it happened again, and he ended up finding the problem, so I'll fast forward. But it ended up being roots that got in the pipe, and we didn't know it when we snaked it. So then my plumber buddy ended up fixing it and putting a new pipe and all that stuff. But twice this happened. Oh, I had do it in the middle of night. Oh, man.

Dan Austin: [39:51] Oh, nothing like shoveling shit in the middle of the night. Yeah. Oh my gosh. That's definitely a first for us. I don't think I've heard that one before.

Chris Prefontaine: [39:56] That was the first That's

Dan Austin: [39:58] a first of

Chris Prefontaine: [39:58] two. Yeah. Yeah. Right.

Dan Austin: [40:00] That's crazy.

Mike DeHaan: [40:00] That's great. How long ago was that?

Chris Prefontaine: [40:02] See, we bought those between '95 and 2006. So probably around two thousand ish, 2001. Yeah.

Mike DeHaan: [40:07] Okay, man. That's crazy. That's that's the last one that will definitely stay with you. That is a first

Dan Austin: [40:12] for sure. Yeah.

Chris Prefontaine: [40:13] I probably still smell it. Just telling you. Yeah. Right.

Dan Austin: [40:16] Exactly, that's funny. That's great.

Mike DeHaan: [40:18] Alright, second question, what is the number one tip you would give to a a new investor looking to get started or to a small time investor looking to take their business to the next level?

Chris Prefontaine: [40:28] I'll give you three quick steps. This is, I don't care if you're in real estate or not, this works. First, pick a niche that you can get behind passionately, you, like, some niches deal with people more than not, like our niche, you gotta wanna help people. Second, find someone in that niche that has been through some cycles, it's scary if you don't do that, trust me, because you're gonna hit some skid marks and some speed bumps, and you gotta be able to lean on someone and go, Hey, how do I do this? And third, this is the hardest part, put the blinders on for three years once you get that person, because there is a lot of shiny objects. There are a lot of shiny objects. So you need to stay the course for three years. I had Brian Tracy on my podcast at age 80, and he said, No, it's seven years, but I'm sticking with my at least three, minimum, with blinders on and staying your niche. And when I say pick a person, by way, it's not just someone who's been through cycles, that's important, but someone who morally and ethically aligns with you, because I know plenty, and you guys probably do too, plenty of successful people that screwed their marriage up or their kids or something else because they just were too focused on the business. That to me is important.

Chris Prefontaine: [41:27] Might not be important for some listeners,

Dan Austin: [41:29] but that's important for me. I love that. Great advice.

Mike DeHaan: [41:31] I think that's such a key point that so many people miss is, you know, they they try to learn from people that present like a certain lifestyle, but they may not necessarily vibe with. And you gotta look at Oh, the rent a car

Chris Prefontaine: [41:44] and the the rent a plane.

Dan Austin: [41:45] Yeah. Exactly. There's no morals behind it that even come close to aligning with yours, and it's just not a good fit long term. That's that's where it gets dangerous.

Chris Prefontaine: [41:53] I look. I've been married thirty seven years this August, and and so that's not by accident. Right? So it's important. Absolutely. That's super good advice.

Mike DeHaan: [42:00] Alright, Chris. So last question, and you already answered this a little bit with your your group, but you can now plug so you can do some math that you want. But where can people find you, follow you, and reach out to you if you'd like to do so?

Chris Prefontaine: [42:11] Yeah, just those two links I gave, and the general site is smartrealestatecoach.com. I'll give you guys a link that you can get on a call with me. I seriously haven't done this in a year, but if you just say in the form you fill out, it's free. If you say in the form, Chris and I can speak with him, I'll do my best to get on with you. We have great staff and families, but it's smartrealestatecoach.com/action and that'll get you a free strategy call. And I just, it's not just, like people say, I wanna pick your brain, it's not that. It's come with, hey. Here's where I am in life. Here's where I ideally if I could paint a picture or whatever one I'd like to be, and here's my block. And I'll you with that block. That's what the calls That's cool. I

Dan Austin: [42:50] love it. It's so valuable. Definitely call definitely reach out.

Mike DeHaan: [42:53] Yeah. Absolutely. Yeah. And we'll put all those links in the show notes, guys, So you can go grab them there. And then they will also be on our website at clickykeyspodcast.com. So you go check that out. Anyways, Chris, man, thanks so much for coming on the show. It was super, super cool to meet you. A lot of fun. And I love the stuff that you and like I said, this was the first show that we've done. And coming up on a 100 now, where I have literally been like, at a loss for words at some points because you were throwing out. It's like such good stuff. Had me had me. Oh, I appreciate that. I appreciate that. So awesome, guys. Well, hopefully you enjoyed this show with Chris. Seriously, seriously reach out to him. He is a wealth of knowledge if you can't tell. And the crazy thing is is too is like we just scratched the surface of what he's capable of and his knowledge base. So absolutely reach out to him. And besides that, share this episode with anybody who might find it interesting. And if anyone's a real estate investor that you know, they will find this interesting. And if they don't, then you need to educate them on the value of creative finance and the stuff that Chris is working on. Besides that, guys, if you wanna learn how to start generating off market leads yourself so that you can have opportunities to use attached to Chris talked about here, you can go to collectingkeyspodcast.com/free and get our free five step guide to start generating off market leads.

Mike DeHaan: [44:04] And besides that, everybody, thanks for listening, and we'll talk to y'all next week.

Speaker 2: [44:08] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.