Ep #341 – Chris Prefontaine – Author of Real Estate on Your Terms
Here is some of what you will learn:
Non-bank financing
Owner financing
Principal only payments
Family run businesses
Importance of value and mission statements
The value of discipline
The power of self accountability
To learn more about our guest please click here
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Full Transcript below:
Chris Prefontaine – Author of Real Estate on Your Terms (Ep341)
Intro: Hi! I’m Rod Khleif. Each and every week I record an interview with a thought leader that I know you’re gonna get a ton of value from. Now here on YouTube are the video versions of my podcast, Lifetime Cash Flow through Real Estate Investing. Now to make sure you get the latest information please subscribe and hit the notification bell. Let’s get started.
Rod: Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I’m thrilled you’re here. And I know you’re gonna enjoy the dynamic gentleman we’re interviewing today. His name’s Chris Prefontaine. Now Chris has his own podcast that you should check out. It’s called the Smart Real Estate Coach and he interviews people just like I do. Chris has been in the business a long time got his butt kicked in ‘08 like I did so he’s a kindred spirit in that regard and we’re gonna dig in to some things that we really haven’t talked about on this show a lot and that is buying property on terms. So let’s get right to it. Chris, welcome to show brother!
Chris: Thanks buddy thanks for having me.
Rod: Yeah absolutely let’s have some fun today. So you know like I’m sure you do on your show let’s talk about background a little bit if you share with my listeners you know your story how you got in the business where you’re at now and why you and I love this freaking real estate business
Chris: Yeah well you go back to any piece of this but I started in ‘91 actually some date myself just a touch I did a bunch of single-family building back then on what I call spot lot you know infill in neighborhoods but what was cool without knowing I was doing it in hindsight now is we did all in terms but actually. So I have the owner weight on his money I have the subs weight I had everybody wait and at the end when I got the home done everybody got paid. So it was pretty cool I was young and ripe and thought dozen what you do it. And so everybody went along then I bought a Realty Executives franchise in ’94-five’ish and I built that to 2,000 sold to Coldwell Banker that was the intent I don’t want to be in that forever. Aand then I started coaching in 2000 doing my own real estate investments and coaching in US and Canada. I had about 48 clients there and that got a little boring because I was tying me to a phone all day as you can imagine but it was a great experience and then the market crash came in ‘08 and I got annihilated that you just alluded to and that caused me to pivot and do everything now the way we do it on terms without using banks or cash
Rod: Okay so what you got out of the experience was you don’t ever want to be on the hook personally on the hook with a bank for debt again and you know I didn’t get that memo. I should have got that memo. I you know like I mentioned to you before we started recording I lost 50 million real really did alright I’m back now and it was painful and I wouldn’t you know I wouldn’t have my amazing wife or live in the beautiful home that we live in if it hadn’t happened but it wasn’t a lot of fun while it was happening. So you pivoted and you just decided moving forward you were gonna buy everything on terms. So as you know my listener base is multi-family. So let’s talk about how someone that’s in this business can buy multifamily on terms
Chris; Yeah so anything I say about single or multi is gonna work because I’ve done multis with this but what I like the most especially for multi, you can do these purchase master lease but I like the owner financing and when I target Rod to be a cool one a target for Maltese would be free and clear properties. I know single feeling-wise and you might know the stat for multi but single-family wise it’s like a third of the properties are debt-free. So I don’t know what it’s a multi I know the two I did was debt-free recently yeah what’d you say there?
Rod: It’s a little less but that’s okay there’s about a million two multifamily properties in this country so there’s plenty of inventory.
Chris: Yeah there you go so we do when I say on a financing, I mean you know it can be a number of things but when I say it it means free and clear and it means principle only payments. And so every one I’ve done single and multi has been principal only payments and so that’s a nice additional hedge against any economy clearly especially you can get long enough terms. The building I’m sitting in right now my own office building, we bought this on terms. We did not use a bank. So I just refused to use a bank and sign my name on it personally and I think that they could do free and clear all day long and in the multi world
Rod: So how do you sell that? because I’m it sounds great I mean alone with no interest and you don’t deal with the bank and you negotiate dictate the terms versus having them dictated to you. How do you.. first of all let’s talk about how you find those deals?
Chris: Yep
Rod: And then let’s talk about how you sell them?
Chris: Yeah so find them couple different ways as you know you can buy a list of anything these days you can buy a list of people that we have pink underwear on Friday. I mean it’s just crazy but I you know so you can buy it from like a Melissa data or any one of those data sources but then recently we started getting it right on you guys probably know this program man propstream. It’s simple so they could go on there that’s like a good resource and you can get your list, you can niche it down to free and clear and then how do you sell them I think you said two things
Rod: So you mail them? you call them? what do you
Chris: We mail typically if we’re gonna target an area yeah or most of other deals we call either one get the data
Rod: So you actually make outbound calls to sellers as well?
Chris: Our virtual assistants do
Rod: So let me drill down on that if you don’t mind, your virtual assistants domestic? are they in the Philippines?
Chris: No they are all US actually we have a team we have two things going on we have we have one that we’ve had for six and a half seven years who we also use for our students. So he’s done I don’t know how many caught ridiculous amount of calls and then we use a service that’s just real estate and they’re in the US
Rod: Okay okay all right so you’re mailing them. Let’s talk about the mailing for a minute are you, how often are you mailing? and what are you mailing?
Chris: You know for me I, so mailings not our main lead generator right. So if I want to do one like literally I can say I’ll mail to the free and clear list I did like a 400 piece mailing recently and I just did a lot of saying we’re looking to buy property in your area to multi. Out of that we bought one and my daughter so that was good let’s do another one. So we sent it on bought another one, a six unit. So it’s not too difficult and you don’t need a whole bunch you’re not talking about a lot of money for a few hundred mailers
Rod: Right right so you just do free and clear and you just mail them a letter. You do letters, postcards? what do you like to do the most?
Chris: I’ve done letters and have done a yellow letter you know the handwritten look and thing and it looks like an invitation. They both work I think the yellow letter gets opened a lot more but they both work fine. We bought a house each time so I mean you usually get a deal out of a mailing
Rod: Okay okay all right fair enough and then you know when you’re talking to the seller you know how do you position terms and how do you sell no interest?
Chris: Yeah two things come to mind one is, in no particular priority order, one is I usually would say to someone so say the property is five hundred fifty thousand. I’m making that up. I may pay them five fifty all the way up to maybe five seventy five if they’ll go out longer because what do I care it’s gonna get eaten up with principle payments in the first X amount of months. I don’t mind paying an extra six or eight months in my mind they don’t know that of my monthly payment gonna pay them I add that to the price and they think they’re getting a premium. Now they’re not stupid but they like that. And then the second
Rod: Hold on I just wanted I want to stop you for a second because that is freaking brilliant okay I love that. I you know yeah I’m asking 250 well I’m gonna pay you whatever it is 275 but you’re gonna carry the papers. I mean that’s huge and so you’re a little back of the napkin thing is six to eight months of payments
Chris: Roughly it’ll take a while. Let’s face it they went out ten years I don’t care if I give him 12 extra you know
Rod: Exactly okay love it okay. So what else?
Chris: Second piece is and for some this is not big depends on the size of the property but they get a stop each year and report interest income if I’m paying him interest right and it’s such a piddly number and a lot of deals. So I tell them look in our report interesting come this is all principal. So depending what your basis is go see your accountant but you’re stretching out this this capital gains thing and you’re not paying interest income
Rod: You turn a negative into a positive. So instead of saying you’re not getting interest you say ah you’re not paying interest income I love it love it. That’s basic sales man. Turn it into a positive okay and you’re right. Let me let me interject a couple of quick things, a couple of things that they come to mind here by the way guys if you’ve got a mail multifamily, what you’re going to find is a lot of that property is owned in entities and it’s kind of a pain but if you really want to maximize your mail your mailers you need to go to the Secretary of State and have a VA do this somebody in the Philippines I had six of them doing it for a year on mobile home parks gosh seems like a lifetime ago in swimming two years ago and I was only I was paying each one of these VA s a dollar 93 an hour full time had six of them working full time for a whole year I did the whole country but what you do is you go into the Secretary of State’s office and you find out who owns that entity the LLC the corporation and you get their home address and if you can you get their phone number and then you’ve got a list and you’re mailing them at their home addresses which is much more powerful than sending it to the registered agent for that entity. So just an aside on that. Now let me ask you this when you do a mailer Chris, is it a one-and-done or do you do a sequence of you know cuz I tell people you know if you’re not gonna do more than one don’t even bother. But it sounds like you’ve been very successful on your one offs do you
Chris: I do agree with you though from a mock a pure marketing standpoint. Yeah you do one you’re almost thrown away but right in lockout but yeah you almost let thrown away I like three to five
Rod: Okay three to five and it were like over a year period then
Chris: Yes spread out. I usually go a little shorter timeframe but maybe six
Rod: Okay okay even shorter okay fantastic okay. So let’s see that was one thing I want to mention and then
Chris: There’s another reason Rod for some well there’s two other ones one is, they like, some people like to spread that capital gains out so depending on
Rod: Okay that’s what I wanna go to
Chris: The spread, they pay it but they pay over time based on the percentage of profit to faces then another one is just pure estate planning. The gentleman I bought this building from he didn’t want the money right now. He wants it spread out he’s 70 some-odd years old they said I don’t need it right now I you know
Rod: Exactly exactly and that’s one of the big benefits if it’s free and clear chances are you’re dealing with a retiree and if you can show them, listen you’re gonna get a million dollars from this property you’re gonna put it in the bank and you’re going to get 1% interest here’s your payment. Now I’ll pay you X okay and you’re only gonna pay tax on what you receive every year and so your payments are gonna be much higher. Yeah you’re in your case you’re not paying interest you know in my case I usually pay interest but you know I love your model better for sure but yeah from the tax standpoint guys you definitely and the key here is if you don’t ask you don’t get. So make sure you always ask if you’re dealing directly with a seller if they’d consider taking payments. So very very important awesome.
Chris: On the term Rod just for script while you’re on that you made me think of it. We usually do like four to six sometimes ten but when someone says how far are you talking? you know if they’re like well how far out I’ll say well we usually do twenty-five or thirty why what did you have in mind and then they think they got a gift when we go to you know if we have to negotiate it down
Rod: Okay so you say we usually do twenty-five to thirty years and if they can get you down to fifteen or twenty, you’re only paying principal. I mean you’re paying you know less than you’d pay on a P.I. loan principal and interest loan yeah love it love it okay no that’s awesome. Anything else on that or can we move?
Chris: No you’re good that’s good
Rod: All right so I know that you know you’ve owned and managed effectively a family-run business. Can you.. and you know a lot of my listeners you know want to do this with their spouse. They want to maybe in bring their kids in I want to bring my I son and I haven’t been able to convince him yet because making too much money doing what you doing but let’s talk about the nuances of owning and managing a family-run business and the positives and the negatives
Chris: Sure. So the positives they’re easy so let me hit those. It’s a different in my opinion it’s a different commitment level if they want to be there right. They just you know they’re not working 9 to 5 and going home. I never see it. I mean they just on it and they’re on it for because it’s family but they’re also on it because there is no free lunch we from day one they get paid as we do deals period. So there’s no draw there’s no none of that you hustle you have a dry period it’s because we all didn’t do something. So that works really really well. The thing that worked well for us is I started talking a little bit off here about we have we belong to a group that it helps other business owners not just real estate, in fact we’re the only real estate helps them to scale their business. Well part of that is established values in mission and purpose and all that which you should do anyway but not many businesses do in and it wasn’t set up by me saying here’s what we’re doing, this is what you got to live by, it was all of us saying where are our values what are we making decisions on. So there’s never arguing about that why’d you make this decision because it fits with the values you told me you wanted to look buy. So that works great and then the other thing is it can be
Rod: Let me stop you if you don’t mind for a second you’re throwing lots of great stuff out here and I don’t want my people to miss it. So guys I know you’re thinking well I just want to buy some apartment buildings but I’m gonna put a team together and you’re thinking what does values or mission or purpose statement or any of that stuff have to do with any of that I’m going to tell you a lot okay because like he said, especially I mean this this is not just a family-run you know this doesn’t just apply to a family-run business. It applies to any team you put together. They’ve got to get behind your mission. They got to you know and let me tell you one key piece here. When you put a team together and I’ve built 24 businesses so this is something you know I love talking about. When you put a team together, you need to make sure they’re involved in that process of establishing those values, those missions, that purpose statement because then they’re behind it they own it they’re enrolled in it. Don’t just dump it on them but every business should do that should decide what they’re gonna stand for you know what they’re you know who they’re gonna help and it’s it is more than just money okay. And so I just want to speak to that for just a second please continue Chris sorry
Chris: Yeah no that’s perfect I love the brainstorming and the other one is it fits in that same realm but it’s kind of what I call meeting flow meeting flow meaning we meet every trimester quarterly seemed like it was too much for us we meet every trimester. We established the annual priorities and then we say in this trimester what are we nailing? what’s like going to move the needle the most? We all agree on that and then we whittle that down to each one of us doing what we call the big three. Big three are the three things we, me personally my big three you’re gonna be what’s gonna move the needle most for me to hit those annual priorities. That seems to work well too because it’s very open communication with family and everybody again is there’s no arguing like we all establish this together. So it’s a lot of
Rod: Does everybody in your family i.e team had their own swimlane?
Chris: Yes and it’s good question because they got their organically. So my son came in started helping me part time and then that grew to I love working with the buyer side okay great and then my son a lot came in and started really taking over my role and duplicating me and my daughter’s more organized and none of us want the other role. So it’s kind of cool
Rod: Perfect perfect and that’s why I asked because you know you want people to play to their strengths and I love that it happened organically for you because that means it’s going to be sustainable instead of you trying to put a square peg in a round hole. They moved to what their strengths and and loves were so that’s awesome. So you meet every trimester that’s interesting
Chris: That’s off site
Rod: Okay so that’s the big meeting. Do you meet on an ongoing basis a weekly basis? a monthly basis? just regarding ops regarding what’s happening regarding
Chris: Yes we meet monthly to see how those are going as a team and we meet every week one on we call them one on one. So I meet with the ones that report directly to me one-on-one every single week to go over where we out of the big three do you need my support? what’s going on? what’s challenging you? etc
Rod: So the big three of the big three initiatives that they’re going to own and work towards that trimester yes?
Chris: Yeah and you brought something up that was interesting you said something about you know they might think they don’t need that right look if you’re buying and selling buildings anything and you just going out and doing deals, you kind of got a job. But as soon as you put a team in place and you can scale it you got a nice lifestyle
Rod: Yes you do and you and you’re basically taking off the employee hat and putting on the entrepreneur hat and it’s a different mindset and that’s a great segway into the next thing I’d like to chat with you about which I know that you’re an expert in and that is being a disciplined and goal driven entrepreneur. So can you speak to that a little bit? The nuances of entrepreneurship versus w-2 and what that means
Chris: Well so let’s hit the discipline thing because I used to say to my wife before the kids are even born and then 30 and 29 now. I used to say you have discipline you literally should be able to run any business and succeed at it. tTis one’s so key so a simple discipline thing that that we do is we call it the power of one daily discipline. This is so elementary but it works and it works for my people I teach and that is on the left side of the paper you put you list down all your things that you know if you do them daily will make a successful year and then across the top you have 1 through 31 for the month and you make its self accountability. You make yourself check off those boxes every single night that’s a simple but if you say a guy in a mastermind call said this he said to me this is when I started in 1994 he said guys, we’re all selling 200 homes at the time as Realtors and he said I got this figured out. I can have a successful year if I just make every day a success and here’s my list. Wwell that’s pretty elementary but pretty powerful I think right
Rod: So just you, you blew through it kind of fast so you put numbers 1 through 31 across the top and you know the list of the of the tasks that you know that if you complete them consistently you’ll be successful is that in my pre framing or
Chris: Yeah so self accountability as you know it’s pretty powerful right so it’s even better with someone else but you can do both and in each day say it says send 10 mails out, call 10 people whatever it is you’re gonna check that off yep I did it. It’s something strangely weird about you personally look at that list that the other day going, geez I’m not checking any boxes I really sucked at it like I did nothing and it’s, if you want to increase the odds of you doing it, give it to an accountability partner and do that every week. I have one every Monday morning at 8 a.m. that’s a powerful it is
Rod: No kidding you so even with your level of success you have an accountability partner
Chris: Yeah it’s actually gentleman that I met through producing my podcast and he has three I think but I have him every Monday I don’t care where we are. It’s 15 minutes it’s what were your wins, what were your losses, what were your highs, and what were you fix this, and what’s your big goal for this week that’s it we’re off the phone
Rod: Okay wins, losses, aha’s, and fixes. Fixes, what does that mean? from the previous call the loss you fixed?
Chris: yeah it could be a loss that you fix it could have been an aha so you fixed it you know and then we do one kind of what’s the big goal this week? what’s that one thing that you got to make sure you do this week and it’s funny we’re both successful in our own right right and he gets on a phone last week and he says geez Chris is so funny this is what I do but that putting out one thing on paper knowing I had to talk to you I make sure it gets done on my whiteboard you know
Rod: Yeah this sounds like Gary Keller going on here
Chris: That one thing yeah
Rod: Yeah love it great book guys if you don’t know what I’m talking about the founder of Keller Williams wrote a book called “The One Thing” So and you mentioned something else you mentioned that you were in a mastermind and I’m here to tell you guys if you know I have a mastermind that I run. It’s over four billion in assets represented in it and you know and I started here in my home my compound here in Florida. And it was just so incredible it morphed into this incredible group now and you need.. I’m gonna invite you to do one for yourself put one together join one I’ve been in probably a dozen of them. I’ve made three you know millions of dollars from them, from the relationships in them and growth in them. And so you know I’m sure you feel the same way yes Chris about masterminds?
Chris: As you were saying it Rod, I mean I can I could list for I could spend an hour and list the dollar directly related to a side idea in the hallway from a mastermind. A conversation and amassment a connection and today the gentleman I talked about in my accountability partner connected me with a gentleman and toy different industry but in a half-hour conversation we both found I don’t know five things we can help each other with I mean big things so I couldn’t agree more
Rod: Right right so let me ask you this. I like to ask this question sometimes and definitely want to ask you this question you know if you could go back and tell your 20 year old self something with what you know now about the real estate business. What might you do differently?
Chris: This thought it would apply to any business so real estate too and it is that and I wish they did it at that age but I wished day 1. Someone said to me, look Chris, success leaves clues. So find some of the doing X whatever X is for you but then don’t like look left right or backwards don’t get on the shiny objects because that happens to everyone all that person or for a minimum of 36 months and you’ll have huge success. Well that’s true because after 36 month you’re gonna be engulfed and successful and happy with it because you gave at the time. And you didn’t deviate. I know that sounds simple but we get it meant to and we sometimes go different direction
Rod: No it’s so true and I you know any just about any successful or super successful person I’ve ever met interviewed no has done it via mentors done it via coaching continual learning I know you’re a big proponent for continual learning as well. I remember my son when I’m in my 8 million-dollar mansion on the beach this testament to my ego that I built and you know and I’ve owned two thousand properties at that point and this was pre-crash, I lost them, but he was nine years old and I told him listen buddy I’m gonna be gone this weekend. I’m going to a real estate bootcamp. He’s like, why are you going to a real estate bootcamp? why aren’t you teaching it and I wasn’t teaching back then I said because learning is earning you know it’s a continuum you agree with me?
Chris: Yeah I always say so this year’s my learning year for my earning yet year next year and next year’s my earning learning it for my or any of the following
Rod: I love it I love it so last question you know do you maybe I may have one more after this but why do you think people fail to succeed in real estate or business in general? what pops into your head?
Chris: Two things immediately, one is the space between the heirs right. There’s no freaking question because my I have the best people I can work think of that I work with that had success the only thing that slowed them down I have different time frame from others is the mental space there’s no question it’s a big part of the game. And the second thing is this is big and real estate unfortunately probably agree with this because there’s too many people touting a bunch of crap that they think you’re gonna make you a rich right. So it’s mismanaged expectations. Oh I saw the guy he told me I could make a million dollars and it’s just stupid. And so I tell people give it three years or don’t come in on our team. It’s just not worth it
Rod: There is no get-rich-quick in real estate. It’s is you’ve become freakin wealthy over time particularly if you hold on of the assets yeah but there’s no get-rich-quick I love it what’s your favorite quote buddy? a quote that you love that keeps you going in life
Chris: You know when I got cranked in ’08 I used to and I think it might be behind that bookshelf but “Massive action trumps everything” you can finish that with massive action sustains massive action is the best revenge you know whatever but that’s massive button
Rod: Couldn’t agree more brother couldn’t agree more. Listen you’ve added a ton of value guys check out his podcast Smart Real Estate Coach and good guy and very knowledgeable and I appreciate your valuable time my friend
Chris: Thank you a good chat Rod
Rod: All right likewise
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