Today we have Chris Prefontaine on the show! Are you looking for a way to get into real estate with creative financing? Then look no further! Chris Prefontaine has been investing in real estate for over 30 years and can help you on your journey. His company focuses on helping others get into the world of real estate investing, mainly on the residential side.

In this episode, you will learn;

• various solutions for using creative financing
• what problems they are solving for the Seller
• the power of getting your first investment deal done

Table of Contents:

• Where To Listen To The Podcast
• Doing Business the Creative Financing Real Estate Way
• Learn Creative Financing Real Estate From Someone Who Has Done It
• Free and Clear Investments With Creative Financing Real Estate
• Using Creative Financing Real Estate to Acquire Income Stream
• How Creative Financing Real Estate Deal With Loans
• Creative Financing Real Estate Niche
• To Give an Opportunity to Learn
• Every Deal Is a New Experience in Creative Financing Real Estate
• How To Reach Chris Prefontaine

Doing Business the Creative Financing Real Estate Way

Darin: Chris Prefontaine lives in Rhode Island. He's been investing in real estate for over 30 years. His company helps others get into real estate investing by teaching creative financing options to help sellers solve a problem. So, just a little bit on how we know each other and then we'll jump in. This is actually the first time that Chris and I are talking, but one of the things that was very interesting when somebody reached out and said. You know what? You need to have Chris on the show he's got 30 years of investing in real estate experience and we're going through some difficult times.

So, I wanted to bring somebody on the show that has been through the ups and downs and try to get some insight from somebody that's been through various cycles. So, with that, Chris, can you share with the listeners your background and how many properties and units you've invested in?

Chris: Yes, so I'll be a 10,000-foot view because this is my 32nd year. So, I started in the early '90s actually building homes and then that transitioned into owning a brokerage, which I had never, ever done. Then that transitioned into coaching people and doing my own investments throughout United States and Canada. Well, I'm not going to say unfortunately, I'm going to say very fortunately, that led us to the crash of 2008. The crash of 2008 allowed me to get beat up a little bit, which allowed me to re-engineer my entire business to what it is today.

32 Years of Creative Financing Real Estate Experience

Chris: We'll talk about it in the show a little bit. But essentially, we do not use banks or sign personally on loans because of what I went through. I had to re-engineer and start from scratch with no money. Literally, no money, no credit. So, from that point on, when we crashed until now, what we've been doing is buying everything on what we call creative financing or terms, if you will.

As far as units, gosh, we've done hundreds of millions over the years. Right now, with our students around the country, we control somewhere between $80 and $100 million at any one time. A lot of that is single family. As you and I were talking before the show, the way we buy property, you literally can buy any asset class. So, we can dive into that. Yes, so that's my 32 years in about 60 seconds.

Darin: That's awesome. So, in the real estate space, there are people that buy with their own capital. There's people that use creative financing, there's people that syndicate deals, there's people that are more educators. So, where do you fall in today? Are you more on the coaching side or are you more on the investment side?

Chris: This is great. So, glad you went here because I don't get asked that. I usually have to find a way to bring it up because what I'm saying is this, Darin. I think first of all, my answer is we do both full bore. So, if I had to split my week, I would tell you it's probably 50/50 now, but here's why I say that. I don't care what niche you're in.

Understanding the Value of Creative Financing Real Estate

Chris: I think it is super dangerous, I'll use that word, to be in the trenches and look for guidance or mentor or coach and have that person not be in the trenches anymore. There's a lot of that going on in every niche right now. It's scary, post-COVID or even post-crash.

If they haven't done that, how can they help you navigate and things are changing right now, right? One constant in real estate, it changes so that's not like a new thing. It's been around for hundreds and hundreds and hundreds of years. So, I do both. I love doing both. I don't have to do both anymore. My coaches are like, "Oh, you still make the call?" Yes, I'm making calls today to properties because I want to stay fresh on the cusp and I love doing deals.

Darin: Awesome. So, on the coaching side, maybe talk about your coaching program a bit. Are you focused on fix and flip? Are you focused on buy and hold? Or are you focused on a single family? What's the value that you bring to your students?

Chris: Yes, we do everything creatively. So, I'll say the three ways and then I'll peel down a little bit. So, we buy owner financing. Literally, the building I'm sitting in speaking with you right now had a recent flood. So, I'm in a temporary office. I bought this on owner financing, the way I teach it. So, owner financing. Subject to existing financing, we buy that way quite often. I love that right now because rates are low from these past lows on properties we are buying. Then the third way is lease purchase.

The Best Way to Learn in Creative Financing Real Estate

Chris: Probably, my least favorite now because I like owning it, but it's how I started the business. So, that's been my go-to safety valve. Those are the ways we buy. The value we bring is this, Darin. So, I talk about the issue in the industry of having someone not experienced. The other issue in the industry, I think it plagues the industry, a lot of industries. But certainly, ours is I get calls weekly from students going, "Hey, I was in some program, it doesn't matter again what niche. I was in some program, I spent X amount of dollars. I haven't done a deal yet," or "I was frustrated," or "I failed.

So, we're on a serious mission to transform real estate investors to just actually do deals in whatever initiatives that you like. In our world, that's all creative. So, we're in the trenches to get that done. So, if you're a student, we're doing the deal with you. I just hung up with a student calling a seller with a student because they're new. You can teach a seminar. You can teach a course. When they get in the trenches, it's different. So, we lock arms with them and we do deals that way. I call it interactive. That's the best way to learn in my opinion.

Darin: So, what do you mean by that? You do them with them, right? You're putting in the capital, you're getting on the calls, you've mentioned getting on the calls.

Learn Creative Financing Real Estate From Someone Who Has Done It

Chris: Mostly calls. So, we're not putting up capital in most of our deals. Let me give you direct examples. So, this gentleman's in South Carolina looking to buy a house subject to the existing financing. If someone's listening, they're new to that. It just means that the seller's guarantee is staying on that loan, the loan's staying in their name, but we're buying the property.

But he's new and a subject to purchase can be a little daunting if you're brand new, even if you've been through our course. So, he prescheduled this with me, but we got on the phone with a seller. I went through with the seller everything that is going to happen. Now while I'm doing that, not only did we consummate the deal, we did, but he also learned a boat load just listening, right?

So, that's what I mean by doing it with them and locking arms, because all kinds of curve balls as you know coming to these real estate deals. They leave the seminar, anyone, me, you, we leave a seminar that sounds great and then I didn't know all this stuff's going to happen. So, that's what we're there for.

Darin: Yes, so a few things on that. One, I think that there's some students out there they feel like if they stroke the check to join a group, a coach, a mentor, the deal should just be done. It's presented to them. I don't know about your coaching program, but I just haven't seen one of those out there. Coaching in my mind is you're learning from somebody that's already done it.

You Have to Take the Journey to Succeed in Creative Financing Real Estate

Darin: So, they know the process you have to go through and some of the hurdles you have to go through and they can prep you. They can shorten that timeframe dramatically, but you still got to get out there and do the work. So, that's my experience. But let me know if you've had the same thing with your group.

Chris: I couldn't agree more. Unfortunately out there, unbeknownst to you and I, that's the stuff that goes on. But here's why it goes on, I think and I'd love to get your opinion on this. There are just too many great marketers. I'm not a great marketer, but there are some great marketers online and on TV tell you, you're going to get rich tomorrow. I scream that you're not.

But once you learn the skillset in any one of the great niches in real estate, you have it for life, right? So if you can manage your expectations in my opinion, you won't quit and go look into the next shiny object. I don't know if you agree with that piece too.

Darin: I do. I think that you have to make a decision and I think you have to be committed to whatever it is you're going to pursue and know that almost anything that's out there that says you're going to get rich quick is marketing.

Chris: Run.

Darin: You have to put in the work to see the fruit, I believe. But you know what? There's some people that they're in the right place at the right time and good for them. So, your coaching program is focused on creative financing. What type of assets is it? You mentioned single family on the one gentleman. Is it predominantly single family?

Everybody Has to Start Somewhere

Chris: I teach that coming out of the gate, Darin, because again, I don't want shiny object syndrome. So, if I get up on stage or on YouTube or whatever and say, "You can buy any asset class, you can buy multi, they got to be scattered." It's very, very difficult for a new person to put their arms around that. So, we start with single family. When they're in the midst of the lead generation that when we teach them how to do that, of course, they're going to run into other deals. Especially if they're out there aggressively calling. So, like I said earlier, I bought this building on a very busy street with all realtors in the area.

Well, I live in on an island. So, it's uncommon for every single person to know about a property. I bought it because the owner wanted, sought out owner financing. It was free and clear, which is my favorite. We'll talk about why in a second. But the realtors were coming in with conventional offers and he's going, "No, no, no, for estate planning and tax reasons, I want owner financing." They just don't get it. So, that's how I was able to buy this, but yes, we start with single family to a base.

Darin: So, I don't know much about single family investing. I'm more focused on large-scale multifamily. But here's what I tell listeners is that every large syndicator that I've brought on that has 1,000 units, 3,000 units, 5,000 units, they all started with one investment.

Chris: Of course.

Get in the Game With Creative Financing Real Estate

Darin: So, if you want to get into real estate, it depends on where your mind is, your mindset. Some people can't believe that they could actually buy a large multifamily right away. Well then, figure out how to buy a single family and then build that and then move on or you stay in your wheelhouse. But you have to get in the game somehow and here's one avenue to do it. So, talk about those three avenues, creative financing, owner financing, subject to, and the lease purchase. How did those work?

Chris: Yes. Especially the first two for multis, I'm hearing just some tremendous deals on this front. So, the owner financing, it means a lot, but I'll tell you what it means to us. It means the property's free and clear. We specifically look for free and clear like this building I'm sitting in, because typically, it's been my experience that the owner, the seller is not in need of immediate cash. Presumably, they would've taken it out, number one. Number two, they're more amenable than to terms. I did a 20-year deal here. It's sweet. So, I seek out that seller.

The reason I seek them out is a lot of times, Darin, whether it's short-term or the whole term. We do principal-only notes and there's always some exceptions with the IRS you have to put in some imputed interest, but most of our deals, you don't. So, we're doing a principal-only paydown. Picture that in a market that might be going wonkers and you don't know where it's going. If I have a 20-year deal or even a 10-year deal on owner financing with principal-only payments, I don't frankly care what the market does.

Free and Clear Investments With Creative Financing Real Estate

Chris: So, that's why in the owner financing world, I seek out free and clear. By the way, for all of us, today, get a list in any asset class you want of things that do not have a mortgage on them.

Darin: That's what I was going to ask you. I would think that that's a low percentage in opportunity.

Chris: I know the number for singles. You're probably going to be surprised. It's about a third of the properties in United States.

Darin: A third?

Chris: A third in the United States are free and clear. I was speaking to a mortgage broker, Darin, Naples, Florida. Because she was selling the home actually and wanted to know how I would buy and I said that number. She said, "No, no, no. Chris, in Naples, it's 52%."

Darin: Really 52%?

Chris: Free and clear.

Darin: Free and clear?

Chris: Yes. So, that's a big pool to swim in and I'll tell you, it's fun. Dealing with this guy in this building was fun. He actually loved creative and he was intrigued by it. Typically, they did something right to get free and clear, right?

Darin: Well, the other thing about that you said the guy's fun. I believe that successful people want to help, not every successful person. But in general, I think successful people, if you find a genuine person that is trying to learn, they will spend time with you and try to help you. So, that guy who is free and clear, he's more apt to probably want to sell to somebody that's getting going that he feels like not only is he making money on the deal. But he's helping somebody else start their real estate career.

Principal Only Deals in Creative Financing Real Estate

Chris: You couldn't be more accurate. Well, he passed away sadly just last year. But when I met him, my wife said, She knows I'm big on mentors and coaches like you and I talk. She said, "Have you had lunch with Alan yet?" I said, "No, but I will." So, I went to lunch with him. Lo and behold, he's the largest landowner in the area and he had all those deals. It was an amazing experience and conversation. So, you're right, absolutely. He loved it.

Darin: That's awesome. You also mentioned principal only. So, does that mean that you're only paying principal back to the owner and there's no interest on it at all? It's not principal and interest. It's just principal only.

Chris: Just principal only on most deals. Now, I say most. I'll tell you what we did here to get creative because this guy was very savvy. But most deals we do are principal only, or for a period of time, in the case of this building, it was 18 months of principal only. He had a set interest rate in his head. I think it was like 5.3 or whatever it was. I said, "Well, Alan, we usually do principal only."

He laughed and I said, "Well, why don't we do a little bit of both? Why don't we do a hybrid model?" So literally for 18 months, every payment I made was towards principal. Picture that compared to a commercial loan that I would've got here. Then I took the balance at that point and baked in 5.2% interest and amortized it over 30 with a 20-year balloon. That's how I did it with this guy.

A Recession Hedge Investment

Darin: So, for listeners’ benefit, some people fully understand everything we just said. Other people are like, "What does that mean?" Well, just think about your house payment and you have a 30-year mortgage and you make a $2,000 payment on your mortgage. $1,700 of that is going to interest and then $300 goes to principal. If you can structure the deal such that all of that $2,000 is paying down principal, that's significant for you. Because now when it comes time for you to sell or even refinance, your principal balance has been paid down significantly more than if it was a P&I deal.

Chris: Yes, and talk about a recession hedge, I'll never say proof, but recession hedge to go 10 years out, we had a home on the water. Million dollar home on the water we bought from a realtor mind you. It was $2,500 a month. That's 30 grand a year. That deal went for four and a half years before we sold out of it. That's pretty cool. So, it doesn't matter what the market does almost if you have a long enough term.

So, sometimes I'll talk to a multifamily owner or a commercial or a residential owner and say, "Look, Darin, yes. I can probably pay your price. I might even be able to pay a premium if your term is long enough." That gets their attention. They're used to people beating them down. So, that works very, very well. It's a win-win.

The Longer the Term the Better in Creative Financing Real Estate

Darin: So, talk about that. Talk about on the term, because when I have heard other people talk about owner financing, I've heard it be more short-term in nature. I'll do seller financing, but it's a three-year balloon or a five-year balloon. So, you have to refi into something else pretty quick and that puts you at risk for the reset. So, how do you get owners willing to finance it for the long term? What do you define as long-term?

Chris: Yes, I'm talking to the students in our own family properties about never going below five years, but a long-term to me would be 10 or more. I think a recent deal come in with a student that was 10. It's only because we're talking about it. It's like the expectation now. As far as how do you get them to do it, here's the deal with any of these creative finance deals.

In my opinion, all we're looking to do is solve a problem or help them accomplish a goal that the conventional market won't give them. Now, on the scale of owner financing, it's usually we're helping them accomplish a goal because they don't usually have a problem financially. That usually lends itself to the other category, subject two.

So, in this case, let's talk about the seller. Why did he advertise that he wanted owner financing? He said to me, "Please don't refi. I don't want to get paid out." Tax reasons and estate planning reasons. I don't know. Perhaps he knew something was going on health-wise because like I said, he did pass.

Using Creative Financing Real Estate to Acquire Income Stream

Chris: What he gave his son and his wife is an income stream versus a building. I'm sure that was pretty pointed because he owned this for 20 years before selling it to me. So, it really is looking for what they're trying to accomplish and solving for it, not trying to convince him of anything ever. In fact, if he had said to me, "I need a three-year balloon" that would be too aggressive for me. My company's now in this building and tenants, but it would've been too aggressive for me. So, it worked for a win-win. Just solving problems or looking to fix what they got going on.

Darin: I like that. So, how does the conversation go with that owner to find out what his goal is?

Chris: I don't care what asset it is. My initial script when I call someone up or if my VA, my virtual assistant calls someone up is, "Darin, I noticed you had your home on or your building on or whatever on at XYZ price. If I got you to your price, I haven't seen your property yet, but if I got you to your price, are you open at doing that on owner financing?" Of course, that brings out whether there's a mortgage on it and all that, but that's the initial question.

Most owners understand the word owner financing or in Canada, vendor takeback. They understand that. So, that it's just a matter of no, no, no, no, I can't do that. I have to go buy something else or no, no, no, no, I want to do a 1031. You get their answer almost right away as far as how it relates to motivation.

The Importance of Proper Mechanisms in Investments

Darin: That's great. Then when you get the guy that says, "Yes," then you've got the perfect fit.

Chris: Yes, then you give options. You usually give options for let's just say 5, 8, 10 after you talk to them. Then the longer the term, the price is a little bit higher. I usually factor in one to three months' worth of monthly payment on top of the price if they add any years to it. So, if my payment is three grand a month for this building and they say, "Oh, I might be opening going an extra year." I might add five to nine grand to the price because I'm going to eat it up in two or three payments. I'm okay with it.

Darin: Right. So, let me ask you this. One of your students is buying as an investment or a rental or to flip or as an Airbnb? What's the play for your student, for the investor?

Chris: Sure. So, on the building and/or multi-front, it's a value add, improved NOI, that route. On the single family, it's most of what we teach to them. It's a rent to own and there's a big difference of how we do it and how the market does it. So, I'll just mention that. The market statistic, I'll tell you what publicly is out there, is that a rent-to-own program for a buyer who needs time to qualify will work 10% of the time. 20% max, because they don't have a good mechanism or a protocol to get that buyer qualified properly, know that they are a true buyer, and get them cashed out.

An Inverse Relationship With the Buyers

Chris: Ours is an inverse relationship. We have buyers that come in. We get them to the finish line and we have a default rate of anywhere between 2 and 10%. That's pretty low. So, it's an inverse relationship to how the market does it. It's mainly because my son started it, but he's the buyer specialist and he helps them get qualified. Make sure they're truly a buyer, make sure they can be mortgage ready eventually, what that timeframe means. That's how we exit most of the properties.

Darin: So, I'm a student, I come, you help me get the deal, I buy this residential property. I then put in a renter who has in the lease agreement, the opportunity to buy the deal at a certain price.

Chris: A little bit tighter, just tweak it a little bit. So, I'll give you example too. So, it's a buyer that has a down payment that perhaps didn't realize they couldn't qualify today for a number of reasons. One big one right now, big since COVID is this major onslaught of W2 people to entrepreneurship, great salaries. Sometimes even 401K goes with them. They think, "I'm great, I'm going to go buy a house now."

Now, they need two years because it's start of a new business, two years typically with banks of what the banks call seasoning. That's just they need 24 months before they can prove that new business. So, they're great buyers for us. They're usually the higher-end buyers, great buyers for us because their credit's good. They don't need time for that. They just need time for seasoning.

Creative Financing Real Estate and Banks

Darin: So, they have the cash, but traditional banks aren't going to approve them because they don't have the W2 and they don't have the two years tax seasoning.

Chris: Exactly.

Darin: So, is that the buyer your student buyer? So your student went and bought this house and now that person is the one that's going to rent to own.

Chris: Exactly.

Darin: Okay, awesome. The second one you mentioned was subject to existing financing assumable. In my world, in the multifamily world, you hit it on the head. Interest rates have gone sky-high. They're really not sky-high. It's 6, 7%, but compared to where they were at 3%, they've doubled in a year. So, some people that I know are getting deals done because they're assuming the mortgage on the multifamily property. So, you're doing the same thing on the single family side.

Chris: Single, multi, yes, right across the board. The key distinction is the loan. Instead of a formal assumption, what banks would call an assumption where I got to go in and I got to sign personally. So, it's just applying for any loan or the loan is staying in their name. The guarantor stays with them and the property transfers. That's what I refer to as sub two, subject to it staying in their name.

Darin: So, explain that to me because I'm thinking that all right, so say I'm the original borrower and you got ABC Bank lent me the money. ABC Bank has a lien on the house. So, if I default and they get the house, but now I'm selling the house to you or one of your students, I'm keeping the loan.

How Creative Financing Real Estate Deal With Loans

Chris: Yes, loan stays in your name until such time we cash it out. So, literally just doing one right now in Phoenix with a student, about a half-a-million dollar deal. Unlike the free and clear, this asset type with the loan on it rather is more of I get a fix a financial problem for the seller. They just want out. So, unlike the building owner that I'm helping them accomplish a goal, the sub-two usually lends itself to, "Uh-oh, I lost my job. Oh, I had COVID. Oh, I have a second home I can't afford anymore." So they just want it done and they need debt relief. That's usually the makeup of that avatar.

Darin: So, how does that work? The bank allows you to sell because that's the asset that they have a lien on.

Chris: There's a due-on-sale clause, right? In almost every loan that I've seen for years and years and years, the due on sale, this will be my attorney friend talking. There's nothing legal about it. There's a contractual issue about it. The contractual issue is between the bank and the seller. So, we obviously would have disclosures that my attorneys start to have them sign off that they understand what they're doing.

However, it's been my experience for 32 years now, 31 and a half that as long as I pay it, I don't cause a headache for the bank. I've never had a loan called on us. Now there's things we do to help navigate that, Darin. One is how we paper the deal. We paper the deal. Let's say it's your house and you're at 123 Jump Street. I'm going to take it in a land trust called 123 Jump Street Batchelder Family Trust.

The Protection Mechanism of Creative Real Estate Financing Towards Loans

Chris: This isn't legal advice. I'm not an attorney, it's just how we do it. One of the reasons we do that is way back in, I think it was '82, the Garn-St. Germain Act allows transfers of property for estate planning reasons and family reasons without triggering due on sale. So, it's one of the many things that we do to paper the deal properly. The second thing is don't ever not pay it because you don't pay it, you get a headache. You're going to get a foreclosure either way.

Darin: So, if you're buying it or your student's buying it, who pays the mortgage? Do you guys pay the mortgage? You guys are paying mortgage, but I'm still the guarantor on that note.

Chris: Yes, absolutely.

Darin: So, I feel like I'm at risk, right? I still have the loan in my name. I'm trusting that you're going to pay every month.

Chris: 100%. That's why that usually lend itself to, "Oh, I need help. Please help me. Take my house."

Darin: What happens if you don't pay?

Chris: If we didn't pay in theory, the bank can take the house. So, here's the protection mechanism for that. Without getting too crazy in advance, we did one with a school teacher. This is a great example. This school teacher was not financially messed out, had good credit, just wanted closure on this house. He had a divorce. So, we said, "All right, we're going to buy your house, and the mortgage's going to stay in your name." There literally was no equity when we started this deal years ago. When we did it, he said, "Yes, but I want to go buy another house. How's this going to affect my credit?"

The Mirror Wrap

Chris: So, what we did was for protection and to help him bring a contract to a bank to show that he is not paying it, we put a wrap. It's called a mirror wrap, but we put a wrap on the property. So, if we ever went south on the deal, we stopped paying the deal, then he can foreclose on his own house because we put a wrap mortgage on it. We didn’t just leave him naked.

Darin: Got you.

Chris: Which wouldn't be good.

Darin: Wouldn't he be second behind the bank?

Chris: Yes, but he'd be notified so he could do the foreclosures and take his house back. Because the mirror means the mirror wrap is going to wrap exactly what we bought for the same terms, same payment, same everything.

Darin: Okay. So, he would be able to take it back before the bank would foreclose on it.

Chris: Yes. That's one way of doing it. There's two or three states that don't allow this. But the other way, we did one in Pennsylvania, would be the seller said, "No, no, no. Even though I was on the phone, he knew I was 30 years in the business." He said, "What else could we do?" I said, "Well, I can put a simple default agreement with your attorney that holds a deed in escrow that is deeding the house back to you. So, if I mess up one payment, there's no foreclosure. You just take the deed and you go record it. No hard feelings, I'm out."

Where Creative Financing Real Estate Is Headed

Chris: So there's a default agreement with a deed signed back to the seller. That's another way to do it. Third way is a land contract. By nature of what a land contract is, a land contract the deed doesn't get recorded yet until the obligation's fulfilled. So, that sits in the attorney's deed on escrow. That's a very safe way for a seller to do it.

Darin: So, solving problems and helping people get to their goals. So, talk about cycles because there's a lot. I don't know about you, but I'm in the syndication space and there's a lot of investors, they're scared. They have the cash to invest and they know that there's high inflation and they're purchasing power is going to go down. But they're like, "I just want to hold and sit on my cash because I'm afraid of what's going to happen." So you've been through ups and downs. Where do you think we're going and how do you pivot in that type of market?

Chris: Yes, so a couple of things. No particular order here priority-wise.

First of all, I don't know where it's going. I love when even the billionaires don't know. So, if people get on and say they know, please don't listen. No one knows, right? I wish they did. Generally speaking, there's one constant. I think I might have said the beginning of the show or off air and that is that the real estate market's going to constantly change. We know that for certain. If we know that, why not get super skillful? Why not sharpen your skills with respect to how to pivot in every market?

Creative Financing Real Estate Niche

Chris: That's what we design the creative financing real estate niche to be. No, we didn't design it. We fine-tune within the creative financing real estate niche that's been around for decades. So, I think that personal opinion, nothing else than a personal opinion. I think it's going to be that flat stagnant to down, which my wife always says to me, every time she has a piece of news or the market changes, she'll say, "How does that affect you guys? How does it affect your deals?" I say, "Great, other than the booming craziness we had when COVID went from I'm scared, which we could get deals then too. Everything's selling."

Other than that, every market I love operating in. That one just was more difficult to find people, but we still did it. So, I'm ecstatic about where the market's going. There's a couple of reasons. Let me give you some metrics that I like. For the third time in 50 years, we have an affordability problem in the single family world. Well, to your and I point, the interest rates aren't even at high from what we've seen over the decades. So, if we already have an affordability problem, that means it's going to get even tougher.

So, that's why people are flocking, literally flocking to creative real estate right now. The 50-year average I think is like 7.7. We're not high right now. So, I think there's a lot of opportunity to come. The third thing I know, fact, is fortunes have been created since literally the 1600s when markets change. There's uncertainty in this chaos. Why? Because buyers and sellers need help. They need guidance. The media's always screaming the worst to get you to watch it.

Real Estate Is a Stable Investment

Chris: Therefore, that thing just cycles and cycles and cycles. So, that's not an economic opinion. That's just my opinion of people's psychology in the media and they're helping us right now because they're screaming that there's going to be the end of their real estate market tomorrow.

Darin: Yes, I mean absolutely. You didn't use this term terminology, but when people think about efficient markets, look, the stock market, one piece of news comes out and it affects the stock price immediately. But with real estate, these problems, these goals, it's not efficient. Some of these people, they want to solve a problem, but they don't know who to turn to. There's traditional financing through the banks and they may go to banks.

You talk about that entrepreneur that used to be a W2 employee and then they end up going to a couple of banks. Holy cow, man, I'm making way more money than I was making before. But I don't have two-year seasoning and I just got shut down by two banks I've been doing business with for 20 years. It's all because this is their process, the tick marks that they have to go through.

So, then sometimes those people, they just stop looking for a way to make that happen. So, if you can help them say, "You know what? I can get you that house and I can get you at a reasonable interest rate and this is how I can do it." Then all of a sudden, first they have to get over the, "Is this a scam? Is this real?" And then once they do get over that hump, then they're like, "Holy cow, thank you for helping me."

Learn to Buy Creatively

Chris: I want to piece together a couple of things. I never really pointedly answered your question about the cash on the sidelines if they have cash. So, what I say to them, keep it the cash unless you need to syndicate or buy bigger buildings, but keep the cash on the sidelines and learn how to buy creatively. Do both. I agree wholeheartedly. Keep your cash for the rainy day. Here's the other thing with banks, you can tell I love banks, but the fact is, in the early '90s, ballpark, I have a hard time pulling stats on this.

Ballpark, 2 or 3% of the transactions in the US anyway were done outside of banks. It's in the teens now. Again, you can Google this and get different stats, but it's way higher. I think yearly, it's climbing now, because banks, you just alluded to it, they're not getting easier to deal with. They're getting harder to deal with. I'm in the business. Now when I went for a small loan, I'm talking 17% LTV for a project my wife and I are doing.

Darin: 17% LTV?

Chris: Seventeen. I was putting some things in place and it was a nightmare. My credit is backwards, should be in low 8s. She said, "Can you imagine other people that are trying to do this?" I said, "No, I can't. They're not getting easier to deal with." So then don't deal with them in my opinion.

Darin: Yes, no, I mean, you're right. I had another syndicator. I mean this person does 200, 300, 400-unit apartment complexes and she was like, "I'm trying to refinance my house and it's so much harder than financing like a 300-unit apartment complex."

Chris: Crazy.

Understand How to Pivot in Creative Financing Real Estate

Darin: It's crazy to think that, but that's the reality of what's out there. Then you have finance companies that are coming up and saying, "Hey, I want to solve the problem." Then there's people that even they can't help. So, then it brings on other people to come in and say, "Hey, I've got a solution for you."

Chris: Absolutely. That's exactly what I alluded to when I said that the creative financing real estate niche and opportunities just every year going up and up and up. So, I'm ecstatic about the next three to five years. Anyway, who knows after that what it's going to do? But I don't care what it's going to do because if you understand how to pivot, you'll be ecstatic about it too.

Darin: Yes. I mean, I like how you said to expand your skillset because there's some people that rinse, repeat, rinse, repeat, rinse, repeat, but then all of a sudden, that opportunity's not there. You have to figure out, "Okay, well, how do I pivot and then do something different?" Then you can rinse and repeat. For you, having 30 years of experience, you probably have a lot of another one of those. This is another one of those.

Chris: Yes. Here's an example. You made me think of them when you said that you got to pivot. So, in this market, before I even live down here, we were taking 3, 6, 9, and 12-unit buildings and convert them to condos. Darin, when I say it was a hallmark, that is an understatement. We would get the master condominium documents drawn up. We would start having the contractors paint, and before done, we'd sell them out, the condos.

What Happens When the Market Crash

Chris: Then everybody caught up and then the multifamily price went so sky high because they were betting on that. They were going to convert. The numbers are different. So, if I kept going, might as well break up. So, instead, we just said, "Let's pivot. That huge opportunity, that wasn't easy but it was better, is gone." That's a good example.

Darin: That's a great example. I was living in South Florida. A lot of the multifamily were turning into condos in that 2002 to 2006 runup because they could get huge prices. Then all of a sudden, when the market shifted, they had to go back to rentals because nobody was buying the condos anymore.

Chris: Yes, I'll give you a good horror story with that. So, I had a six-unit in Providence, Rhode Island. You're familiar with Rhode Island. I think we bought it for 400 or 500. We turned it into condos. We sold hotcakes the first two or three for 172 grand. The market pivoted in 2008. Like you threw a light switch, the fourth one, I could not get 52 grand to save my life. They just died.

Darin: From 172 down to 50?

Chris: Yup. Less than a third. Talk about a pivot.

Darin: That was crazy.

Chris: That wasn't fun.

Darin: No, and the guy that bought it at 50K, probably did pretty well on it, right?

Chris: I don't know what the project's done now, but yes, I think it did okay.

Darin: Especially if he used some creative financing.

Chris: Yes, I think he's okay.

To Give an Opportunity to Learn

Darin: He's probably okay. So, you've written a bunch of books. Why did you write books and what are you trying to put out in the marketplace with the books you've wrote?

Chris: A couple of things. One is until someone coaches, this will be harder to grasp.

But there's nothing better than helping someone transform their life, whatever that is for them. It could be monetary, it could be a lifestyle, it could be whatever. So, one route to do that was what we do as a company. Well, one route was to get the book out there and to get a book out that purposely doesn't hold back anything. I've just read so many books myself in real estate and outside of real estate that you go, "Yes, but I got to go do this now. I got to call there. I got to opt into some." We lay out what we do.

The Real Estate On Your Terms, which has been revised during COVID, lays out A through Z. Here's the resources, what students did for deals, how you could do it. Now I'm not saying that's a read-the-book and make a million dollars. I'm not saying that, but I am saying, your eyes will be open. "Okay, I get what's going on here." So we're going to, as you know, give it to all your listeners because I'm big on free, Darin, because of what you started the show with today.

That was letting people understand what's out there. This is not about market. This is about picking a niche you love and then sticking with it with blinders on. The book gives you the opportunity to say, "That's for me," or "No, it's not. I pass."

The Recipe for Success

Darin: Yes, that's huge. So, that's a part of getting educated is reading books and listening to podcasts, and getting to know people. Then each individual has to make a decision. All right, how am I going to get from point A to point B? Most people are looking for financial freedom. I mean that's why they get into real estate is that they want to build wealth, and they want to reduce their taxes. You can do that in a lot of different asset classes. So, you can do it in single family, you can do it in small multifamily duplexes and fourplexes. So, you could do it in large multifamily, you could do it in self-storage. There's just so many different places you could do it.

But you know what, having books out there that somebody can read and say, "You know what? I like this, Chris, and I like this process and I think I can do it." Because I think believing in your mindset, believing that you can achieve it is a big piece of being successful. I mean, if you sign up for something and you don't believe that it's for you, I don't care if you paid the money, I don't care if you have the best coach in the world. It's going to be very difficult for you to be successful.

Chris: Halfway through what you were saying, it's exactly where my brain was going, because we'll have a student. You could pick a market, but right now, I can think of two in New York where one said, "I can't do deals here. I can't do that here." The next guy's going out and getting six deals.

Skillset, Systems, and Mindset

Chris: They're in the same market. 100% of what you said, it's all up here, which is scary by the way, because the only thing holding us back is that. If we know that, you probably know, I hope you're old enough to know because I know I am. Brian Tracy, he was on my podcast.

Darin: I've met Brian before at a conference.

Chris: He's awesome.

Darin: Read a few of his books.

Chris: Yes, a few.

Darin: He's got so many books. Yes.

Chris: He was on my show at age 82. I think it was like two years ago,I said to him, I think that the three pills we do are skillset, systems, and mindset. I said, "How important his mindset?" A lot of the guests say 90%. He said, "Oh, it's all of it." He said, "Trust me, I've gone broke, I made a lot of money. It's all of it." So it's interesting to get it from someone like that.

Darin: All of it, that's crazy. It's true because there's some people and I'm sure you come across it and your students come across it. Is that you may find the perfect person that you can solve their problem, but if they're not ready to hear the solution, their mindset doesn't allow them to believe that it could solve their problem or achieve their goal, it's just not going to happen. If you don't believe that you can use these systems and processes to help people. That's the thing is that flip of the switch of understanding that you're actually helping somebody.

The Next Step for Chris

Darin: I think that people in real estate feel like I'm just trying to sell somebody a deal. The ones that are successfully realized, "Look, they're actually helping somebody." So they're trying to get quickly to the people that they can help. So, if they can't help them, boom, they're off to the next guy. So, they're having to do the work, but the people that actually move forward, they're thankful.

Chris: If you want to have a better experience on the phone with sellers, approach every call the way you just said it, approach every call with "I'm just looking for people I can help." That's it. If I can't, I'm moving on. Not I need a deal or I need a check tomorrow. They sense it. Just go truly from wanting to help.

Darin: Yes. That's huge. So, where do you go from here now? I mean, it sounds like you get a lot of joy from helping other people on the coaching side. You're still in the trenches. You're doing 50/50. Which side brings you more joy and what's your go-forward plan from here?

Chris: Yes, your question's timely. So, this year, we transitioned my son-in-law to CEO of the company. So, more operational than I would be so that I could get back to doing deals more. Here's what's cool, the way we combined it is this. One of our higher-level coaching programs has about 45 or so active members and I get to do deals with them now. In other words, I help them do deals. They're the most committed. That's the sole thing that I work on now in the coaching side of our business.

Every Deal Is a New Experience in Creative Financing Real Estate

Chris: So, I get to do deals, do them with them, and revenue share. So, we're partners in the deal. So, I get my fix of I'm helping someone transform their life and I get to do deals and no deal's the same. I don't care what niche you're in. So, that's what gets me up still. As soon as it's bored, I'll be gone. My attention span wouldn't last, but the deals are never the same. So, I don't get bored with it.

Darin: I've asked a lot of syndicators and it's the same question, same answer. Why do you keep doing it? Look, I know the money you can make on some of these deals. At a certain point, you've got the financial freedom, you've got the time freedom, and they're like, "Well, one, what else am I going to do? Two, I enjoy it. Three, I want to help the next guy come up. I want to teach the other person." I think that even when you're talking to your students in the beginning, it's all about how they can be successful. And they're only thinking about themselves and their families and how they're going to grow their wealth.

But then there are people that are watching like, "Hey, I know you joined this coaching program, I know you're going after real estate." Then a year or two later, they're like, "Man, how'd you do it?" Now they're going out and helping their network figure it out. Yes, I hope with just that statement you made, we're such in sync on this stuff that anyone in the W2 world says, "That's cool. Can one of these guys or someone they know can help me?" Because it's true.

Everybody Swims in Different Lanes

Chris: Someone that you or I know can help them leave the W2 in one of the niches that we know of. It's just a fact. So, take it by the reigns and roll with it.

Darin: Yes, absolutely. Even if you don't want to leave your W2 and you just want to grow your wealth as a side hustle. There's opportunities to do that where you don't have to put all your money in the stock market. That's what everybody's been taught growing up, but you don't have to. The returns that Chris has seen and then I've seen are significantly better than putting it in the stock market and the tax benefits as well. So, with that, you're going to continue to grow the coaching business. You're focused on doing more deals and helping other people do deals. How is it working with your son?

Chris: We have my son and my son-in-law in the business. My daughter used to be, and hopefully, she'll be back after the grandkid's a little older. Everybody swim in different lanes organically. I wish people would say, "How'd you plan on that?" I didn't. Organically, Zach loved running the company and scaling things, my son-in-law. I loved doing deals more in the trenches. My son, Nick, loves helping the students with just the buying in, the disposition. That just all happened organically. They each don't like what the other one does. It's perfect.

Darin: That's perfect.

Chris: Yes, you couldn't have planned it better. My daughter used to be the general manager, and hopefully again, she'll get more active. She's starting to get more active again. So, yes, it grew organically and I'm happy for her.

Sharing Knowledge Above and Beyond

Darin: That's huge. So, where do people reach out to you if they want to get to know more about you, your coaching program, your books, and what you got going on?

Chris: Thank you for asking this, first of all. Second of all, I'm big on free as they can go to YouTube. If they put in Smart Real Estate Coach, they literally will see 240 some odd deals that I whiteboard, me or someone else whiteboards. And get to know how we do these creative deals and trademarked payday system and all that good stuff. It's all free. The book link, we can give them, because I want them to get hard copies, no shipping, and none of those crazy offers we get put in shipping. Just go to wickedsmartbooks.com/darin.

We committed to giving every single listener. It doesn't matter if there's 2 or 2,000. We'll get you out those books and we'll ship them at our cost. Those are both free. Then at least you dive in to go, "Okay, this is an issue I want to dig into," or "No, no, thanks." But at least, you didn't have to go spending tens of thousands to figure that out.

Darin: I could vouch for that because it just showed up on my doorstep.

Chris: Oh, good. Somebody's doing their job. Awesome.

Darin: Yes, so somebody's doing their job and I got all the books. I did not do plus shipping, so it just showed up.

Chris: Good deal.

Darin: Thank you for that.

Chris: You bet.

Darin: So, Smart Real Estate Coach on YouTube, wickedsmartbooks.com/darin. Then what else.

Chris: The regular site, smartrealestatecoach.com. Yes, that's just the regular site.

Get the Itch

Darin: Awesome. Well, you are the first person that I've had on that really focuses on, I know you do both and you've been in this business for over 30 years, but single family and multifamily. But there's a lot of people that can't jump right into big-scale multifamily and that's where I spend most of my time. Me, I was like that. I first did a duplex. My wife and I, bought a new construction duplex that wasn't going to have maintenance issues and I was scared to do that. Then once I did that, I was like, "Holy cow, I want to go bigger."

Chris: Get the itch.

Darin: Yes, I got the itch, but people say, "Are you glad you did that?" I'm like, "Yes, because that was my first deal." Once I did that, then it expanded my mindset to think, "How can I do something different?" In your world, maybe somebody does uses that first approach, but then they're like, "Okay, I want to expand that mindset. I keep talking to people that don't want that, they want this. How do I do that? How do I help them in that capacity?" So thank you very much for coming on. You are also from Rhode Island. I went to URI. So, I miss good old Rhode Island.

Chris: Love to have you.

Darin: Yes. Well, you're moving into better weather. I don't miss the winters up there, but moving it into better weather and Newport and Narragansett all good places. Appreciate you coming on. Listeners, I hope that you enjoyed that one. Until next week, signing off.

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