Chris Prefontaine 0:00
terms of the answer it’s buying property I don’t care if it’s commercial residential retail a boat a car doesn’t matter it buying things on terms without banks in my case lease purchase owner financing to name two and people say over and over and over I don’t know if I can do that Mary I don’t think sells it no they do because I not just I don’t feel any company here with my son and son in law. We buy homes every month, but in in properties and multis in our own office building, okay, so I know it works. But we’ve got about 80 what we call associates now around North America, mostly us that also do it.
Welcome to CREPN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant We are here to learn from the experts.
J Darrin Gross 0:57
Welcome to commercial real estate pro network. CREPN Radio, Episode Number 253. Thanks for joining us. My name is J. Darrin Gross. This is the podcast focused on commercial real estate investment and risk management strategies. Weekly we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio. Let’s get into the show. today. My guest is Chris Prefontaine. He’s got 25 plus years experience in real estate as a builder, developer, a realtor, real estate investor and also a best selling author. And just a minute we’re going to speak with Chris about one of his his books and just the basic topic, real estate on your terms. But first, a quick reminder, if you like the show, CREPN Radio, please let us know. You can like you can share you Subscribe. And as always, if you leave a comment, we would love to hear from you, our listeners. Also if you’d like to see how handsome our guests are, be sure to check out our YouTube channel. And you can find us at commercial real estate pro network. With that, I want to welcome my guest, Chris, welcome to CREPN Radio.
Chris Prefontaine 2:23
Thank you, Darren, pleasure to be here, my friend. I am looking forward to our talk today.
J Darrin Gross 2:30
Before we get started, if you could take just a minute and share with the listeners a little bit about your background.
Chris Prefontaine 2:36
Sure, the risk of day myself I’ve been at this in some shape form or another since 1991. Actually, so going on almost 30 years. It’s pretty scary.
I did some spot building I called it back then single family homes, way back when he really understood understand what terms meant and we never took out bank loans we would build on someone else’s land and then we would pre sell the home and then at the very end
When the buyer cashes out everybody got paid including contractors did that for a while, then bought a realty executives franchise put my broker hat on had never done that as a realtor ultimately built that and sold it to Coldwell Banker in 2000. And then from 2000 until the lovely crash, we were doing our own properties. We were coaching people throughout North America and thenlike so many people in the US anyway at least got beat up with the crash and that caused us to re engineer everything we do and we have.
J Darrin Gross 3:29
So your your experience definitely from ground up It sounds like as far as of construction and then into sales and and coaching. Maybe the good place to start. It would be the the how deals are financed, pre crash. When you were an investor, how are you negotiating or how are you structuring the dealsYou’re doing
Chris Prefontaine 4:01
Yeah I can remember specifically so so let’s take it from like after I sold my company called bank I was doing what everyone I still think to this day considers to be the conventional way either borrowing hard money you know from some sort of other investor who just has money to put to work or bank loans. And and both of those meant I was signing personally on him. And so I thought nothing of it credit was great. Morocco was great. They’re giving up money Thomas anyone wants a good credit. And so we ran with that. The problem was when things come rolling down when they come knock and whoever signed personally right they don’t care why the market came down or whatever they’re going to go into whether the personal signature is not that was the big problem.
J Darrin Gross 4:43
Right now and in that mess when when everybody was caught I will you know, you weren’t alone.how willing were the the banks to work with you on that?
Chris Prefontaine 4:56
Not to know the we we had like 22 Two or 23 properties back then and they were either going through by force, short sale, some sort of liquidation or foreclosure. We two or three of them had to go foreclosure. So it was pretty ugly. It was, it was a part time job, if not full time. I remember like it was yesterday, my son had shared an opposite. He’s like right next to me. And he learned a boatload do that for those times.
And so it’s very interesting. So they, they weren’t I mean, creditors were because you can call a creditor you can call a credit card, you can call it call a collections, you can call them and you can negotiate. banks don’t care. As long as they know you have assets especially they’re coming. Right. So that yeah, that took me a better part of probably eight or 10 years to be totally done. But but four years it was pretty busy just doing workouts.
J Darrin Gross 5:46
Gotcha. And, and in that you mentioned is kind of a full time job. We’re where the properties that were in question, were they all investments or were these some conStruction projects?
Chris Prefontaine 6:00
Good question. Let me think. I mean, I had I remember specifically I had a six unit construction project going on. I gave that back to the bank amicably. They were they were fine because it was, you know, their costs were low. I had a boatload of my cash investor cash in it. So the bank was good. Had a six unit has a good story, a six unit building, we were doing condominium conversions back then because you could buy a six unit let’s say in this case or three. And before you get the condominium, Doc’s drafted and engineered attorney, an engineer, haven’t pre sold. I mean, it was crazy. So here’s some numbers for you. We had a building six units in Rhode Island, first two, or three. So it’s like 172. I remember like it was just full price, the fourth, third or fourth, whatever the next unit was, it was like a light switch was thrown, we couldn’t get 50 grand. So that’s two thirds in this particular area dropped in Providence around and if our life depended on it, like I remember the owners, the other owners when you touch them for 50 grand and so on.
That’s okay. So what do you do? You got a construction loan you got, you know, bank loans. It was crazy. You couldn’t get out of those no way around it.
J Darrin Gross 7:08
Well, so when those were you basically just selling them out of Florida then or what were you? Did you
Chris Prefontaine 7:14
we couldn’t even sell them at the on the floor at that point. So that, that that one in particular was a hard money lender that to this day, we’re super good friends, because instead of hiding, one of my good friends said, Look, this is back when this happened. He said, Look, you didn’t take the national market down call who you can call and tell them why I’m here. I’m not going anywhere. I’ll work with you. If it takes me 10 years. And I said that to the Sky News. 2020 years, my senior we had lunch. And to this day, I may do with them. And he’s made other deals with us since then. But it was because I communicated. So you said What did they cooperate? Well, he did. But he was private.
J Darrin Gross 7:47
Right? Right. No, it’s kind of a lesson that I think, you know, hopefully we haven’t forgotten. I think sometimes I wonder if things don’t kind of inch back but I think that everybody. Every market has its own dynamics. And clearly back then the money was, you know, cheap and there was a gold put people on houses. And, you know, there was, rightly or wrongly that the lending got got a little loose. And I don’t think anybody was anticipating. You know that as bad as it could be. I mean, we have always had corrections. I mean, it’s part of the cycle. But anyway, there’s a lot of a lot of stories, a lot of lessons learned. So yeah, so all right, so prior to the crash, you’re doing the traditional thing, hard money and bank finance financing, you’re signing on the line there. And as the situation developed, the signature became worth more kind of assuming you understood more of what you were signing up for.
Chris Prefontaine 8:58
That’s a good way of saying it lightly. The identity Thank you.
J Darrin Gross 9:00
Well, I, you know, I think there’s a lot of things you know, anytime you go sign up alone, there’s How many times are you signing and the volume of paper kind of prevents anyone from Really? I mean, I shouldn’t say anyone I know some people that sit there and will read the whole thing.
Chris Prefontaine 9:14
Or their attorney super shocked, maybe, you know,
J Darrin Gross 9:16
yeah. And, and, and to their credit, at least they have some sort of essentially lease, they’re taking the opportunity whether or not they understand everything they’re signing. Whereas now, I’m still kind of just perplexed by how much like DocuSign and all that is basically, yeah, sent me a PDF and told me to sign that they one time and click the button and, you know, it’s, yep, I’ve signed for everything.
So it’s, I don’t know that the more signatures and all that stuff is improved anything. I think it’s just adding more more layers of, you know, an opportunity for somebody to, to welcome into this way whoever’s authoring the contract is, it’s protecting them. It’s not protecting you, the guy Yep, but sweet well let’s roll forward then so you you you got caught and you know as did many and lessons lessons you learned what what what are the takeaways from that and how have you changed your? Your yeah forward financing
Chris Prefontaine 10:19
So that the same answer right because everything that happened then caused us I got to the point where it’s like I even gonna like go into real estate that’s how spent I was and then it’s okay. So So what could we do if we were to go aggressively? Stay in aggressively real estate well, terms is the answer. It’s buying property. I don’t care if it’s commercial, residential, retail a boat, a car doesn’t matter. It buying things on terms without banks. In my case, lease purchase owner financing to name two. And people say over and over and over. I don’t know if I can do that. Mary I don’t think sells it. No they do. Because I would not just I don’t feel any company here with my son and son in law. We buy homes.
Every month, but in in properties and Maltese in our own office building, okay, so I know we’re spot, we’ve got about 80 of what we call associates now around North America, mostly us, that also do it. So we’ve, we represent a lot of different states now. So that was the lesson was don’t sign personally. So do it by using those vehicles I just said, and don’t use your own cash or leverage your own cash here. As recently as yesterday, my CFO said to me in a meeting with two other employees, did you know instead of doing one of those SBA loans for your company, you could you could take on Ecuador in your house be really cheap. And I said, Absolutely, absolutely knocked does not happen. It’s never gonna happen again, because I did that pre op. And so I said my debt to equity 17% Not, not the inverse, like I like I always was doing it’s next to nothing, and it’s never gonna be higher than that. So, all that to say the lesson was the personal signature, Darren and then when I say no personal I also mean no investor money. Unless we’re doing something really special when we’re taking a seller out or doing something unique. We’re not we’re not going to borrow and signing anything.
J Darrin Gross 12:10
So where I guess let’s back up here. So I get basically the simple answer is it’s not your money. You’re looking at a lease or seller financing. What are some keys that you’re that you look for some tells? Because, you know, I think that anybody is looking on the MLS or through loop net or a commercial broker. The first choice or the first thought that that goes through everybody’s mind is, you know, conventional financing that the seller is going to get cashed out. Mm hmm. So what what is it that you do? Is it just would you go to any deal and ask us or is there a specific type of deal that you’re looking for that makes sense for this kind of thing?
Chris Prefontaine 12:59
Yeah, good question. I’ll give a few answers about a third of the properties in the United States are free and clear. Different pockets, different percentages, but roughly speaking, and so that’s a great Ponte efficient, so to speak, because if they need to cash out, presumably they would have yanked it out. And they’re usually the ones that will be open not only open by inviting people to structure something on terms, and I alluded to it earlier, but this office building is exactly the case. He want is 70 years old or 71. He wanted terms. He wanted 20 year terms, we usually do like three 510. He wanted a long term. In fact, he he forgot to write it in a do on sale. He said, I don’t want to be cashed out on you make sure you’re clear on that. In other words, he doesn’t want me to refinance and never pay him off until 20 years, even though he’s 71. So that was more of an estate and tax issue, I’m sure. So they’re out there. So you got a niche and find them. I’ll give you another example. We bought a six and a four unit in the same town.
How do we buy them? We said Hmm, we’d like to add a multi or two more to our portfolio and we’d like it to be 40 to 10 units so we literally mailed 326 and it was small pieces of mail and we mailed them three times three tweak the letters little differently regular number 10 envelope we bought those two homes for that now what was the criteria four to six units free and clear both of those are free and clear both was structured owner financing no money down and here’s the key for the recession resistant principal only payments no interest no interest they got their price they’re happy to do that and I’ll pay the price for a premium as long as I get my term and principal only payments they both did that
as an example three examples coming office building two
J Darrin Gross 14:37
Principal only? Hmm So that just seems to be kind of counter I mean basically it’s this year you’re reducing every payment goes direct to principal hundred percent. And what so tell me why is it more of just like you said, l ike the tax issues I would primarily one of
Chris Prefontaine 14:56
The taxes of it, yet some of its ego Not they want their price and that’s that’s stuck in their school, their brain no matter what you do. So I gotta get my price. Okay? So if you give me four or five year term, I’ll give you a price. If you give me longer, I’ll give you more than your price. Because let’s just give you an example. One of the houses I did, it was a four year term principal payments, I’ll use round numbers weren’t 1000 bucks a month. Each year, I went to them and said, If I pay 6000, more down on the principal, I’m putting it down expensable will you extend my term? 12 months? Did it two years in a row? They said sure. So I got 12 grand and principle pay down by prepaying some principal.
And then now here’s the twist. So so you know, I’ll do i do incorporate interest if I have to. So this year, it would have been the third year there would have asked for that. I said, they said, Hey, you didn’t do that thing again. And I said, well, instead, why don’t we extend it 15 years, you’ve been getting no interest and I’ll add 4.5% interest in and we’ll amortize it over the next 15 years. And their accountant loved it. So we took a four year deal and made it into a To extension, so went to six years and then 15 went to 21 years.
J Darrin Gross 16:04
So you’re doing combinable paid down there for the first. I mean, the in the front end there. That’s, that’s huge.
Chris Prefontaine 16:10
Yeah, that’s what does it. And now he is a quasi combination. This guy this building said, I want 5.5% interest old school loans, a lot of land big investors. That’s what I want. Okay, well, I usually buy principal only. So let me structure something I think you’ll, you’ll like what I did with him, as I said, we put more cash down as our office. But I think we put like 30 something down, we broke the mold on that we usually don’t put cash down when we do like 30 something grand down. But then when we did heavy principal payments, I think was like 2000 bucks a month, all the way for almost the first full year and then we amortize it at 5.2%. He was happy and I was happy. We hammered the principal right away.
J Darrin Gross 16:46
No, that’s that’s really, I mean, that’s the secret the bank doesn’t want you to know. Right? And I look at, you know, most loans. I mean, it takes you about five years really before you start at that point, you know, at least five years. Feel free to really start, you know, hitting the principal? For sure. Yeah. And to be able to do that on the front end there. That’s, that’s beautiful to get really kind of a running start on your your pay down.
So, you know, you mentioned, like a third of the properties throughout the US are free and clear. Does it matter on the market? Do you find there’s any is it Do you find it more plentiful and in you know, bigger markets smaller markets is just
Chris Prefontaine 17:34
Terms in general lease purchase owner financing subject to existing financing, those are you have to talk to a little a few more people, extra people if the markets hot, hot, hot, right. Even as hot as the markets been with our students spread out where there are some pockets that have been flat since 2012. And it’s great. It’s great to buy in that market. It’s great to buy in a slightly downward trending, but when it’s screaming straight up, it’s a little harder. You just have to talk to more people because the people that are free and clear. They’re not desperate any shape form or fashion they want their number.
J Darrin Gross 18:04
Chris Prefontaine 18:06
That’s the key.
J Darrin Gross 18:07
So it’s kind of a numbers numbers game but you’ve got your parameters figured out. And and you said you market how many how many postcards Are you mailing out?
Chris Prefontaine 18:19
We didn’t do a lot we don’t do a lot of mailings when teach our students so we only mailed out one batch of 300 something and we did that three times and we got two properties out of it.
You know, it’s crazy to each one of those. We profited over 100 each, we’ve already flipped them, just improving the noi
J Darrin Gross 18:35
Got it, and you’ve demonstrated it works for single family and commercial multifamily
Chris Prefontaine 18:41
Works for all the above have done all the above. Now we teach on a broader scale, mostly single family. They can make it pre recession proof that because they can pound down principal and they’re always sellable. You know, so we do teach that and we own a lot of those. We own we carry like 50 or 60 of these at any one time in our portfolio, not counting our
Students, and we’re not on one single loan as to my earlier point. So, you know, I go to bed at night knowing I mean, we our contracts are set up properly, where the loans are never in our name on a lease purchase, for example down the loan stays in the sellers name. So I know that’s a no brainer.
J Darrin Gross 19:17
So let’s walk through a lease purchase for a second. So you’ve got you identify a seller and you say the seller has financing already in place.
Chris Prefontaine 19:29
Yeah, so I’ll give you a scenario as if there’s obviously many customer upside down some are debt free. Well, let’s do like a standard. We get all our leads on the single family side from for sale by owner for rent by owner and expired listings that relatives can’t sell, I didn’t sell. Let’s take a let’s use real not round simple numbers. Let’s take a house for 300 and they’ve got 250,000 equity, I’m sorry, 250,000, mortgage 50,000 equity, and for whatever reason that didn’t sell or didn’t sell in that timeframe.
So we come in and say, Okay, Mr. Mrs. seller, provided you don’t need that 50 today, because you didn’t get it, then sell in the market. If you can wait on that I’ll protect the entire 50 you probably weren’t gonna get 50. They agree, yeah, we’re gonna go lower, I would pay some fees, realtor, whatever. So we’re going to protect your 50,000 chunk. But we’re going to do that honor before the end of the term of the lease purchase. Usually, it’s what’s used three years for this one. And at the end of that term, we’re going to give you your 50. And we’re going to pay off the underlying debt. Now it’s 250 today, but it’s not going to be 250 then so that helps us.
So though, that if a silicon wait for that and wants to protect that number, it’s a great way for them to do it. And on our end, what are we doing the single families, we fill it with a buyer that needs more time, or we call it a ringtone, but it’s basically a strong buyer that just needs time to get financing, credit, downpayment, whatever.
J Darrin Gross 20:55
It is there a sweet spot for that kind of operation. tendency for you I mean, you know, the assuming somebody is further along in their mortgage would be more attractive than somebody who just just finance yesterday.
Chris Prefontaine 21:12
A more attractive for us Yes, but another good point efficient just because you brought that up is I have one of my students who’s having a real successful time with buys a list tiny list again a few hundred he buys a list that is little to no equity bought in the last two to five years. Who are they’re looking for debt relief, they’ve got to move out of the area and they can’t sell the thing because it’s no spread. Those people are typically giving us the long term so we can hedge against the market. And we either do a lease purchase or buy it subject to that existing loan staying in the sellers name. That’s another good list. Like there’s all these you know, sub lists, not just those categories. I said that we just listened to our we caught our wicked smart community but we we listen to our students and they we know it’s working in every market.
J Darrin Gross 21:56
So in the lease purchase basically you’ve got a couple of paydays and you get the obviously when you sell, there’s the the cash out. And I’m presuming that’s between the the amount you’ve pre negotiated with the seller plus whatever the pay down of the mortgages that that spread. That’s where you’re going to get that.
Chris Prefontaine 22:15
Plus the markup.
J Darrin Gross 22:16
Yeah. Right. And then are you? Yeah. And then you obviously sell for more than what they what you agreed to? And then are you able to make some more on like a rent spread between what your mortgage payment and ran to that?
Chris Prefontaine 22:32
Yeah. Yeah, we call that payday, too. So what you said for us, we call it payday. 352 is the difference between the outgo and the income, right? It could be the bank or the owner, whatever. But there’s a spread there. We average, we’re lower than our students. Actually, we average like 310 bucks on that one. The back end we average like 3540. And then on the front end pay day one. That’s when a buyer comes in and has to put down a non refundable down payment. And that range is like 2627 grand for us. So our deals are like 75 grand deals. cash out between 18 months and 10 years. So you get this cool spread of here’s my predictable cash flow saying a dozen deals, stop, scale it up, you know you got flexibility versus one flip or one wholesale or one rehab, you know, it’s it’s three paydays.
J Darrin Gross 23:16
Yeah. No, definitely. There’s no lack of capital. I mean, that’s that’s a very appealing, you know, benefit here strategy there. Can you talk about some we talked a little bit about the the benefits I mean, the the sellers or the tax and the the ego are kind of the two things it sounds like you’re you’re appealing to any any challenges explaining this to a seller? I mean, is there any resistance or is it more? Is there a kind of a longer cycle to getting somebody to agree to it or is it more like you, the people you’re finding they’ve been hoping somebody like you would come along?
Chris Prefontaine 23:55
Many of them. good way of saying it fireside too, but many of sells. It’s not difficult to explain it to them if you just use the proper scripts up front and the proper script up front is, hey, Darren, if you got your price I see here. Are you open to doing that on lease purchase or owner financing? Or do you need your money today? If they say, No, no, no, I got to fail me, I need my cash or I got this building. I got to do a 1031. Tomorrow, you know, if they have to do it now. Then I say okay, no worry. I’m not the buyer. if anything changes use me as a plan B. It’s that simple. If they say, Hmm, interesting. I I’m open to that great when it comes to property, I’ll give you the different options. So it’s just that initial conversation and then finding out why they’re selling because if I can fix whatever it is, I want the best price. I can’t talk them upside down. If I can fix that. There is no explaining. I’m just giving them a solution.
J Darrin Gross 24:46
What’s the largest type property you’ve done on a lease, lease purchase?
Chris Prefontaine 24:50
I’ll give you Austin. I’ll give you a student. So we have one currently. We actually did it on our financing 950,000 waterfront at Cape Cod. Massachusetts, we still have it we keep renegotiating extending the term out, which is great. Largest lease purchase for us. Probably around 1.1 million. I have a student in DC who the 800 to the one four is like the norm. So he’s done like a one eight to 2 million. It’s just, you know what the answer is it’s the sweet spot is the median price range in any market and then the higher end item, you know, look for those but don’t like bank on those because they’re slower to cash out. Sometimes they’re slower to find there’s less of them. When the market softens. I was gonna hit you know, all these reasons, don’t do a ton of them. But stick stick to median. You’re safe.
J Darrin Gross 25:43
That’s awesome. So for somebody looking to get started, what would be some some keys that you would suggest they consider how to get started?
Chris Prefontaine 25:57
Well, I would answer this Way regardless of whatever show this was like literally it could be a show about restaurants and I’m gonna answer the same way pick a pick a niche in this case in real estate that you can get excited about just you know so many of them does does Airbnb is apartment there’s all kinds of niches once you find that then find someone so your company go this is it I can get I can get behind this then find someone in that niche that’s like doing it not did it 20 years ago not wrote a book about it not as a really good marketer because just they’re still doing it. They’re in the trenches. Then once you find that, you here’s the big challenge people get like all these shiny objects, I watched it late night commercials and get rich quick. So number three is commit to it. I don’t care whatever it is commit to it for 36 months have blinders on like whatever that group person board of directors or mentor or coach says you do you be with that for 36 months and don’t look left right or backwards. And I don’t care again what business you’re in restaurants, hot dogs in real estate, you’ll have a phenomenal experience.
If you do that simple form, it’s the third piece. It’s so hard for people to manage expectations and patience. And finally, you know, sticking with someone.
J Darrin Gross 27:08
That’s that’s a, you know, I found in my own experience, the three years is really kind of a proven. I think it gives the market a chance to see that you’re still there. You know, I think
Chris Prefontaine 27:21
That’s a huge point. Actually, I don’t you said but that you’re right, because there’s some credibility there, but also not bought and also, like, they’ll do a deal as much sooner than that. But I know if mentally they’re committed three years, they’re not going to waffle on a curveball comes their way, which it will,
J Darrin Gross 27:36
Sure but even that I think even more to be ultimately successful, and it is at that traction, you build the traction along the way. But in three years, everybody’s gonna know that you are the guy that’s still there that’s doing it. Oh, yeah. And whether it be your your reps, I mean, you’re you know, you’re getting plenty of practice to where, you know, you know, the deal. You’ve done deals where it’s going to be around I would think the year
Your long term successes really you know be really strong as opposed to you get any you get the you get the one hit right away and you think is easy and then find that yeah there’s a lot of work and it’s not as easy and and.
Chris Prefontaine 28:15
Ya know well said
J Darrin Gross 28:18
I do have a question about tax so for since you’re not taking title to the property is basically the income just treated as ordinary income then or is there any Do you get any depreciation or anything like that with any of the
Chris Prefontaine 28:34
Okay gets it gets even better but but to answer that direct question, no depreciation or anything unless you’re buying it subject to existing financing and taking title you are correct, it follows title that’s what I tell people follows the deed. However, here’s what’s really cool. So let’s say I one of our students asked me this this morning from Florida. He said what do I do what I tell my accountant, he did his first what we call sandwich lease deal where he didn’t take title, it’s just in the middle is what’s neat pay day one that we got up front to pay the The non refundable down payment that’s payday one.
You when you get that you don’t have to you can the IRS would love you if you report it, but they don’t have to report that until and unless the exercise the option is exercised, they’ll default it, then you get to claim it. So I can take a deal where I get my 26 grand up front and doesn’t cash out for three years I get that 26 grand to pay tax until year three. Now, you may want to I’m not an accountant. This is what I do in my accountant we picked a formula so that we don’t get whacked if we had a whole bunch that were turned out the same year we don’t get whacked. So we picked a formula that every deal we do report a percentage of it and the other goes on our books as a deposit. So a the IRS loves us because we’re actually pre reporting income and be we’re not gonna get stuck at some point and be behind. So you just got to plan that out with your accountant. So if you said it’s essentially like an accounts receivable then is that what the mean because it hasn’t you haven’t it hasn’t been recognized until the sales completed and we actually Put on like you were a conventional sale, we put it on as a liability deposit even though it’s non refundable. That’s how he holds it on my books. You know, again, I’m not an accountant. Sure, but and then so let’s take a 20 grand, we put 10 of it as income that year. So it goes to we literally have paid a one on our on our income statement for income coming in order income, and then the other half the 10 will sit in deposit liability paid in one account.
You can spend it, but it’s going to sit on our books as that.
J Darrin Gross 30:28
Sure. And then as far as the installment, it’s just ordinary income and as far as it comes in, or
Chris Prefontaine 30:33
Yeah, because all you’re doing then you don’t have the loan. So all you’re doing is lease income in and lease expense out when you pay it online debt and that difference is you’re just sharing comm Yeah,
J Darrin Gross 30:42
gotcha. Gotcha. But it’s certainly a creative way and I don’t even see creative way because I think that what I do recognize just like you pointed out to there’s so many people out there that you know, they they’ve owned the property forever. How are they going to get out of it? This is an attractive term, it keeps them they don’t have to mess with the property more, they’ve got income coming in. So, definitely a win win for the, you know, for the person that that has this as an option. It seems like a definitely a good solution.
Chris Prefontaine 31:22
And if you’re doing but if you’re doing single film is it’s a win win win because the buyers, I mean, we’ve had some buyers Darren in tears thinking man, because of my bankruptcy because of my divorce. I thought I never could buy again, and we give them this pathway. And so it’s super healthy, in my opinion, energy wise to be win win win. That’s not easy to get, especially these days.
J Darrin Gross 31:39
No, absolutely. Absolutely. Hey, Chris, if we could, I’d like to shift gears here. By day, I’m an insurance broker. And I work with clients to assess risk and try and manage the risk. And there’s a couple of different strategies we typically use.
Unknown Speaker 31:58
The first is we looked at
Unknown Speaker 32:00
See, is there a way to avoid the risk? If we can’t do that, then we look and see if there’s a way to minimize the risk. And if neither of these are an option, then we look to see if we can transfer the risk. And that’s what an insurance policy is. And so, I like to ask my guests
Unknown Speaker 32:20
if they can identify what they consider to be the biggest risk. And just to be clear, I’m not necessarily looking for insurance related answer.
Unknown Speaker 32:32
But with that, if you’re willing, Chris Prefontaine, I’d like to ask you, what is the biggest risk?
Chris Prefontaine 32:41
I don’t want to sound like a redundant broken record, but in my world so comes right to the top of my brain when you ask that is you signing personally and exposing your personal assets to anyone or anything?
Unknown Speaker 32:55
Got to be the number one in my world.
Unknown Speaker 32:59
J Darrin Gross 33:00
That’s definitely is you’ve witnessed. If everything goes bad and you’ve got, well, it is a risk. I mean, that’s just point blank it is it is a risk. And if if the payments aren’t made, as agreed by or as expected by the lender, they’re coming to you, right?
Chris Prefontaine 33:21
Yeah, and I do make I make one exception just to be clear and just full disclosure, and that is a personal residence. But using my methods, my son in law and daughter bought their own house on terms but I wasn’t able to I do mine conventionally. But if you can do that, make that in extremely, extremely excuse me low loan to value. That’s all. I need to get it that way.
J Darrin Gross 33:44
Chris, where can listeners go if they’d like to learn more and connect with you?
Chris Prefontaine 33:51
Simple then go just go to the website. Smart real estate coach calm or smart real estate coach podcast is a show. But what I had said too often
Unknown Speaker 34:00
And I’ll offer everybody is we have a hardcopy, you know hardcover, in hardcopy, Amazon bestseller real estate on your terms that we sent you. And if the listeners go to this link I’ll give them and just say they want they heard us on your show. We’ll go ahead and ship one out to them physically ship it out not electronic, and it’s not one of those Hey, put your credit card in. You gotta pay 10 bucks for shipping. We will ship it out. It cost me a little over six bucks plus the book and we do that as long as they say they’re on your show. The link is free. s r EC stands for smart real estate coach. Free s r ec. Book. calm.
J Darrin Gross 34:38
Got it? s r ec book.com. no free s r e c book.com.
Unknown Speaker 34:46
Gotcha free. Got that on the front end there. Okay.
J Darrin Gross 34:51
Chris Prefontaine 34:52
I’ll give them a lot of what we talked about.
J Darrin Gross 34:54
Yeah, no, I appreciate that. And I’m sure you’ll get some requests for that. appreciate you doing that.
Chris Prefontaine 35:01
Yeah, no, probably my team will be maybe not so psyched with me. But away we go.
J Darrin Gross 35:06
All right. Well, Chris, I can’t say thanks enough for taking the time to talk today. I’ve enjoyed it and learned a lot. And I hope we can do it again soon. Yeah. Thanks for having down. Appreciate it. All right. For our listeners. If you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow? That’s all we’ve got this week. Until next time, thanks for listening to commercial real estate pro networks. CREPN Radio.
Unknown Speaker 35:38
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