Business Innovators Radio - Interview with Chris Prefontaine, Chairman & Founder of the Wicked Smart Companies & Host of the Smart Real Estate Coach Podcast

Episode Date: May 26, 2023

Four-time best-selling author of Real Estate on Your Terms, The New Rules of Real Estate Investing and Sell With Authority for Real Estate Investors, Forbes Business Council Member, Chairman and Founder of the Wicked Smart Companies,2x Inc. 5000 Honoree, Host of the Smart Real Estate Coach Podcast with almost over 400 plus episodes.Learn more:https://smartrealestatecoach.com/or get his free book – https://wickedsmartbooks.com/saundersInfluential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-chris-prefontaine-chairman-founder-of-the-wicked-smart-companies-host-of-the-smart-real-estate-coach-podcast

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us Chris Prefontein, who's the chairman and founder of the Wicked Smart Smart Real Estate Coach podcast. Chris, welcome to the program. Hey, thanks, Mike. I'm super glad to be here. I appreciate it and I look forward to chatting.

Yep, you too. And since you're a podcaster, you are a seasoned vet and we will just have a good fun time just chatting. And as you know, we just want to kind of get to know you. So before we dive into what you do and how you do it and how you serve your clients, give us a little bit of your story, what's your background and how did you get into the real estate industry in the first place? Sure, sure. So it's been 32 years. I'm going to condense.

And in my New England style, I'll do that as quickly. because I've been at this since 91. I was doing things on terms in real estate meeting creatively before knowing what terms was. I was buying land without having to pay for or use banks. And so that is kind of what I model is today. I then bought a realty executives franchise back in the 90s with one goal, and that was to sell it. And I did sell it in 2000 to Coldwell Banker.

And then from 2000 until the crash, I was doing coaching and my own deals. In the 2008 crash is what really causes to re-engineer our entire. business to what it is today, which is we buy, when I say we, it's a family company, we buy and sell property, but we do it without banks, without credit, without cash, and then we teach that all around North America as well. So that's 32 years and about three minutes. Awesome. And guess what you didn't talk about? All of the volatility highs and lows and twists and turns, you know, that are certain that have gone through all of that because you mentioned the 2008 crash. Well, I'm going to correct you by saying it really was the 2007, eight, nine, ten, ten, ten,

11, 12. I mean, I lived it. I was back then, I was in the mortgage industry and it's like, it wasn't just the crash. It was just an implosion and it kept on and on and on. And you had to pivot. And that's awesome. That's what we want to talk about now. And also when you talk about terms, it reminds me of OPM, other people's money. And that's what you're doing is preserve your cash, your liquidity, use other people's money,

use their terms. And then that opens up options and opportunity for you. 100% agree. I remember it like it was yesterday. It took four or five years ago of that mess. Oh, my word. I've got a wife and four kids and it hit you like a sock in the gut out of nowhere. It was like literally overnight. But you know what? When I talk to people about, oh, yeah, you remember the economic crisis of, you know, that time frame? And then guess what was in our past 9-11? And then guess what we've got COVID? There's these times of market volatility in the housing market. There's times of market volatility. in the stock market and then there's life volatility because there's this little thing called COVID that was in our recent past. And you know what we have to do is we have to be resilient,

figure out how to go up, down, all around and pivot and persevere through that because in the next few months or years, something is going to pop up. Who knows what that's going to be, personal, professional, financial, another virus, who knows, but there's going to be something where smooth sailing for about a minute and a half. And we're going to need to figure out how to persevere through and the cool thing about what you do is you can say to your clients, been there, done that. Let me show you this battle scar. Let me show you this battle scar. And I can guide you the way through around that moving forward because I've been there and I've got the blueprint. Yeah, you know, this is huge that you just said this because I've been screaming about this for a while.

I don't care what industry. It doesn't have to be real estate. Yours is the same. I'm sure you'd agree, but you can tell me that is going to happen. So be very, very, very careful when you go seek someone out, which you should anyway in any industry to get better, but make sure they've gone through economic and personal challenges sometimes because that all matters. You know, you ever heard the phrase trust fund baby? You know,

we all have. And I remember growing up one of my friends at high school, he turned 16 and his dad was a super rich real estate investor. And he got his son a Porsche, brand new Porsche for a 16th birthday. And I remember thinking, where do you go from there? You know, you turn 18. What are you going to get from there?

So it's like these, you don't appreciate. things. And if you've been socked in the gut personally, boy, you know how to get up in the morning and put your shoes on and just get her done. And professionally, you know those problems. And when something happens, you know how to keep it from happening again or put some things into place to mitigate that. So as an example, what would happen in the real estate realm if you dump the whole bunch of cash into a property thinking, oh, yeah, I'm going to flip that. But what if it took longer than you expect? And now you needed that cash and the lesson there might be, why don't we use terms, stay as liquid as we possibly can?

Then when we flip it, maybe possibly the profit margin was a little bit less, but at least we had liquidity and options. And that is that lesson moving forward. So let's talk a little bit about some of those lessons that you have learned the hard way that you now teach your clients and investors and students. Sure, for sure. Because you just open up the whole thing with the terms. It opens up the ballgame. You have pivot ability, is what I call it. Yeah, I mean, for sure.

And like I said, I was in the mortgage industry and I would have a lot of clients that are like, hey, I'm going to pay extra my mortgage, you know, pay three payments a month. And I'm like, I love the concept. But guess what? You start paying five and 10 and $15,000, $20,000 over the next few couple years into that mortgage. And it makes logical sense on paper, but you now are, don't have that cash. And you can't reaccess it without begging and pleading and applying for an actual loan. So why don't you stay liquid?

So I think some of those things when you are now structuring your deals, if you can get some creative terms like Robert Allen back in the day, you know, like creative financing and owner financing, but these creative terms, boy, that opens up some options. So what's an example of how you would recommend structuring a deal these days? Well, here's a classic one. You said owner financing. So we buy owner financing, but we niched it down even more. So we buy owner financing from sellers who are free and clear. They're debt-free. There's no mortgage in the property.

So they want what typically? They're not hurting in any way for it. They want some cash flow. Yeah, cash flow and price. Call it ego, call whatever you want. They want their full price. And when I can get a principal-only payment, that's what we do, Mike, which is most people go, come on.

So 99% of the deals we do are principal-only payments. Picture that as a recession hedge. As they make a payment every month, it's principal only because we gave them their price as long as we get a long enough term. It's an incredibly powerful strategy. Yeah, you know, and what you just talked about there is a psychological approach. You know, so in marketing, you have to know how people think. Well, you know how that owner thinks because it's free and clear. What do they really want? They want to know that they won. How can you give them that win? Oh, you want X for the price? You got it.

Wait, you're not going to beat me down. Nope. But here's how we want to structure that. That's a huge aha. Yeah, my own office building is on a busy road, and there must have been, you know, hundreds of real estate agents that went by that building. He literally had a sign that said for sale by owner, but they kept bringing him offers. He told me this. They kept bringing them offers, and he said, that's not what I want. I want to structure owner financing for trust planning and tax reasons, and they couldn't

give it to him. So I walked in and gave it to him. Huh. You know, like, I think that that is so, if you, you're like talking two different languages. People ignore the for show by owner and they go, hey, all cash or hey, here's the mortgage and we can close in 30 days thinking that that's going to light their buttons. But this guy had a legacy planning, estate planning goal. And all it takes is like, hey, what do you want? Like talking and communicating and then going, oh, well, if that's what you want, how about if we and no one did that, but you won.

Yeah, that's exactly what it is. And by the way, this was born out of what you and I both experienced, right? it was born out of that heartache of the crash because I said, I almost didn't get back in real estate. You mentioned four years. It was like February of 12 and it started in February of 8 for me. I know. I'm like, well, how am I going to get back in? Okay, I know.

I'm not going to use money or banks. Yeah. You know, and so I'll give you one more example that wasn't related to the 07, 8, 9, 10, but way back in the day when I was growing up, going through college, my parents preached to me, don't get into debt, credit cards are bad. And I'm like, yeah, yeah, of course. And so what did I do? I went, graduated college, got my first job, started making a buck or two, leased a vehicle at $500 a month, bought a house and ran my credit cards up to $30,000. And it's like the thought of that, and this is 26 years ago. But when I dug out of that 15, 20, 30 years or 15 or 20 years ago, I'm like, never again. You know, so for me, I learned that lesson and it's like debt is bad. I don't I don't like the remembering of that feeling. And so I want that freedom and flexibility. And same coming. through these times of the real estate crisis. Now you're able to say to people, hey, yeah, you can do it this way or that way.

But how would you feel if? And I think that that's when you can bring it home to people and go, man, protecting your family, protecting your investment, your retirement portfolio, rather than putting all of your money into it or a huge amount, why don't we put the burden on the seller and structure these terms? I think that is so huge. So now what you are doing is you are. you've perfected that system. And rather than keep it to yourself, you're going, hey, I'm kind of like the guy in the jungle with the machete.

I'm forging the path. You want to come along with me? And now you're teaching people how to do the same thing. Yeah, we teach and we, and again, you've been, you know this like I do. So you appreciate this, I think. And that is we teach interactively, meaning we don't sell stuff and go, okay, good luck, Mike. We sell a base foundation, but then we do deals with students and revenue shares. So we're all in the game.

Wow. Yeah. You know, very frequently. And do you ever like have this huge project where you can buy a 400 unit apartment building and then you need a bunch of partners to come in and you say, you can trust us because we've got our skin in the game as well? Do you ever do deals like that? Or are you buying individual properties going? Look at the one I've got just put into escrow. So is it, which kind of variable is that?

It's the latter. We don't, I don't syndicate because that, Mike, that's the one at like, after the crash, I said that just doesn't make me sleep good tonight. I don't want to raise money in syndicate. I just want to buy things on terms. And so to this day, we stick to that. But any asset class can be bought that way, of course. But to your point, what you're doing is you're saying, oh, hey, if you wanted to buy a, let's just say a duplex, fix it up, sell it. Let me tell you, Mr. Mrs. Johnson, I'm doing that right now.

Look at the one I just put into escrow. I just closed it on this. I'm doing. And they're like, oh, yeah, he's doing it. He's not just the teacher out there saying, here's what you ought to do. Oh, yeah, yeah, yeah. He's out there doing it. Yeah.

Yeah, we've done probably, I don't know. Over 700, probably close to a thousand deals. Wow. So do you typically buy fix up hold for cash flow or are you doing fix and flip? What is your, what is your formula? Actually, neither. It's a pivot. So we exit most, just for the sake of the show, most properties rent to own.

So we are helping people that created their own business after COVID and need seasoning with the bank, as you know, or they need time for car repair. Either way, they need time. They're in a rental-owned vehicle. They eventually get mortgage ready. And in doing that, we create three paydays, which we have trademarked. So we get paid three times now, monthly and then longer term, which is a cool model. So I love that because it's not the traditional fix flip or buy and hold. It's that pivot. So let's identify those three paydays. I'm certain the third one is when it gets sold, you make a profit based on the equity. And then the middle one is the actual cash flow for the rent coming in. How are you getting paid on the first example? The first one, great question. Yes, spot on

on the second and third. And I'll add one to the third. But the first one is their down payment up front. Because remember, we don't want a renter who has some dream to buy someday maybe. We want a buyer who says, oh, I want to buy in the bank can't finance me. I just need time. Right. So that's pay day one. And then payday three in addition to the equity, you said, is also all of the. the principal paydown that was accrued during the term of the deal. Right. So also, guess what you have from the psychological standpoint, from that rent to own a person that's in your property, they've got skin in the game because they put money into it.

And they're fully planning on buying that property. So they're treating it a little bit better. They've got pride of ownership. They almost are like envisioning themselves as this is my house. I just can't do it now. and maybe you're going to work with them or put them in touch with someone that can help with credit repair, all of those things. But you're actually doing a service to people that can't quite get in the market now and not saying,

go away and come back when you fix this. You're like, hey, I can help you with this right now. Yeah, you said it exactly correct. We say to them, look, we're not landlords. You're a buyer. You just don't have a loan or the property in your name yet. So you're going to behave like you're going to capture equity like and you're going to take care of it like you're a buyer. and with the exception of a 2 to 5% default rate, they do.

And that's not bad, as you know, from the mortgage business. Oh, my word, yeah. So now, how does the, if you're structuring that deal, how does the rent-to-own payment on that compared to what that person could go out and rent something comparable? So as an example, if you could rent something for $1,500, is your payment going to be $3,500 because, you know, it's, I'm sure I'm being absurd. But how does that compare because if some rent are going to go, oh, my word, man, just for a hundred or two more per month, I'm actually going to be buying this place?

How does that comparison? Yep, good question. So we typically try to be at or slightly above, and I'm talking like 100, above what they would be for their end loan so that there is some incentive there. And sometimes just because of how good we bought it, where we're even more competitive. But I'd like to be, again, you use the word psychologically, slightly above so they know that they're going to move into a better position. and get principal pay down when they got their own loan. So I'll give you, I know we've used some examples. I'll give you one that if you like it, you can steal it because it makes that point perfectly.

There's this, these two farmers and they lived, you know, a couple miles apart. The one farmer, you know, drives down to the other farmer's house and he comes up walking up on the porch and they're chit chatting. And every so often, his hound dog on the front porch lifts his head and howls, like almost in pain. And three, four, five times down the road, the one farmer goes, why is your dog house? And he goes, oh, he's just laying on a nail and it's hurting him. He goes, well, how come it? He doesn't just get up and move. He goes, well, it's just not hurting him bad enough yet.

So when you're not taking advantage of people and gouging them with that rent, you're making it such that it's a win, win, win for everybody. But it's just enough that makes them feel motivated to go as soon as I can get the thumbs up from that mortgage lender. I'm going to get that loan and move forward. And then it's going to be another benefit to them. I think treating people fairly equitably with all ethics, that's huge. I can tell that you care about that.

And then everyone appreciates it. And I'll bet you you end up getting referral after referral from people that have come from just even the renters. Yeah, we get on both ends, but more so the rent the rent on. You're right. Because they, you know, you and I both know, people tend to hang out with people like themselves and they're in the same category. So if this is now a buttoned up system blueprint checklist that you have. now figured out the pivot and the formula, you now are teaching other people to do the same thing in their area. So talk a little bit about what you're able to help someone that may, might be going,

you know what? I would love to get into this, but I've still got my, you know, corporate nine to five. Yeah, most people, so we are doing that. We call associates. They're associates all over the country. Most people do have J.O.Bs coming in with us. Just last Friday, we had a gentleman leave a government job after 30 years. He's right here in New England, coincidentally. But that's what we tend to do with people, is help them plan their escape from that W-2. It just takes a little bit of a strategy, Mike.

I mean, some people say, give me, I need two years, or I need to have this much in the bank, whatever their need is, and everybody has a different palette for that. We help them get a strategy together to do that. And other people, a few, like their job and just want to do this as a supplement.

That's great. So I think that some people might say, you know, I've read Rich Dad, at. I know that investing in real estate, quote, unquote, is popular in a lot of people, but I don't know the process forward. And even if I did, I don't really feel comfortable going out and getting that big old mortgage on that property and hoping that I can rent it out. But you're saying that the risk to one of your associates is a lot lower than the traditional real estate investing model because you're teaching them to find the right types of properties

and create those kind of options and seller financing to where it doesn't feel as a pressing as I've got a portfolio of millions of dollars of real estate. And if the market moves, then I'm going to get the bank all in my notes. Yeah, not only does it, it doesn't matter. And here's why. The tenant buyers, I'm sorry, when we buy the property, if you're a student, the agreements to buy that property are contingent upon, until you're more advanced, contingent upon finding your tenant buyer. So you usually have a 90-day window,

and you find your tenant buyer, and you go, great, lock that up. Now I can start on the, property. So you don't take on this, the underlying mortgage from the seller until such time you have your buyer in hand. That sure is that nice safety net. Yeah. Yeah. And it's a whole lot better than, well, I've got this lease agreement. And I guess they're going to be good at least for a year. But if they tear the place up and then they move, I've got to take three to six months to find someone else because it is rent to own and you've now found that person before you're on the hook, so to speak, with the deal. You now know that you've got the quick step one, two, three, all in place. The person going into that property is feeling like they're buying it on buying it because they are.

It's just over time. And it's a much more high quality tenant. Yeah. I mean, I've dealt, I've been a landlord. So I've dealt with tenants before. And now that I deal with buyers who need time, I'm sorry for the landlords out there, but that's like a adult daycare, right? So instead I'd rather deal with buyers who I just have to help get mortgage ready and have a positive environment. So I love your quiz,

which is a positive way of calling it a pivot, but I love the approach. So obviously the answer to this question is, yes, yes, yes, but are there certain parts of the country that this works better than others or are these kinds of deals out there, you just got to know where to find them? Yeah.

100%. We show them how to find him. And it's not a tricky process. Mike, it's like most investors would be familiar with as far as who we call. A lot of the virtual systems are doing the calling for us. So yeah, we bring it from literally A to Z from the lead to the check. I love it. And then obviously, you're going to have some support to go, hey, you found your first deal. We can walk you through and we can support you with giving you this idea. And you're not going to just like hand them a handbook and a PDF and go, good luck. You're there to support the associate. see, it's all along the way. Oh, yeah, and I know you say that facetiously, but you and I know that unfortunately from the marketers out there that just market and don't care about the back end. That's what happens. And so, no, we hold their hand. That's what I meant by interactive.

I don't know of a better way to learn. I love it. Well, Chris, it's been such a pleasure talking with you today. I love your approach. What's the best way someone can learn more and reach out and connect with you? You know, we're big on free, Mike. And so, because, again, there's too many people marketing for money out there. I just want people to look for free and then go, oh, I like this.

that niche or I don't. And so I want to give everybody a free book. You mentioned some, some older books in the past on what we do here. The best seller, real estate on your terms, just go to WickedsmartBooks.com forward slash Saunders. And we set up a nice link there for your tribe. It's the real hard copy book and it's a real free shipment. You will not be asked to put a credit card in for shipping. We do it totally free. And then if you want to go through my master's class. It's just me if you can deal with listening to me for 55 minutes. You go to smart real estatecoach.com forward slash master's class. Awesome. Well, it's been such a pleasure talking with you. I really appreciate your time

coming on today, Chris. I appreciate it, Mike. The time well spent. Thanks, buddy. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.com.com.com EntrepreneursRadio.com.