Transcript of Interview with Chris Prefontaine:
Dan: Welcome to another episode of Shoulders of Titans, this is Dan Lok. Today, I am so excited I have the privilege of introducing you to another successful entrepreneur. A best-selling author, and educator in the real estate industry, a professional real estate investor. This is a close friend of mine, Chris welcome to the show!
Chris: Thanks for having me on Dan, I appreciate it.
Dan: Chris, before we get into some of the strategies and how you build your company let’s talk about where you got started. How did you get into what you do today?
Chris: Okay, I can go back far on this one but I’ll breeze over it and I’ll bring it back to today. So, I go back to the early 90’s in real estate and building single family homes and owning my own Brokerage. I used to call that “adult day care”, running around and working with realtors. After the 2008 debacle in the real estate market nationally in the U.S, I started to restructure. I started re-engineering absolutely everything in my business so that we are now buying and selling what I call a lot safer investment before we get into the detail. That was all driven from the 2008 debacle.
Dan: Hmm, so everything overnight changed. How did that effect your business?
Chris: Well I had at that time, and I’m sure a lot of people can relate to this even if it was just one home they owned personally. But I had twenty something properties and my goal back then was just okay, it was to accumulate all these properties and over the years pay them down with the tenants being in them and gain all this wealth. That’s great, but they were all leveraged and they weren’t spitting out cash flow. Cash is king as you know, so when the market by anywhere from thirty to ninety percent or something crazy in some markets, those all became either foreclosures or short sales that needed to be worked out. That’s significant and you’re talking millions, so my part time job or probably full time became working these things out and we took a beating. Cash flow was over, everything was over and we had to work those out. That was quite a task.
Dan: I’m curious, through the psychology of it. When you were going through adversity, what was going through your mind? Were you frustrated? Were you just focused on the tasks, and the solutions? What was going through your mind back then?
Chris: All the above. If you think about it, yeah, I beat myself up with the mistakes but also in hindsight I tried to put it all in a chamber. So, I think I got that term from Dale Carnegie but in the office on any given day if I was working on these headaches. I mean they were headaches, and they were stressful but I would try to close that chamber so to speak and go on and start the other things that I was working on. If I didn’t then your life can be consumed by that and you can get in the fetal position and just give up. So, I would put it in chambers is the best way I can say it, sort of like “time locks” to go work on the next thing. The other thing I did was reaching out to people who also went through adversity in their career, and I’m talking about people maybe in their 60’s and 70’s and I know had been through serious cycles. Quite frankly, when I talked to them Dan I found out they not only went through it but they went through it at a way bigger level than I had. So, I thought “this is bad”.
Dan: So, these guys were thinking “oh I’ve been through that before”?
Chris: Yeah, not only that but they were thinking “that’s nothing. What are you talking about? You have that many? Oh, that’s nothing”. I was thinking “you’ve got to be kidding me”. So, it not only helped me get through that while others were saying “look, it is what it is. You’re going through this and here are some thoughts for you”. So, I just reached out to mentors and that was key to getting through that.
Dan: Now, isn’t the way you invested before 2008 the same way that most people were taught to invest in real estate, right? You know you get some real estate, you get a tenant, you get a mortgage, maybe you break even or have a slight positive cash flow. That’s what everybody, usually when I think about real estate investing was doing. How does your approach change after 2008?
Chris: Yeah, you’re right. You hit it on the head. The standard is to go to a bank or a private lender. Guess what? Their signing personally on that, and that’s what I should have said in the debacle. All that stuff I was on personally. So yes, they are taught to do that. They are taught to a bank, or reach out to private lenders and you are on the hook personally. There are no safeguards there. So, what we teach now is buying on terms means what? It means you are never going to take out a bank loan, in my model you’re not going to go “begging for money” from private investors. That’s not my model. You are not going to put your family, or yourself on that line. What does all that mean? Does that mean you need credit to do what I do? No, it means you don’t need credit either. So, you’re not worried about all that stuff out there and so when I put my head on the pillow at night now I don’t have all that stuff to worry about.
Dan: For someone who is not familiar with where’s the investors now, Chris this sounds too good to be true. Walk me through how this works?
Chris: Okay, so we buy homes or properties, primarily singles but we are not limited to that. We do it three different ways Dan just to keep it simple. One is owner financing, another is lease purchase, lets stick with those two first. So, on an owner financing deal you’re going to say the same thing when I say this one but it means primarily that the home is debt free. I call you and you’re a seller and there’s not debt on your home. I’m going to probably pay you market value Dan, but I’m going to do that by making monthly principal payments. PRINCIPAL payments, not one penny of interest, principal payments to you monthly until such time we agree on. That could be 48 months, 60 months, whatever it is and then you’re going to receive the balance on a balloon payment. So, think of that, they are getting top dollar, and I’m paying monthly principal payments. I’m getting a huge benefit from that and if the market evens dips against that because I’m hedging against it because I’m paying down principal only. The punchline is we don’t put any money down, on a rare occasion we put somewhere between one hundred and a couple thousand dollars, but that would be rare. So, that’s the owner financing realm.
Dan: So, with the owner financing now, multiple questions just formed. So, let’s just assume a baby boomer is retired and they pay of their home, right? Why couldn’t they just list the property with a real estate agent? Why do they need to sell it this way?
Chris: Great question, so a couple things come to mind. One is, sometimes they want for the very reason you said, they want all the money rightfully so. In the market right now, I’m going to use some very broad numbers to make it easier for the listeners but the market right now in many places, 80% of the people, especially the higher end cannot get financing. So here you have this baby boomer, they have a gorgeous 10-acre estate in Pennsylvania come to mind we just did a little while ago. He was leaving for Texas and he wanted this thing sold, but he wanted his price and he was not getting it on the open market. We gave it to him, closed within a week and we have been making payments ever since and he couldn’t be happier. Also, you bring up something interesting when you say retirement as well, the other thing they like is that they are getting all the money but they are not having to stop and claim any interest income which can be more tedious than anything on some of these deals. So, it’s very important that people know that this isn’t just for people that are hurting. These people were debt free, they are retiring and they want to maximize their cash and they do that with us.
Dan: They want to sell that and maybe travel the world or something right?
Chris: Yeah, and I get that.
Dan: What about a lease option?
Chris: Okay, so a lease option is interesting because it can apply to so many deals but let me just give you an example. So, you have a home and it can be debt free, no equity, or it can be leveraged. You have a home that’s not selling and it’s on the market for 300 thousand dollars. You’ve tried several realtors and/or by yourself and it’s just not happening. Let’s say you owe 275 thousand dollars on it, by the time you pay a realtor after 300 thousand dollars, you pay a realtor, you pay a transfer tax if you’re in a state that has that, then you’re left with a break even or sometimes people must go into their pockets to close their own home. So, we come in with a lease purchase and say “alright, don’t do that. We will give you the 300 thousand dollars if we have enough time, our term must be long enough. But we will give you the 300 thousand dollars, but here is how we are going to do it. We are going to take over your mortgage payments on the 275 thousand dollars, we are going to pay that every month for you. We are going to give you your 25 thousand dollars in equity that you wouldn’t get is you sold it commercially, we are going to give you that at the end of the term of the lease. You are locking in your 25 thousand dollars, that’s all you must do. We will do a lease purchase, you’re done, no more worry, go do your thing and we will get you your 25 thousand dollars at the end of this term”.
Dan: I see, so in a way it almost feels like you’re not just investing but you’re almost just finding out people’s problems and solving problems for them through real estate.
Chris: You said it, you actually got it. Yeah, I tell a lot of our students when I do webinars on this. You are a problem solver, you’re exactly right. You know, you go to a doctor, an accountant, an auto body shop, why? To solve a problem and that’s what we do. We shouldn’t say problem though, we are solving whatever their challenge is because a challenge for someone who is debt free is “look, I’ve got all this money and I want to maximize it”. That’s not really a problem, that’s a good thing.
Dan: Yes, now what about in lease option. What kind of market is necessary? Is it an up market or a down market? When would it work and when would it not work?
Chris: Okay great question. So, does it work better in a downward or flat market? Of course, you have a lot more sellers that need your help. However, most areas in the country right now are in a pretty good market and stuff is selling. Well guess what? When stuff is selling there are also what they call “expired listings” in every market, listings that aren’t selling for whatever reason. So, it’s just hard to find Dan, so you must call three people instead of two, or five people instead of three. Yeah, you just have to work a little harder but you can always buy on terms. We buy four to ten properties around the country every single month, some of them in our own market with our own family team and some of them with partners and that won’t change, it just is how much work we have to do to get those.
Dan: Makes sense. Now, I know you teach a number of strategies as a strategy coach but what about finding these deals? Some people are saying “okay Chris, this sounds exciting. How do I go out and find these sellers?”.
Chris: Yeah, there are a bunch of different ways, ill name a few. One is clearly what I call the “expired listings” and for those who are not familiar with real estate these are just people who with a realtor on what is called the multiple listing service of some sort and it doesn’t sell so it shows up as expired. So, we have a service that takes all those and then we will broadcast a message right to their voicemail and the serious ones call back, now we have someone that wants to talk to us. The second way is, For Sale By Owners, these are people that are out there saying “I want to sell me home” and they are raising the flag. They typically need more time and that is why they think they can sell it on their own, that’s why they are doing it. Those are great leads you just have to wait it out and do some proper follow up. We don’t call those either Dan, we have some virtual assistants around the country who call on all of those for us, once they have someone that says they are interested then they write up all their information and they get it to us and now again, we are calling someone who wants to talk to us. Those are the two main ways, there are other mailings and things like that but those are the two main ways that we call leads.
Dan: I love that, because then the way you are approaching it is not just again a solo investor banging on the phone five hours a day, calling a bunch of people and all of that. No, even through a virtual assistant or a voice broadcast you using attraction marketing to sift and sort through all the people not qualified, and then people who raise their hand you can talk to. That’s very good, so how did you come up with that angle? Because that’s very different, I know a lot of investors and they don’t think like that.
Chris: Well, I can’t say I’ve invented it all. Everything you and I can possibly think of has probably been done unless we are Bill Gates or whatever. This stuff has been done. So, the answer is pieces from everyone, I’ve followed a number of different people and then the rest is kind of being in the trenches. I said we were a family company, well when I restructured everything it was me, and then it was myself and my son Nick, and then it my daughter Kayla the general manager, and my son in law. So, you learn every week, real estate is constantly changing so we are tweaking our systems.
Dan: Awesome, and I love how you work as a family. That’s actually very rare. What is it like working as a family?
Chris: We love it. The way I structure it, and it’s good to do it this way with family, it may be tough with other people, although I know that people have pulled it off. We all share in the revenue and the growth, so there is virtually no such thing as a salary or anything like that. It’s more like “hey we are here to do deals, we are here to do business” so as we do those here is your share. The second piece that comes the mind is the trustworthiness. Think about it, the business runs itself and you don’t have to throw 80 hours a week at this thing so they basically run 99% of our buying and selling entity now and there’s a huge level of trust obviously, I don’t have to worry about it.
Dan: I can also see that you’re teaching your kids about the work ethics and the values not just “oh Dad is making money with this” but you guys don’t do that. They fully understand the operation and what you do, and that’s awesome. You guys don’t have to be like “I’ll see you guys over Christmas, or once in a while” because you’re working together doing deals. That’s great.
Chris: You know we put it in buckets though Dan, I would say chambers. So, I’m in the office speaking to you now, we all live within a block or two of the office. We make a joke when we leave the office, because everybody is busy doing their thing that we might see each other across the street and say “hey, how was your day?” just totally separate.
Dan: That’s awesome! So, Chris, once the listeners use some attraction marketing and they bring in some leads and begin talking to some sellers…. It seems to me, and I believe that it’s the most important skills in real estate is negotiations, how do you approach these sellers? What do you say? Give me some examples.
Chris: Sure, So interesting next step. Let’s picture that the property information sheet come back from the Virtual assistant and it tells me on there that Dan is the seller, Dan is moving out of state, or Dan has someone that is ill, or whatever your motivation is, it’s on my sheet. So, there is no real script, well there is of course and our student learn those, but we have structured information sheets to flow nicely with conversations so when I call you back I’m just literally reviewing the information sheet, reviewing your motivation and then presenting a couple different options depending on what they tell me. So what do I mean by that? Let me give you an example. So, say someone is moving out of state and they have to be gone by two months from now, something urgent like that. They have a mortgage, its current they just want it taken care. So that’s some standard stuff and I’ll say “great, I’m going to send you some information on our company”. We have that all done and formed in the computer, and once you get that it’s going to pose some questions and based on that we are going to structure the best deal for you. That’s all we do.
Dan: That makes a lot of sense. Maybe Chris, also share with us an example of one of your top students. How much are they making? How many deals are they doing?
Chris: Sure. So yesterday we just got one and this just comes to mind since we have many. This gentleman is in Pennsylvania, he an engineer full time, trying to make that transition to real estate full time but even part time he is our top partner right now. He is kind of neck and neck with someone right now but he’s our top one. In the last year he has gotten eleven deals under contract, he’s closed on three of them already, he has eight more he’s working on and the rough total which he sent to our team, he has about $2.1 million in controlled property value there and $700,000 in profits. Now they are not all closed because these things have terms, so between 12 and 36 months. However, think about it he could stop working today, keep his job and over the next 36 months, let’s call it 48 months because some of them are longer terms, he has $700,000 coming back even with some hiccups. That’s not a bad deal.
Dan: Wow that’s amazing. AND it’s without the risk, without having to put everything on the line, right?
Dan: Now I’m also curious because I’m also an educator myself but I think people who are successful and they also want to teach. They have what you call a teacher’s heart right? Because you could do this just as a family and just do your own deal, but you have also chosen an educator path. What inspired you to do that?
Chris: Okay, fantastic question. I have always got a high, adrenaline rush helping someone else. Not just speaking or generally in the business but when you’re talking about this business the rush, the satisfaction to see someone else succeed. That gentleman we were talking about had no business experience in this field and then translating to the end result is rather amazing and it’s kind of what drives me. The other thing piece of that is because we are in the real estate industry is that it’s never the same, the business changes all the time. Quite frankly if I didn’t do that, I said this to someone the other day, because the buying and selling business as everyone will learn, it can be done in 5 to 15 hours a week if you do it right and you’ll make a healthy living and then some. So, I don’t know what else the heck I would do. I just enjoy helping others.
Dan: Yes, that definitely makes sense. Now also the way that you do coaching is “oh here is come videos and powerpoints”, no you actually go into the trenches, I know you have different programs but you help them, it’s almost like a joint venture partner. I think you even call your program a joint venture partner, that you’re helping them and working alongside with them, not just “hey here is a bunch of information, good luck”. Your approach is very different, talk to us a little about that.
Chris: Yeah sure, so let’s use the whole process we were talking about earlier. So, lets picture them doing that, not me. So, they get the information sheet and they have to call the seller and they are brand new, what are they going to do? So now they get in, and they are new and they go “uh oh, now I have to talk to someone, now I have to talk to the seller”. Okay so what I do in the beginning is yes, we are hands on. We are in the trenches every day so we know what they are going through. What I do, if they are brand new, you show me the first four property information sheets, this is just an example, I’m going to call two of them for you by myself. I’m going to take the call and I’m going to send it to you. Also, you’re going to do two, and then you’re going to send them to me and I’m going to help critique your call and you’re going to get better, and better and finally you’ll be at a point like the gentleman we were talking about earlier that just bangs these out, I don’t hear from him anymore. When does he need me now? Well he needs me when it’s a more “how do you structure this now?” or “the seller would like to talk to you Chris as my senior partner”. Just today I spent forty minutes on the phone with that very guy and his seller. So are in the trenches with these people, helping them close the structured deal, helping them work with a buyer. Every aspect of it we are literally helping them through it as a true partner would.
Dan: Yeah, because I could see for anyone who is new of course not knowing what to say or what to do. It could be overwhelming and I think doing that first deal is extremely critical, because it builds their confidence. If you can hand hold them a bit, almost an implementation program, I won’t just call it coaching program. An implementation program and now they can experience success faster versus a lot of real estate educators do a two day, three-day training. That’s great, but you know a lot of people go home and they don’t do anything because their scared, life gets in the way and they don’t do anything.
Chris: I agree 100%, the other thing is maybe we are going to bring this up anyways. But the other piece of that is I get criticized by some educators because in my book and just by how I coach and teach in videos, I want to tell them that they didn’t just leave a seminar and everything is rosy. You’re going to have some speed bumps, here are the speed bumps, and there is a chapter that says, “what can go wrong?”. It’s not all fluff, right?
Dan: Yeah, and usually everyone talks about what happens if everything goes right? But we have to talk about what goes wrong. I always believe that the key to business success is to avoid bad assumptions. I live by that and on my desk, I have three questions, what don’t I see? What don’t I know? What could go wrong?
Chris: I love it.
Dan: So, I look at that note every day, asking myself those questions. If I can prevent all those things, business is fine. As you know entrepreneurs are naturally optimistic and say, “everything is going to be fine, everything is going to work out at exactly the time you want”. No, no its never like that right?
Chris: Oh, I agree, I agree. It’s kind of like the ’08 thing, right? It’s so super easy to write a goal and be positive about it but when you get that major curve ball that’s when the tests come.
Dan: Yeah, 100%. So, what about when earlier this year you published your first book Real Estate on Your Own Terms. Talk to me about that. What inspired you to write that book?
Chris: You know I’ve always, since being in real estate since the early 90’s I just wanted to write one. I just had no idea when or how, and when the 2008 turn came if you asked me then I would have told you I wasn’t going to do it but once I got through that re-engineering of the business I started to really scale it and I started to run into people that also dealt with 2008. Sure, they said that they got patted on the back and people said to them “it’s okay a lot of people went through it”, and I thought “why don’t we get the word out there on what happened because A: they can relate. And B: what can they do to not be back there again?” So coincidentally a bunch of my partners and students had experienced ’08 and they are confident that they are back on the track where as before they just felt beat up. So, the whole idea behind the book was “here is what we went through, you’re okay if you went through it, and here’s not to re-engineer it”. Now, if you never went through it then here’s how to avoid it. The market is going to change again.
Dan: Also, I love the title itself. Real Estate on Your Own Terms, it’s not just “oh how to make money in real estate”, there are thousands and thousands of books on that Right? But its Real Estate on your own terms, I read through the book as well and I love the idea that this is just a business, you are using this vehicle to create wealth and create a lifestyle for your family. You want to do it without the risk, and without credit. Quite frankly maybe people don’t have a lot of that either so I think it’s awesome.
Chris: Yeah and I think the couple words that you said that made me think about is this. The whole idea of “on your own terms” is designing that lifestyle that you want and deserve. Someone on the radio asked me the other day “what about people who have a job?” and I just don’t understand why they don’t want to make the transition? Why go to someone’s schedule? Why go to someone’s vacation time? Don’t. Design your own lifestyle, there are many out there but this is a good one.
Dan: Yes, I’m also curious what habits you believe helped you make you successful?
Chris: You know the word discipline comes to mind Dan, I know it’s kind of a general one but I used to tell the kids when they were young “if you have discipline, forget real estate for a second, if you have discipline you can pretty much be successful in a lot of businesses” and I don’t care if its opening up the corner hot dog stand. If you have discipline and you have the right mentor to follow, those are the things that would answer your question. Discipline, 100% to stay on task as long as someone told you, which my mentors did and do to this day. As long as your mentors told you how to get there, then it’s just implementation, to use a word you used earlier. So, the discipline was huge and not letting people, comments, or things bother you. Because I could have been in the hole a long time thinking about what people did, said, and thought during the 2008 debacle right? So, you have to have the alligator skin, you have to put it in the chamber because those people are not paying your bills, they have nothing to do with it. The discipline, putting things in the chamber, and having thick skin are some things that come to mind. Of course, being goal driven. So, if you have that big enough carrot out there, usually with a mentor you can find out how to get there.
Dan: The “why” has to be there as well first. The “why” has to be strong enough, the “how” will come later, you get the “how” anyway. If you read the book, you watch the training, you do whatever it takes to find the “how”. After you wrote the book, I know you hit amazon best seller, how did that impact your real estate career?
Chris: You know it’s just different, for a lot of reason. When you talk about buying and selling, customers come in the office and talk about seeing the book and of course some say it brings a whole new level of credibility. Also, when a client is looking on the internet, as you said earlier, there is all kinds of stuff on there, some of it is good, some of it is bad. However, when they see there is a book there and “oh wow, it’s a bestseller”, it gets rid of a lot of layers and you kind of jump to the head of the class. You just elevate yourself a whole bunch more, so it’s an indirect and a direct benefit. So, besides having a blast doing it and having good intent, all that other stuff was a good surprise for me. To have all these people, I guess the word is attract attracted to me, because of it. Does that make sense?
Dan: Yeah it does. Ill share a quick story with you. People ask me “why do you want to write a book?”. I say “Well if you look at the AUTHORITY, what are the first six letters?” Its Author. Sometimes in day to day conversations it’s just “oh he’s the guy who wrote the book” right? “He’s the dentist that wrote the book, he’s the makeup person that wrote the book”, whatever right? In a society, when someone has written a book, it positions them as the expert in what they do. Ill share a quick story with you. Now, I’ve written like thirteen of them now and people keep asking why I keep writing books. Well, I learned a lesson early on in my early twenty’s I was a copywriter, I was trying to get copy-writing clients and I was trying to pick up the phone and cold call. It was impossible, getting rejection after rejection and finally I said, “there must be a better way, this just does not work”.
Finally, I thought to myself “you know what, maybe you should write a book”. This was my early twenty’s, right? So, I wrote a book on how to maximize your profits in minimum time, it was about copy-writing and how to write copy writes. It’s so bad, the cover was done wrong, it was supposed to be a nice cover and it turned out to be like a brownish crappy color, right? Its full of typos, anyway if anyone listening to this finds that book then let me know and I’ll buy it back from you because I want to burn it, I don’t want it out there anymore. So, I printed maybe a couple hundred copies, and one time I was flying to the States for a business meeting and sitting next to me is a gentleman.
We started talking about what he does, and what I do, just chatting. He was interested in marketing and he asked me for my business card, I didn’t have a business card but I reached in my briefcase and I had a book. I handed him the book, and you could see his look, his jaw just dropped to the ground and said, “you’ve got a book!?” I said “yeah, read the book”. We continued talking and before the plane landed he wrote me a check for ten thousand dollars for a marketing copy-writing gig. Now, would that have had happened if I just gave him a business card? I don’t think so. What was amazing Chris is that he has not even read the book. What people don’t understand is, I’ve read a statistic somewhere on Amazon that people who buy books, something like ninety percent of them don’t read past the first chapter. They just like the fact that you have a book, so from then on, I never had a business card again.
Chris: Yeah if he wrote the book then he must be the man. I’ll write him a check.
Dan: Yeah that’s exactly it, it’s a quick decision-making process for people or there is the off chance he was looking for a marketing, copy-writing and then “oh you wrote a book, you’re the guy”. Boom, it’s a done deal. So, talk to me what it was like writing your first book.
Chris: Well, I didn’t know what to expect. Saying that it was a lot of work would be an understatement, the project took a year if that is any indication, it was July to July. I remember like it was yesterday, it was an awful lot of work Dan, from thinking of content to editing, it can be a daunting task to say the least.
Dan: How much time writing the book did you take? Was it a couple hours a week? Did you block out time every day? What was your process?
Chris: I did because of what I said earlier, I have to time block because I just have too many balls in the air and I enjoy that. So, if I think back because it was spotty an hour here and an hour there but I would think that it would have to of been an hour or two a week not counting thinking time.
Dan: Wow, and that still took one year, right?
Chris: Yeah almost exactly!
Dan: Did you spend a lot of money? Did you publish this yourself or did you publish it with a publisher?
Chris: No, I wouldn’t know where to go with that. No, I spent a good amount of money if you want to know the amount I’m happy to share.
Dan: Yeah so probably tens of thousands of dollars assuming printing, and doing all of that.
Chris: Well yeah, all said and done multiples of that, yes.
Dan: So, after that, the book is released and because you have an audience on your podcast and you push it on amazon, it became number one?
Chris: We did, we were number one the first weekend it launched in three different categories. It hit real fast.
Dan: Maybe then for your students, if they are professional investors they may be listening to this, they may say “hey Chris this sounds great, do I need a book? Why should I write a book?” What would you say to them?
Chris: Well, no one needs it right? But here’s why I think someone should go through it and why I think they should have it. I don’t know what business everyone is in but think about this, every business that we are all in has a return of investment for your efforts and every business we are in has a sized check for that. So, I can tell you, I don’t care if you sell popcorn on the side of the street, or if you sell real estate, or do copy-writing, it doesn’t matter. I can tell you that you will get more clients, business, and profits by having that for the simple reason that you said earlier. There is no doubt, I don’t think anyone could throw a business at me where I would say “well that won’t work with that business”. No, it would work unbelievable with that business, so the short answer is whatever you price tag is now, whatever you’re doing now, how about you take that up two, or three, or four times by saying “here is my business card in this case, or here is my book” because I know you can go to the bank with that advice. I strongly believe in that since going through it.
Dan: Yeah and sometimes I think people feel like “oh I need to have thirty years, forty years” when it comes to writing a book. They think “I need to wait until I’m sixty years old, with my lifetime experience I’m going to write a book” or maybe “my story is not compelling enough to put in a book”. It is not true, it is not true. In my early twenty’s I wrote my first one and what the hell did I know back then right? But I knew that it was a powerful marketing tool and that’s why I pretty much released a new book every year in various sectors, because of that. It opens so many doors, speaking opportunities, deal flow, in terms of P.R opportunities. So many thing, when people are still think about it they will be like “damn, Dan just released a new book every damn year, what the heck?”. Eventually you will have so many, it’s one thing to have just one, but to have more than one its truly amazing. I can’t even emphasize how powerful that is. So, don’t think that “oh you’re not good enough”, or you have to wait, you don’t have to wait. You have a story that you can share, and now there are so many ways you can get a book out there. Also, with Amazon it’s much easier now. Back then, I was trying to pitch to a traditional publisher, writing proposals and all that, it’s very very hard.
Chris: Yeah, here is my thought while you were talking. If you look at whatever it is you do, and I can guarantee you that your 1% better than someone, maybe 10%, maybe 100%, but if you’re 1% better than someone, even a student of mine in six months, if they study and follow the curriculum for lack of a better word, they know a whole bunch more than a whole bunch of people. So, they can go ahead and put that in words right now and you’d be helping so many people.
Dan: Yeah, so I’ll give you a perfect example. I wrote another marketing book and Kala read the book, that was almost four or five years ago. At the time, she was just a waitress, working a dead-end job and she read the book and got so inspired, went online and started an amazon publishing business. Then almost a year ago she got in touch with me and we talked and she said “hey Dan, your book inspired me so much, I’m doing this kindle publishing business and I want to do a bit of coaching. I want to help because your book inspired me to do that”. I said “great, let’s think about it” and all this time we have actually pondered up and helped her reengineer her business with the kindle publishing, plus her own coaching program. Now she’s doing about $40,000 a month through kindle, plus her coaching program we are going to take her up to $100,000 a month. Think about that kind of relationship if she did not read my book? I don’t think so. A book is in people’s house, in people’s office, it’s in their hands, they are holding it, they are thinking about it, they are putting it on their shelf, pick it back up off the shelf, they are reading it. A business card, you get lost. But this is the kind of thing where you make an impact on someone’s life. Think, I didn’t monetize the opportunity three of four years later who would have known right? And when you have so many books out there, people can read that and you don’t know what will come out of it. That’s what I want to say.
Chris: Yeah, timing for people is a good point. The book sitting around has serious shelf life and I could have your book on my shelf and six months from now, and I do this, I re-pick up a book cause your life changes and you’re in a different mental state and it just has such longevity.
Dan: Chris, what to do you see in the real estate industry? the trend? what’s happening in the economy? What’s your take?
Chris: You know if I knew that Dan, you and I would be on a beach somewhere not having to worry about another penny. Aside from that, I think right now in most markets, I’m in about 21 different states right now will different partners so I see a lot. Right now, I think its flat to slightly turning up, and of course when you get into the hotter cities, and the pockets where its booming, but that’s always going to be the case. I also have partners that are in markets that have hundreds and thousands of expired listings so it’s hard to say. I never pretend to know the secret, crystal ball on that one.
Dan: But you don’t need to with your strategies, it doesn’t really matter because in an up market or a down market, your solving problems. It’s almost you are solving individual problems, not so much the big overall problem, of course we have to look at the real estate trend.
Chris: Yeah, you’re precisely right, that’s why I kind of answer it that way. I know people in the multi-family business for example, and this really shocked people. They teach when to buy, when to sell trends because they are doing a lot of the bank loans, a lot of the conventional stuff. Where as ours is independent of the market. It’s just, I say they might get more leads in this particular market than this one over here but you’re still going to do business.
Dan: That makes sense. Now for someone who wants to invest in real estate, realistically how much time, let’s say they have a job that they work in, how much time do they realistically need to invest to get this thing going?
Chris: Okay great, so at the very beginning its different than six months in because at the very beginning if someone came to me Dan and they said “look, I’ve got forty hours tell me what to do”. I’d say, “Dan I can’t keep you busy for forty hours, I really truly can’t”. So, when you start you have to find five to seven hours a week, and when I say if you’re serious, if your goals are in the healthy six figure range per year. However, when they get to the six-month point, I’ll use that gentleman that we talked about earlier. Now he is thinking “okay I want to do this full time, I see the light, I see how I can scale this”, so the short answer is five, or six, or seven at the beginning; then once you get this going if you want to stay part time you’re going to want to find ten to twelve solid hours, and you can run this business doing two deals a month. I mean that is a healthy pay out still.
Dan: Yeah, I mean you talk about your top student Don. He’s had just a handful of deals, eleven? Nine?
Chris: He’s got eleven total, yep.
Dan: Eleven is not like thirty, forty fifty deals. It’s like one deal a month, a couple deals a month, that’s a significant amount of profit.
Chris: Yeah because we teach three pay days in my book on each deal. Actually, coming up I’m going to teach a fourth but let’s use three. The average of three I may have alluded it to earlier, is somewhere in the sixty-five to eighty-five grand range. Per three days, per deal, that’s pretty significant.
Dan: Now, what about people who have some experience, maybe they own some properties, maybe they have been investing the traditional way, could this just kind of add on or add more tools on their tool belt? What would you suggest? Should they switch to this? Or should they just add on to it?
Chris: Either is fine but what you bring up is huge. I have plenty of people that come to me, they are just property holders like I was before, buy and hold. I have rehabbers who come in and say, “man that’s a lot of work plus there’s TV shows and its very competitive so I want to add this profit center” or they come and say “look wholesale is like a job, I want to do this. It seems like you’re creating some wealth here”. So yeah, they can add it as an additional profit center, and they should. Then they will make the business decision, and then they are two different things, or three, or four different profit centers. If ones overshadowing the other than they will make their own switch. That’s something they can decide, or if they are just in the buy and hold, they are a passive investor; Certainly, to get three pay days going is a much different model. I should have said what that means. Three pay days is, I do a deal with you Dan, and I have a pay day today, I have a pay day monthly, and then I have a pay day at the end of the term. Super important because cash flow is king. I know it’s an overstated saying as well but its key.
Dan: Maybe give me an example, how does that work? So pay day today, how do you get paid today? How do you get paid monthly? How do you get paid at the end of term?
Chris: Okay, so let’s go back to the $300,000 property you and I talked about earlier with the lease purchase. So, I’m going to sell all of these properties how? I’m going to sell them all on a rent to own program, who is this dealing with? This is dealing with the 80% of the market that I told you can’t go out and get a loan today. It’s not all negative, a lot of its credit and cash is needed. But it’s not always, a lot if it on the higher end deals, and I’ll give you some numbers, I’m a self-employed person and I didn’t realize in the States that I can no longer walk in the bank and can get what’s called a state income loan anymore. I can but its super expensive, so I have to show two years of valid qualified income. Two years. So, they come to us and say “look, I went to the bank and I’ve got $30,000 on that $300,000 house, 10%. I’ve got this down payment and I’m ready to do it but the bank told me I have to wait two years”. So, I put them in the home, they pay monthly, they put down the $30,000 down, that’s in my pocket. That’s a non-refundable down payment, now they pay monthly where I get my second pay day. So, it might be $300, $400, $500 dollars, and then on the backend, I’m getting a big payday because I marked the price up from what I put on the agreement form number one, but then number two something we didn’t talk about. As I’m paying down that seller’s loan, I pick up all that principal paydown benefit at the end, so there’s three big pay days.
Dan: So, let’s say see if I understand this correctly. So, once you do a lease option, you sub-leased it to somebody else?
Chris: Yeah, it’s a rent to own but basically yes. That’s the legal term but we are sub-leasing it to someone else and that’s our right to do that.
Dan: Okay, so here’s a question. So, for someone though, you have your spread in the monthly, why are they paying above market rent? Why would they want to rent this house instead of something else?
Chris: That’s a good question, but they are typically not paying above market rent. I’m not going to take on that mortgage payment or that owner financing deal, and this is what I tell the sellers openly, how we make money. So, if you tell me “alright Chris, yeah ill sell you my homeowner financing, I want $1500 a month”. I say “Well Dan, $1500 is kind of what I can go get on the open market, I need to create a spread, this is not a non-profit. So, I need to be paying you rent on $1000 or $1100 for example”.
Dan: So, then you can go and you can charge the spread. So, let’s say you charge then $1500. Also, here’s the thing. So, it’s a little bit different mentality. Let’s say I have a property, I find a tenant and I’m the landlord, they come in, they lease it, they stay, and there’s something wrong with the toilet and they call me, right? That type of relationship is very tedious work and I think anyone who has been a landlord knows what I’m talking about.
Chris: I know it too well.
Dan: Now, in this way it almost feels a little bit different. The tenant that you sub-lease to.
Chris: It’s a lot different. This is a huge thing that you bring up. So, the tenant/buyer is treated, this is the conversation in the contracts that you sign. They are treated, behave like, and pay bills like a buyer. So, what does that mean? That means when the toilets clogged, they fix it. That means, when the refrigerator goes they buy a new one. They don’t call me, I don’t want to know about it. So, it’s a very different relationship. Here’s another way it’s different, what I said earlier about putting up a $30,000 payment. They are going to put up between 3-20% always, well when you put up a down payment, you are acting, behaving like a buyer. You have skin in the game, there is risk there.
Dan: Not, just a renter who says, “oh I pay a couple grand a month or whatever and I trash the place” right?
Chris: Yeah, they say “who cares, we will move on to the next”. No, not even close.
Dan: So, they are looking to actually buy a home, but they just can qualify in terms of getting a loan.
Dan: So basically, you have solved a problem for the seller, you’ve solved a problem for the buyer who can’t get a traditional loan but they do want to own a home in some creative way. You’re kind of the middle person, the entrepreneur in between to solve the problems and put the deal together, and put these win-win-win situations together. You make money, sellers challenge is gone, and you’ve helped this person who can qualify to get a loan get in a home.
Chris: Yeah, and you’ve hit it on the head. My son said this a couple years ago when he came on board with me, it was actually three years ago now. He was a realtor at that time and he’s since retired his license, but he said to me “what a difference, what a healthy environment because of what you do”. He said, “it’s a win-win-win, you don’t have whining, you don’t have complaining, it’s a win-win-win”.
Dan: Yeah because a lot of people in real estate, even if you’re buying wholesale. You’re trying to get the deal at a huge discount, you’re twisting peoples arm, you’re trying to low ball them, right? Then you’re arguing back and, forth right? The rehab of the house is the same thing because you’re dealing with construction and renovation and all of this stuff. It feels that this so different and you are more using your intelligence and creative thinking to solve problems, create win-win and everybody is happy. Nobody feels like “oh you’re taking advantage of my home” and “you’re trying to grab money from me” and that kind of stuff, right?
Chris: Right, I actually call that in my book the “master transaction engineer” meaning whatever they can throw at you so to speak, whatever your dealing with you have an answer, you have a pathway, you have an out, you have an exit.
Dan: That’s awesome, “the master transaction engineer”. I love it. It’s very very true that it depends on the pieces of the puzzle and you just put it together. The of course then they have to learn all the different ways to solve the problem, and of course you teach them all that. That’s amazing. It’s so different.
Chris: Yeah you tend to learn it Dan, again you know this. You tend to learn it when you do it right? So, when you’re doing deals with us you’re going through two or three and okay, you know that type. You learn it best by doing it.
Dan: That’s awesome. Now, Chris I always ask all my guest this question, and it’s a deep question. So, if you could time travel back to one of your start up days, or earlier days, and have a five-minute conversation with former self, to communicate any lessons you’ve acquired with intention of saving yourself some headaches. What would you tell yourself?
Chris: Okay, that’s definitely a deep one. Two things come to mind immediately. One is make sure you don’t just find a mentor that did what you want to do in life or business, but follow 100%. In other words, put the blinders on, don’t look left, don’t look right, don’t look back, follow them 100%. I can’t stress that enough because I think Tony Robbins says it, there’s someone up there that’s done what you want to do successfully. Second is, I guess this came from the 2008 debacle but it holds true, I think with everyone. Its live well, not a little, well below your means because when markets turn, when catastrophe happens, when health things happen, and family, all of these things have happened to me. So, if you’re living below your means it’s a little burp, it’s not a big big deal and you get to make decisions and you get to invest properly, you get to grow your business properly. Why? Because you’re never, never strapped. That’s what came out of the 2008 debacle and it helped dramatically.
Dan: I love it. So, live conservatively, and well below your means. Also, I think finding a mentor, someone that you trust. I also believe that sometimes, you don’t just find your mentor but your mentor finds you as well. The right person, versus a lot of people they kind of jump ship. You know they learn a little bit from this guy, a little bit from this guy, a little from him. We can all learn from a lot of people but I think there should be one role model that you follow, right?
Chris: Yeah you know what, we have a mutual friend Joe Vitale right? I ran into Joe recently and something came up about mentors and he said “Chris, I don’t follow people, I just find someone or they find me and I immerse myself. That’s my life for a while”. That’s why he’s good at what he does. Find somebody that you can trust and then once you’ve done that, immerse yourself, don’t just dip your toe in and go find and someone else.
Dan: That’s right, I think Tony Robbins said it, don’t dabble, you want to master. Right? You don’t want to be a dabbler. Fantastic. Chris, maybe you want to share any final thoughts and maybe your contact information so if our listeners want to find out more about your coaching programs, or they want to get in touch with you and find out how? Or if they want to get a book, on Amazon obviously.
Chris: Yeah, I appreciate that. So, they can go to www.smartrealestatecoach.com. The podcast that you alluded to a few times is www.smartrealestatecoachpodcast.com. That’s the best way because on the www.smartrealesatecoach.com and we will get in touch with you. Of course, go on Amazon and get the book, I’d love to hear your feedback.
Dan: Okay perfect. Chris, thank you so much for inspiring us today with your story and the principal ways of investing. I love it, it’s so different and out of the box so I think that our listeners go a lot of value out of it. So, thanks so much. I appreciate it.
Chris: Thanks for having me on. It’s been a pleasure.