Are you tired of the traditional real estate investment routes that seem to require tremendous upfront capital and extensive personal liability? What if there was a way to build wealth through real estate without relying on banks or tying up massive amounts of your own money?
That’s exactly what real estate veteran, Chris Prefontaine has mastered over his 30+ year career. In the latest episode of the Passive Investing from Left Field podcast, with host, Jim Pfeifer, Chris pulls back the curtain on his innovative “creative real estate” strategies that have allowed him to thrive even through major market downturns like 2008.
Chris’s real estate journey began in an unconventional way – by building homes on vacant subdivision lots entirely through owner financing terms. With no bank involvement, he was able to get homebuilding projects off the ground without any upfront cash simply by getting lot owners to agree to be paid later once the homes sold.
“I was naive enough in my 20s to ask vendors and landowners to wait until the house was built and sold and everybody got paid,” Chris chuckles. “And it worked!”
While that allowed him to get his start, Chris’ approach fundamentally shifted after the 2008 real estate crash decimated many of his traditionally financed investment properties that had bank loans with personal guarantees attached.
“The biggest lesson was the personal guarantees,” Chris states. “I had about 23 of those [personally guaranteed loans]. The bank came looking for me.”
Determined to never repeat those mistakes, Chris rebuilt his business model from the ground up, this time steering completely clear of banks and personal liability through creative acquisition strategies.
Subject-To Deals
With this approach, Chris acquires properties while allowing the existing mortgages to remain in the original owner’s name. He simply pays the mortgage payments on their behalf and retains full ownership of the property without ever assuming the loan.
This method has been particularly lucrative recently due to the ability to acquire properties with extremely low locked-in interest rates from years ago. “We’re grabbing properties in every asset class with interest rates between 2.5% and 5.5% because they were the people that owned back when rates were good,” Chris explains. “I don’t know about you, but I don’t think we’re going to see those rates anytime soon.”
Owner Financing
For free-and-clear properties, Chris negotiates deals where sellers receive a negotiated price through an owner-financed mortgage. However, unlike traditional mortgages, these are frequently structured as principal-only payments.
“For single family homes, I do principal-only typically – 99% of the deals are principal-only with no interest,” Chris shares. “You never get any kind of arrangement like that from a bank.”
Then when he’s ready to exit a deal, he’s able to capture that paid-down principal as a lump sum in addition to any value appreciation.
Lease Purchases
For instances where owners won’t transfer the deed over, Chris utilizes lease purchase options to control properties and rent them out to tenants. The tenants’ rent payments are higher than the underlying lease payment, providing cash flow along the way.
These types of creative deals form the backbone of Chris’s innovative “Three Paydays” system that generates:
- Upfront cash from down payments
- Ongoing monthly cash flow
- A final cash payout from captured equity through principal paydown and price appreciation
Due to the structure of these deals, Chris is able to accumulate income streams and equity in real estate without any bank financing or personal investment beyond some modest closing costs.
“Any asset class can be done like that with owner financing,” Chris elaborates. “We don’t do deals unless it’s contingent upon filling the home [with a tenant].”
This creativity has allowed Chris to keep investing heavily through even the most turbulent times when most real estate investors are sitting on the sidelines.
“The world is full of people that do whatever it takes every single day, no matter how hard or how long, to accomplish all their goals. Or is it more full of people that kind of follow the herd?” Chris poses. “If we know that, then why don’t we make sure we’re going in the opposite direction most of the time?”
A prime example is the current higher interest rate environment, which has forced many prospective homebuyers to the sidelines, at least temporarily. But according to Chris, that’s created a booming opportunity for investors like him who utilize rent-to-own lease purchase structures.
With so many people priced out of mortgages for now, “They enter our rent-to-own program,” Chris says. “It gives them time to either save more money or increase their credit score to get a better loan, and it gives them that pathway to home ownership.”
Chris also keeps a close eye on the traditional commercial real estate asset classes like multifamily; self-storage in particular is one that he’s been bullish about for quite a while.
“I love self-storage to this day,” Chris raves. “It’s very unlikely at the small monthly rates that they charge…that you’re going to yank your stuff out of there unless something dramatic happens.”
Rather than acquiring self-storage facilities himself, Chris often utilizes owner financing strategies with existing “mom and pop” operators who can sell with favorable terms to fund their retirement.
For investors looking to adopt Chris’ wealth-building methods, he suggests first finding a real estate niche that resonates with you. Then locate a coach, mentor, or community aligned with your values and on a path you wish to follow.
Lastly, and perhaps most crucially, Chris recommends making a minimum 3-7 year commitment to master the strategies, as lasting success doesn’t happen overnight.
“Put the blinders on for 3-7 years, and that’s the hardest part,” Chris advises. “If you do that and you stick with that personal group…you’ll have a great experience.”
While Chris’ techniques may sound unconventional, the proof is in his results and decades of experience creating cash flow and equity without banks or excessive personal capital. If you’re interested in discovering how to break free from traditional real estate constraints, tune in to episode #159 of the Passive Investing from Left Field podcast. You’ll gain a wealth of insights into Chris’ innovative “creative real estate” system for building your investment portfolio and net worth through low-cost, passive income streams.
If you enjoyed Chris Prefontaine’s wisdom and stories, the Left Field Investors (LFI) community offers more great resources to build on your real estate investing education.
Become an LFI “Infielder” to access:
- Exclusive educational content and investor training programs
- Off-market investment opportunities from vetted sponsors
- A network of thousands of like-minded passive investors
- Virtual and in-person events to engage with experts
- The support to confidently build your investment portfolio
Whether you are new to passive real estate investing or a seasoned veteran, LFI provides the people, knowledge, and opportunities.
Join now to take your investing to the next level!
