124: Building a Rental Property Empire without Money with Chris Prefontaine

Chris Prefontaine has been in the real estate industry for many years as an agent, broker, landlord, flipper, developer, builder, and landlord. He was hit hard during the housing crash and decided he needed a new strategy to make money in real estate. His plan was to make a lot money without using any of his own money. He was able to do this by finding properties he could lease to own, which he could then turn around and lease himself. You can listen to how he made a lot of money in real estate, lost most of it, and came back to reinvent himself on this episode of the InvestFourMore Real Estate Podcast.

How did Chris get started in real estate?

Chris grew up in a family business where his dad bought land for an industrial gas business, built facilities for the business, sold the land, and leased back the building. Chris knew he wanted to be an entrepreneur but did not want to be in the family business. He started building houses without investing much of his own money. He would buy a lot with owner financing and get the builders to agree not to be paid until the house sold. This was back in the 1990s, and Chris admits he probably could not make this work in today’s real estate world. Eventually, Chris got his real estate license and started a real estate office as well.

How did Chris start and sell a real estate franchise?

He had started to develop subdivisions, but one subdivision did not do so well, and he decided to start his own office. Chris bought into a Realty Executives Franchise and was very hands on while training his agents how to sell houses. Chris had a full-time assistant, a buyer’s agent, and a runner on his team. Eventually, he was able to sell this team to a Coldwell Banker office and exit the real estate brokerage business.

How did Chris get involved in condo conversions after selling his real estate office?

After selling his real estate office, Chris worked with his wife on condo conversions and raising roofs on ranch homes. Chris would take 2- to 6-unit apartment buildings and convert them into condos which he could sell individually. He was selling many of these condos for $150,000 to $200,000 when the real estate market crashed. He could barely sell his condos for $50,000 after the crash and was left with a huge financial mess. Chris had to turn to short-selling many of his properties and even lost some to foreclosure. After the crash, he decided he had to invest in real estate a different way.

How does Chris use lease options to buy rentals with none of his own money?

After the housing market crash, Chris could not get loans for properties, and he did not want to. He had personally guaranteed many of his debts before the crash and decided he wanted to use other people’s money from now on. Chris started to buy houses both with and without equity by using lease options. He would take over the payments for homeowners under 3- to 9-year terms. At the end of the term, he would agree to pay the owners a lump sum. While he was making the homeowners’ payments, he would put a tenant in the property who would lease to own the property themselves. The tenant would make a down payment and pay rent that was higher than the mortgage payment, and the mortgage would get paid down over time as well.

Chris controls about 65 properties using this strategy and rarely—if ever—has to kick a tenant out before they buy the house. They are very strict about who they rent to and make sure they have the ability to eventually buy the house. Chris typically buys houses in the $200,000 to $500,000 price range.

How can you contact Chris and learn more about his investing?

Chris has a great podcast as well and recently wrote a book: Real Estate Investing on Your Terms. You can find it all on his website: Smart Real Estate Coach.