In the latest episode of the Raising Private Money podcast, Jay Conner interviews real estate veteran Chris Prefontaine. With over 30 years of experience and having raised over $5 million in private money, Chris shares invaluable insights into successfully navigating the challenging landscape of real estate. The conversation revolves around creative financing techniques, the 3 payday system, and the intricacies of structuring and selling properties. This blog post delves deeper into these topics to provide actionable tips for both novice and seasoned investors.

The Birth of Creative Financing After 2008

Chris Prefontaine initially started his career in single-family real estate. However, the 2008 financial crash prompted a shift in his approach. Moving away from traditional financing involving banks and heavy cash investments, Chris adopted a strategy that combined private money with creative financing techniques. These include owner financing, lease purchase, and "subject to" deals. This pivot allowed him to maximize his real estate deals while minimizing personal financial risk.

Attracting Private Money

Chris first tapped into the private money market by approaching professionals he trusted—his attorney and accountant. By demonstrating the advantages of earning a 7 to 8% return on investment through his 3 payday model, he gained their confidence and subsequent referrals. Trust plays a crucial role in this process; as Jay Conner points out, investors are ultimately investing in the individual, not just the opportunity.

Understanding the 3 Payday System

One of Chris's hallmark strategies is the 3 payday system, designed to create continuous income streams. This method ensures profits at different stages of the deal: principal payments, cash flow, and markup when selling on terms.

Breakdown of the 3 Paydays

1. Day 1: Upfront Payment
   - Earned at the outset of the deal, often during acquisition.
2. Continuing Cash Flow
   - Monthly income generated from lease payments or seller financing arrangements.
3. Final Lump Sum
   - Realized at the end of the term, either through selling the property or final payment from the buyer.

This approach contrasts sharply with traditional real estate models such as wholesaling and flipping, which are mostly transactional and offer income only upon the sale of each property.

Buying Real Estate on Terms

Chris emphasizes three primary rules when buying and selling real estate on terms: avoiding banks, requiring little to no money down, and creating 3 paydays.

Types of Creative Financing

1. Owner Financing
   - The seller acts as the bank, accepting monthly payments directly toward the principal.
2. Subject To Existing Loan
   - Acquiring a property subject to its existing mortgage while maintaining the original loan terms.
3. Lease Purchase
   - Lease agreements that provide the option to purchase at a future date, are often facilitated with little initial investment.

Benefits for Sellers

Sellers may agree to these creative terms for various reasons. Some are looking to solve financial problems or achieve goals that the conventional market cannot fulfill. For example, sellers with free and clear properties may be willing to accept monthly payments in return for a higher total payout over time.

Marketing and Selling Properties

Rather than relying on traditional multiple listing services (MLS), Chris uses a specialized company called Prosperity for marketing real estate deals. By focusing on direct referrals and automated processes, he can negotiate favorable terms with sellers and ensure a higher rate of return.

Identifying Ideal Prospects

One effective strategy for finding properties ideal for terms is targeting expired MLS listings. Approximately one-third of these listings are