JF1895: What Are The New Rules Of Real Estate Investing? With Nick Prefontaine
Nick grew up in the real estate world, but never really had much of an interest in it until reading Cash Flow Quadrant. Robert Kiyosaki is probably personally responsible for thousands of real estate investors finding their way into the business, usually thanks to Rich Dad Poor Dad though. Nick will walk us through how he buys on terms more often than not, which includes finding deals, and negotiating with the sellers to sell with some form of seller financing. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“I would do upwards of 50-60 doors per day” – Nick Prefontaine
Nick Prefontaine Real Estate Background:
- Part of the Smart Real Estate Coach family, expert in buying and selling on terms
- Specializes in working with lease purchasers to get them into a home and on the path to homeownership
- Recently authored The New Rules of Real Estate Investing
- Based in Newport, RI
- Say hi to him at https://www.smartrealestatecoach.com/
- Best Ever Book: Cash Flow Quadrant
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Nick Prefontaine. How are you doing, Nick?
Nick Prefontaine: I’m doing awesome, Joe. I’m excited to be here.
Joe Fairless: Well, I’m looking forward to our conversation as well. A little bit about Nick – he is part of the Smart Real Estate Coach family; he’s an expert in buying and selling on terms. He specializes in working with lease purchasers to get them into a home and onto the path of home ownership. Recently authored “The new rules of real estate investing.” With that being said, Nick, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Nick Prefontaine: Sure. I will start off by just saying my story of how I’ve gotten interested in real estate, and that will give a little bit more insight to the listeners out there… It was back when I was about 14 or 15 – I would say 15 – at that point I got turned on to a certain book. It was Robert Kiyosaki “Cashflow Quadrant.” I can remember that like it was yesterday, reading that for the first time.
I grew up in real estate, but that was really my first interest in it on my own, picking up that book and going through it, and just seeing what was possible. That was at that time – when I was 15 years old – after my accident, and actually shortly after that I went to a seminar, Quick-Term Real Estate School I think it was called… And then what I started doing actually when I was only 16 years old was knocking of pre-foreclosure doors; in other words, people that have received a notice of default from the bank. I would go to these cities where there was high concentrations of those, and knock on their door, try to get them to set up a meeting with an investor on our team that could meet with them and see if we could end up buying their house and helping them out of their tough situation. So that was my first kind of experience into real estate.
Someone brought this up to me recently, they said “Wait a minute, so this is only two years after being in a snowboarding accident and recovering from that, having to learn how to walk, talk and eat again, you were going to some not-so-great areas and knocking on people’s door that either were a couple payments, all the way up to 10-12 payments behind on the mortgage?” And I never really thought about it that way. I kind of took a step back and was like “Wow, I didn’t really realize the significance of that”, but yeah, I guess that kind of was a big deal.
Joe Fairless: That you were 16 years old, knocking on these doors, snowboarding accident or no snowboarding accident, just as a 16-year-old, that’s impressive. That’s something that I’d say 99.99% of 16-year-olds do not do. In fact, I don’t remember interviewing someone in all my interviews who at 16 years old was doing that.
What type of responses did you get? Tell us about the bad ones first, just to paint a picture of what you were coming across on one extreme?
Nick Prefontaine: I was trying to be as efficient as possible. The way that I saw being as efficient as possible was to hit the areas — it didn’t really dawn on me at the time, but the areas where there was the most concentration of these were not so good areas, not so great cities. Well, I’m sure they’re lovely cities, but every city has a good and bad area like that.
Joe Fairless: Sure.
Nick Prefontaine: So it really didn’t strike me at the time as a bad idea. I was just thinking “I can hit the most amount of doors in a day.” So that’s what I did. I would do upwards of 50-60 doors in a day, I think; that was at my peak, when I was doing the most.
Some of the bad situations – I remember first going out there before I really knew what I was doing, and not really having an approach, I guess you could say… Just knocking on doors and basically trying to rehearse or recite something that I’d memorized and planned out. I just remember I had a lot of resistance at that… But then my cousin and I actually flew out to California to learn from one of the top guys in the industry, that was having the most success with door-knocking the notice of default doors like this. And once I got that, I really learned that you have to relate to these people and kind of get them to drop their guard and to make them realize that you’re on their side. Then once I was doing that, my whole approach changed. I was seeing a lot of success after I did that.
But yeah, a lot of doors slammed into my face, for sure. There’s nothing like learning how to sell when someone’s in a very distressed situation, missing one, two, or sometimes even up to nine or ten payments, them opening the door and basically you having to sell yourself in 30 seconds to help them. So that was really a — I guess you could say school of hard knocks.
Joe Fairless: Yes, no pun intended. Whose seminar did you go to that helped you out?
Nick Prefontaine: Ron Legrand, Quick Start I think is what it was called at the time.
Joe Fairless: Okay. And you have 30 seconds — so let’s just do a scenario here. You just finished this seminar about 60 days ago, so you’ve implemented the approach that you learned, where you have to relate to people, you have to have them drop their guard, you’re on their side, your whole approach changed… So now walk us through what that looks like within the first seconds, when you knock on someone’s door.
Nick Prefontaine: Sure. Let’s just role-play and pretend it was you.
Joe Fairless: Okay.
Nick Prefontaine: Okay, so… Knock-knock.
Joe Fairless: I open. Yes…?
Nick Prefontaine: Okay. I would have a clipboard with me, and I would look down on my clipboard; you can’t see that, because we don’t have video here, but “I’m actually not 100% sure I have the right address… Could you confirm some information for me?” And I show you my clipboard. Once they saw their name on the notice of default list, you would open up to me, and tell me what happened, what they were doing to fix it, and how they were stuck… And basically the whole tone of the conversation would change at that point.
Joe Fairless: Okay, so all you would say is “Can you confirm some information for me?” and show them the clipboard, and that’s it?
Nick Prefontaine: Pretty much.
Joe Fairless: Pretty much. I know each situation is different, but yeah…
Nick Prefontaine: Exactly, that’s what started the dialogue. Before that, it was very stand-off-ish, and very “What are you doing here?”
Joe Fairless: So what would you do before?
Nick Prefontaine: I would go to them and say “Hi, I’m Nick Prefontaine, with blah-blah-blah. I noticed you had XYZ happen. I’m here to help you”, that kind of thing. Kind of talking at them, and not being on their side.
Joe Fairless: Right. Whereas this way they’re taking the lead on the conversation.
Nick Prefontaine: Yeah, exactly. They would open up to me and tell me what happened… “Oh, god, thanks for coming by…” and what they were doing to fix it. I’m not gonna say it was the majority of the time, but I was able to, in a lot of cases, set up meetings with investors of ours [unintelligible [00:08:52].21] years after that.
Joe Fairless: Thank you for sharing that. What a way to start your career… How old are you now?
Nick Prefontaine: I am 30. 14 years ago.
Joe Fairless: Okay, so that was 14 years ago. Thank you for that math. So it was 14 years ago. Have you been focused on selling on terms and lease options since them?
Nick Prefontaine: Yeah, it was actually interesting how my foray into this niche within real estate transpired from that. Shortly after that I was door-knocking, I remember, up until January of February of my senior year. I was 18, so I did that for a couple of years. But then after I stopped doing doors and I graduated – I graduated a few months after that – the next natural progression was to get my real estate license… Because I grew up in a family all real estate; when I was younger, my dad was a builder. Then after that he transitioned into being a realtor and then an investor… So that’s really all I knew, was real estate at that point. So I just figured it was the next natural progress. “Oh, I’m 18, I graduated high school…” I never really wanted to go to college. I just really enjoyed working, and especially my success with door-knocking these pre-foreclosure doors, or notice of default doors… And seeing success in that, I just wanted to work.
So I started studying a few months after graduating to get my real estate license, and then in March of 2008 — I know all the listeners are thinking “That’s a fantastic time for you to be a realtor, and to get your real estate license…” [laughter] But I really enjoyed it, just because I got my real estate license, and shortly after that, later in that year it transpired that the market crashed, and everything like that. But really, I never knew anything different. I never knew a good market or a bad market; that was just the market that I was dealing with. That was the current market at the time. So I learned how to make a living. I learned how to work with buyers, and list and sell houses during that financial climate.
I really wouldn’t change a thing from that, just because there was less competition because the market was not very good at that time… I didn’t know any different; I thought it was normal.
So I just went out there, and the majority of my peers and other realtors out there were complaining about how bad things were, and how good things used to be. I had no idea… So I actually look at that as a blessing.
Then fast-forward to — I would say probably six years, solidly, being able to survive and make a living… I was doing great. I was a successful realtor, I was supporting myself, that kind of thing. My dad started doing this terms investing. He, as I said, was always in real estate, but he started doing things like rent to own real estate, owner financing, that kind of thing; things on terms, non-conventional stuff that you don’t need to go out and sign personally and get bank loans for. He started doing that back in 2013.
Shortly after that, by the end of 2014, he was starting to get overwhelmed with — first it was the marketing of all the properties that he was getting under contract. Then shortly after that it was the buyers that he needed help with. And come to think of it – and this is actually kind of funny – I look back now, Joe, and I’m like… I kind of laugh about it, just because I was at first very like “No, no, no. I’m doing my own thing.” I think it was my ego getting in the way. “I’m doing my thing, I’m a realtor. I don’t need your help.” I was doing that, so I was hesitant even to start helping him with the marketing.
But then once I started helping him with the market, I just noticed how much of a need there was to help with the buyers. So I took that over for him, and I started working with his buyers. Then by December 2015, and just the very beginning of January 2016, I was waiting for my last commission check to come in. I just let my license go. Just because at that point, when I first started with him, my income as a realtor was 90% of my income, and working the marketing and some of the buyers was 5% or 10%. It wasn’t a lot. But then over the course of two years or a year and a half, my income had gone the opposite way, so I was making the majority with him, buying and selling houses, and helping the buyers and doing the marketing. So it was more hassle than it was worth to keep my real estate license, with all the expenses and all the courses that you have to go do every single year, for hours on end, for no reason.
Joe Fairless: Looking at what you have been doing in the current position that you’re in, what are some things that you’ve enhanced since you’ve been doing it? Just to learn more about how you’ve evolved your process. I ask that question because when you were 16, you went to a seminar because something wasn’t working. Then you fixed it, and then you were off and running. So I’m sure there was something that you weren’t doing as efficiently with your current position, that you’re doing more efficiently now.
Nick Prefontaine: I never thought about it phrased that particular way, but what happened – an interesting thing that happened, Joe… When I first started helping my dad with the buyers – with these deals you can get paid up to three different paydays out of the same deal. Just to keep it super-simple for your listeners, you’re making money on the first initial down payment from the buyers, and that usually ranges anywhere from 3% to 10%. Then you’re making money between what you have to pay either if you’re paying the seller directly, if it’s owner financing, or if there’s underlying debt, paying the mortgage; the spread between what you have to pay and what you charge your buyers – you’re making a little bit of a spread there monthly.
And then sometimes and often, the third payday comes at the very end. That’s when the buyer gets their own financing, because in the majority of the cases you are selling the home for more than you’re buying it for. So you get a big payday on the back-end of these deals, and you’re also benefitting from the principal paydown over the course of these terms.
When I first stepped into the position, helping my dad with the buyers, his average “payday one” (we call it), the buyer’s initial down payment, was $10,800. After I was working for a few years with it — and this isn’t just me; I’m not just trying to toot my own horn here. This a collaborative effort between everyone in the office… We were able to get the payday one doubled, from 10k to 20k. Now, the reason that we were able to do that is I wouldn’t just structure higher down payments and “Wow, you doubled the down payment” initially. That would be wonderful if I did, but that’s not 100% what I did. So yeah, I asked them a couple times if they could do a little bit more, and I had them stretch their down payment a little bit more initially… But then, more importantly, I structured payments with these buyers over the course of their term… Structured around if they got year-end bonuses, or anything like that, or if they were self-employed, if there was any other better times of the year for income, I would structure it based on their payment schedule, and they would contribute towards their down payment at that time.
So over the course of the lease, not only would they be paying for the regular monthly payment, but they would also be making a few times a year, in most cases, down payments towards their down payment.
Another good one, Joe, was tax returns. So if a buyer was getting 10k from tax returns, we would say “Okay, so how much of that 10k would you be comfortable with committing towards your down payment?” That got us basically a whole other stream of revenue. So that’s how we were able to double the down payment from 10k to 20k.
Joe Fairless: It changes the dynamic of the conversation with that type of leading question…
Nick Prefontaine: Yeah.
Joe Fairless: Taking a step back, what’s your best real estate investing advice ever?
Nick Prefontaine: My best real estate investing advice ever – look, Joe, how we buy and sell, it’s not a good fit for everyone… But I think if your listeners are at least intrigued by anything that I’ve said, Zach has said, or my dad has said – because I think they’ve both been on this show – what they can do to find out more information is head to our website, which is SmartRealEstateCoach.com, and they can get registered; we have a free webinar. It’s called the On Your Terms webinar. I think it’s like 60 minutes long, or a little bit over 60 minutes long… And if by the end of that it still seems like something they wanna dig into and learn more about, they’ll know how to take the next step and the action from there.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Nick Prefontaine: I’m ready for that.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Okay, best ever book you’ve recently read?
Nick Prefontaine: Best ever book that I’ve recently read – I’m just gonna go back to my favorite book, that started me down this whole journey, of energy and everything like that, which was Frequency by Penney Peirce.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Nick Prefontaine: A mistake I’ve made?
Joe Fairless: Yup.
Nick Prefontaine: Do we have time for that? I know this is the lightning round…
Joe Fairless: [laughs]
Nick Prefontaine: We’re still in the trenches every day, Joe, so we are constantly buying and selling houses and putting tenant-buyers in them… So I believe two of the tenant buyers that we actually installed in homes with a down payment last year – one of them is gone from the property, and the other one, we’re in the process of getting them out of the property. So we still are in the trenches, dealing with this stuff every day. And it’s not a bad thing when that happens, it’s just you have to learn how to pivot, and then you end up actually finding a better buyer, in most cases.
Joe Fairless: Best ever way you like to give back to the community?
Nick Prefontaine: Best ever way I like to give back to the community is — I mentioned I got in a snowboarding accident, and I had to learn how to walk, talk and eat again briefly. Once I was transported to the Franciscan Children’s Hospital after I got out of my coma – I was in the ICU – I was at the Franciscan Children’s Hospital, and after getting out of there (I was there for only a little less than two months; that’s where I had to regain everything) myself and my family, we created a family foundation, the Prefontaine Foundation, that 100% benefits the Franciscan Children’s Hospital, and shortly after that, just because there was so much work administratively that we didn’t anticipate, the foundation was dissolved into the hospital, and it’s now the Prefontaine Fund at the Franciscan Children’s Hospital. I still give back 10% of what I earn to them, and also I still participate with them in charity events that they have, and I’m always looking to support them and grow what they’re doing. They’re awesome over there.
Joe Fairless: Well, I really appreciate you sharing your story, the lessons you’ve learned, how you got started, talking about enhancing your effectiveness when you were door-knocking at the age of 16, to continuing to enhance effectiveness on an ongoing basis now with what you’re doing. I love that we went through the role-play with the door-knocking, and just talked through your approach after you enhanced your process, just to learn how you did that… Because – man, that’s a challenging thing to do, going door-to-door, knocking on strangers’ doors. I imagine that’s up there with public speaking in terms of fears that people have.
Nick, thank you for being on the show, sharing your story, talking about your best advice. I know you’ve got a book that you authored, “The new rules of real estate investing.” How can the Best Ever listeners get access to that?
Nick Prefontaine: They can actually get a free copy of that. And when I say “free”, I’m not talking about we’re gonna hit you up for shipping after you opt into it. It’s 100% free, shipping included. They can go to the website NewRulesForFree.com. I also did mention the webinar that they can check out, the On Your Terms webinar; I encourage anyone that’s even a little curious to check that out, because with that you actually do get a free strategy call with my brother-in-law Zach. That will really help you understand it a little bit more, I think.
Joe Fairless: Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Nick Prefontaine: Thanks, Joe. I loved it.