Aug. 1, 2022

Investing In Land with Mike Deaton

Investing In Land with Mike Deaton

 In 2016 Mike and his wife left their corporate jobs to dive into real estate. Two years later, they have launched two real estate businesses across multiple asset classes, combining tremendous cash-flowing financial returns with incredible tax benefits. They are active land investors as well as partners in more than 1,200 units of multifamily assets. Today Mike talks about investing in land!

Transcript

Josh
 Good day, fellow dealmakers. Welcome to the deal scout on today's show. We're going to talk about cashflow. We're going to talk about multi family multi-family property, syndication, operations, all sorts of cool stuff, man. You would think that I don't even do this as a living talking them jumbled right now, but with that, Mike, welcome to the show, man. I'm excited to talk to you. 


 Mike
 Thanks Josh. Likewise, I'm excited to talk to you in the audience. 


 Josh
 All right. Why don't you kick us off, man? I, I, I was reading some of the stuff on your LinkedIn and want to get an ideal for who you are and what you do on a day-to-day basis. 


 Mike
 Yeah, sure. Easy question. Right? Who am I? Background I was born and raised in Texas in the Fort worth area, kind of went down the normal path or the quote unquote us normal path of going to high school, going to college, getting out of college, not knowing what the heck I wanted to do. Just letting different opportunities take me up. The corporate ladder is the way it worked out heavy operations and supply chain background. Really for 25 years, fortune 500 companies got to travel around the world through all of that. I'm married, divorced, remarried, have a couple of kids that are ideally and hopefully young adults that are stable and happy and functional in life. That was my goal there, but yeah, for me, the big turning point in my life story was in the early two thousands, right around 2006, 2007, got divorced, had an opportunity to go overseas work in Eastern European country. 


 Mike
 I met my now wife there came back and we, took adversity in both of us, kind of finding ourselves out of work, right around 2016. We took that opportunity to step back, reflect, think about what we wanted to do out of life. It's at that moment that we decided to get more entrepreneurial in our world and real estate was where we chose to focus those efforts. And, fast forward it's been five or six years. I consider ourselves successful repeat entrepreneurs. We are manifesting our best life. We just moved to kind of our dream home in the mountains of Colorado. We get to work from home here at about 10,000 feet elevation and we've got deer and Turkey and Fox that just roam around the property and able to do it through real estate. A lot of passive investing, we got on the active side of things and just, started to leverage all of that and we're looking to continue it. 


 Mike
 We love it. It's just been a passion. That's a nutshell story we can dive into any or all of that more here on the, on the show, but that's kind of the high level. 


 Josh
 Yeah. Well, I appreciate you sharing. You said you were hit with some adversity, right? Like you found yourself out of work and you had a heavy background in corporate America supply and operations and then, divorce. At one point, finding yourself jobless, like what did, what was going through the mindset of where you were at as you're looking, because behind every deal maker, there's a dealmaker story and journey, which helps them then create value for other people. What was going through your head, your heart, your brain, as you were living through that? 


 Mike
 Yeah, a hundred percent. I mean, that is, like I said, a pivotal moment or a couple of them spread out over of time, but at least in 2016. I was with Microsoft at the time, working supply chain for the Americas and just, I had outsourced the majority of the work that I was responsible for. Just had less and less direct staff management. I was living in the Dallas Fort worth area. Microsoft's headquartered in Washington and the Seattle area, really any upward mobility opportunities were going to come with a relocation and working at a corporate office. This was pre COVID. So, it was still office time. Anyway, express the fact that I didn't really want to do that. If there were opportunities, to get out with a buyout that I would take that. There was a layoff that happened in 2016 and found myself on the list. 


 Mike
 At the same time, my wife was working for a healthcare company in the Plano Texas area. They decided to consolidate all of their operations at their headquarters in north west Arkansas. So, she found herself out of a job as were not going to relocate to Northwest Arkansas. Yeah, I mean, in that very moment, a lot of panic, a lot of anxiety, a lot of, we have a big mortgage to pay. We have daughters that are approaching college age, just all of these bills. My immediate reaction was to work my network, put my resume out there. I had interviews with the likes of apple, Amazon Tesla, some of the big names in tech. I, it, I was just really, okay, so already when you're interviewing, at least for me, there's anxiety there. I mean, there's an apprehension of being judged. Am I going to get a job? 


 Mike
 Am I going to get a good job, whatever, but on top of that was really just a deep unsettled feeling in my gut that it just really wasn't what I wanted out of life and what I wanted to do. I mean, I was already traveling a couple of weeks. Every month, company culture was rough, like just, drive, what have you done for me lately just did not feel fulfilling. So, in that moment have a wonderfully supportive wife who, believes we can do anything and everything together. She believes in me and just all of that came together and allowed us to really step back and think about what do we want out of life? What's our overriding purpose, what are our values? Let that guide us into, where did we want to go in this next chapter of our lives? Fortunately we had some money in the bank. 


 Mike
 I had college largely taken care of for my girls. So I didn't really worry about that. We were empty nesting. That's another advantage that we had in being able to take what we considered a bigger risk in starting something on our own. We just, we had a lot of factors there, but most importantly, we took the opportunity to actually listen to those and do something with those. So, that led us into real estate. We had already been exploring of, let's say cashflow in general. I think I had recently, re-read Robert Kiyosaki's rich dad, poor dad started the mind thinking more and more about cash flowing businesses, getting onto that business slash investing side of the, of his quadrant. And so those seeds were already replanted. Let's say I had done some research and study, decade before, but just really hadn't taken the opportunity to leverage any of it. 


 Mike
 So that really w all taken together. We, we took that moment to listen and to really take those steps into starting a business and doing it in real estate. 


 Josh
 Yeah. What did the first one look like? Cause you guys were, applying for jobs, both kind of where you both jobless at the same time. 


 Mike
 Yeah. Yeah. 


 Josh
 Holy moly. All right. That doesn't add a level of stress at the dinner table. It doesn't, 


 Mike
 Well, it, I think in a normal circumstance, it doesn't, and even that thought, you start to think about, if I had cash flowing investments, then your runway's a lot longer than if you're working in W2 job and all of a sudden the spicket turns off and it's just whatever you have in front of you is what you're able to burn. That was another motivator that, there's a better way to earn, to have your money working for you rather than, you spending time in an office working for money. Those, those kinds of things, we took all as motivators to find a different path. The question for us was can we get there in enough time before, we have to get a job or we have to start bringing in some revenue there. I, I talked to my girls are 26 and 22 about to be three. 


 Mike
 They're, they're also at that formative place in life where they're trying to make some big decisions and it's hard when you're young, but, there are, especially in today's day and age, there are so many ways to make money to live. I mean, you don't have to go sit in a cubicle and work in a job that doesn't fulfill you largely, there's just so many opportunities out there. Not that there wasn't a time before, but I think with, the digital space and gig economy and remote work and all of that, there's just really seems to be so much opportunity to make things work and do it in a way that fulfills you personally. 


 Josh
 Yeah. Yeah. I was going to college, I grew up on a construction site, swinging hammers with my dad and his advice for me was get your bachelor's degree. Right. Get your, get your degree. You can have any job you want. Right. All right. I got a job in corporate America, and then I worked with the government for and I experienced these kinds of things. I was like, man, I'm not cut out to work in this I'm super entrepreneurial at heart. It was just like this nasty pole of fight of showing up our day, every day clocking in and out for something that didn't feel fulfilled and like a purpose. Right. The, it seems as though you're when you're encouraged your daughters or even clients, looking at the website and such, it's like create these opportunities for cash flowing things. Cause it gives you options. You're not married to tie down to handcuffed to any one particular opportunity. 


 Mike
 Precisely. Yeah. Yeah. I mean, so we, we started our real estate venture really in vacant land. It was a more approachable way to start a business. The cost of entry was lower. We did a lot of owner financing on reselling properties to people. Then, a few years back, we scaled into multi-family and we, we had looked at a few different asset classes, storage units, mobile home parks multi-family. It was really out of a desire to diversify our business, but also to invest in depreciable assets that could help us with our tax bill and really reduce our liability there. We could keep more money in our pockets rather than, paying out in taxes. And, and we largely chose multifamily because of the opportunities to give back. So, for one, when you, and we do a lot of value add type investing where we will buy a disk, a distressed or a, a property that really hasn't been given the attention that it needs so that we can go in print of eight, bring it up to market or better than market standards. 


 Mike
 In doing so, right, you improve the living conditions of a tenant base. They really appreciate you coming in and taking care of the amenities and doing some renovations and things like that. And it's super rewarding. Also, we get to help out people that were like us or that are just looking for something different and the opportunities to generate regular cashflow, to get a good return at a refinance event or a sale at the end of a syndication is really rewarding. And it allows people that opportunity. We have several clients, that have just thanked us for the opportunity, especially now that the stock market is so crazy that, it enables you extra degrees of freedom to make different choices with your life so that, like us, you weren't married to a W2. All of a sudden, what once was. I assume this is similar to when you got out of college, but like what once seemed like a safe career path and choice is not really safe at all. 


 Mike
 I mean, you're at the mercy of whoever is making decisions above you. So, more and more, my grandfathers both worked for large companies, their whole lives retired with a pension and that was it, and that just doesn't happen anymore. You really have to be a lot more thoughtful, I think about your career and your investments and what you're doing with your money. It allows you, like I said, that degree of freedom to make other choices, whether you want to start a side business, a different business, keep working and enjoy the, build up the cashflow. Yeah, that's the most rewarding aspect of what we do. It's a large part of why we do what we do. 


 Josh
 Yeah. It's super cool. You got your start, you're applying for these jobs and you're like, wifey, I think maybe we should just start our own, right. You went on this search, what did the search look for? Cause you said in real estate, you looked at self storage, you looked at multi-family ultimately you got your start in land. Right. You looked at these different asset class in commercial real estate on the flip side. Like what other opportunities did you explore before saying real estates? The one, 


 Mike
 Yeah. Outside of just applying for different jobs in corporate jobs before I was let go from my job. Let's say six to eight months before we had started looking at side hustle opportunities. There was a lot of listening to podcasts and understanding, Hey, what are other people doing? What things sound attractive and appealing. I, through that process, I heard two different guests on podcast, talk about buying and selling vacant land. I just started doing a little research on the side and I purchased a starter pack. He calls it a toolkit, but just to see what it was all about and it came us mail, a bunch of binders with materials and then like DVDs that you could listen to. And, and so being fully employed that came and it pretty much just went right to the side of my desk and started collecting dust because, I didn't really have time to dive into it. 


 Mike
 Okay. Maybe I looked at the first couple of modules and then thought, oh, this is going to be, a lot of time and work and all that. That ultimately our search wasn't too long when, when these events happen, because we already had this kind of teed up and it was something that we had talked about a few times, Hey, let's start, this, let's do this. We just hadn't ever pulled the trigger. So, once we started talking about different ideas, we just said, we really ought to give this. Let's just, let's go all in. We decided to start with that and we allocated a budget. We said, here's some seed capital that we're going to use to start our business. We decided to get a mentor and a coach. We said, if this is gonna be our full-time business, let's go, and get the help that we think we need and accelerate our growth through that. 


 Mike
 So, it's a formula that really worked for us. We, we gave ourselves a a year to get, a business going and underneath this. I think it took us about six months to get our first sale. It was a lot of tenacity and pushing through all of that. And, and a lot of doubt, like, is this going to work or not? But, once that first breakthrough happened, things started accelerating and then, were still eating savings at the time. Our next goal was to get the black such that, were actually paying bills and ideally putting away and back into our business. So, we just set a series of goals and we stepped up into it and, lo and behold, w w and we ran it like a business, right. We, we took a lot of responsibility and we put metrics in place and we disciplined ourselves to get up and go to the office and work and check back, make sure things are working as they should be. 


 Mike
 And if not course correct. Do all the things that, normal businesses do and, or at least successful ones do. We tried to emulate that and I leaned a lot on my operations background, just, probably of overkill in some regards, but, it helped us do that. As far as our search goes in terms of different business ideas, we really didn't explore a whole lot of variety at that time. We just, we decided to pull the trigger and just go with what was in front of us. We had already heard about success stories and seeing that, this is working for other people. There's no reason that we couldn't do it. And we're both pretty capable people. So, we had a lot of confidence that we could scale up and get something done. 


 Josh
 Super cool. You mentioned a book, Robert Kiyosaki and he talks about the rat race, right? It's, it's when your passive income exceeds your basic needs is when that happens, you are free, right. You could step off the rat race or the treadmill, and you can, and you could go. You mentioned that you guys started active, inactive real estate, then you got involved in some passive stuff. Where are you in terms of the rat race or, has your passive overcome any of your active expenses or what, where are you guys at, in the world today? 


 Mike
 Yeah, we're so we're a pretty good mix. I mean, we are very active and we want to be active. We enjoy having a business purpose. As I mentioned, our purpose is largely driven by helping others. So, through that, we enjoy finding deals and pulling together investors and really running successful deals. Our land business is we started out just 100%. We were, were the, we wore all the hats. We were the owners, were the workers. And, we created a new job for ourselves essentially. So, over the years, we have to be honest, ebbed and flowed in that regard. We have hired assistance and a team to help us do some of it. There's been moments where, whether through turnover or just life events or whatever, we've kind of gotten sucked back into the day-to-day. I would say that business today for us is it's probably a 50 type endeavor. 


 Mike
 We, we spend maybe 20 hours a week combined just doing things. My wife essentially runs most of that business today. That's a very, it's a very active pursuit in that. There's not really a way to invest passively in it. It's, it's essentially buying and selling properties now, we can and do make it more passive in that we hired a team. We're not actively, hands-on in there. Once we got into multifamily, our journey was structured in such a way that the first few deals we joined were passive. I mean, we had some retirement accounts and of liquidity that we joined in on the passive side of things, really to get the experience mostly, and just understand the language, the nature of an investment, how had the communications working and those kinds of processes within the multifamily investment space. We just continued to step deeper into an active role. 


 Mike
 We joined a couple of investment opportunities where we didn't do a whole lot for the deal, but, we helped raise of equity. We helped with earnest money. We did of investor communications, but it gave us so much more of an in-depth look behind the scenes of what happens. And, you come to an appreciation of what makes a deal successful, what makes them stumble what we wanted to see as investors, what were able to provide to people. Now we primarily find and source deals and run those deals as well as bring investors in. But, it's more of an end to end view, and that journey has helped us craft, what kind of a leader do I want to be in a multi-family syndication? How do I want to communicate with my own general partners? How do I want to communicate with the passive investors of limited partners, levels of transparency and all those things that, we just, we tried to take the best of our experience, as well as some of the things that we didn't want to do that we had been a part of and in other deals. 


 Mike
 So, we're, we are, I would say probably 80 to 90% on the active side of things. Although we do have a few passive investments, the goal is I don't at this point in my life. I don't think I ever want to get away from some level of active participation. I would like to be more of a business owner where, maybe I have three, four or five businesses and it's more steering and coaching and doing things like that. Today I spend a lot of time pretty hands-on I'm meeting with brokers, I'm meeting with property managers, looking at underwriting at a very in-depth level asset, managing, going to properties and, and assessing progress. And how are things working? I still do a lot of the investor communications myself. I'm very, hands-on, in our endeavors and the goal over the next five years or so is to bring on other people, to help with the communications aspect of things, the marketing that goes into attracting investors and things like that. 


 Mike
 There, there's obviously we enjoy it a lot. There's, I, I enjoy networking with brokers and property managers and going on podcasts like this and, and doing all those sorts of things. So it's kind of easy right now. I like to think I still have some youth on my side, even though I'm gray more and more gray every day. But, I, I'm a firm believer in that an active mind is one of the keys to longevity. I really just, love staying sharp in a business perspective. I like it a lot. I had to do a lot of things on a personal side in terms of fitness and hobbies and different things like that. I do think staying involved in business helps people just stay sharp as they age. 


 Josh
 Yeah. You mentioned, getting your start in raw land deals. Right. Let's just say, I'm getting my start working at a corporation, got some money in the piggy bank and, I'm starting to go either. I'm coming up for retirement soon, or man, I've really got to get away from this crazy boss. Right. I start looking, I say, let's just say I choose raw land. I got 20 hours a week to devote to this, and I want to go raw land deals. What, talk to us about the mechanics of making raw land deals work as a real estate investor. 


 Mike
 Sure. Yeah. It's, it's an interesting business model. It's like flipping houses to some degree. The way we do it is we first as with most real estate, you look at the market, where is there a good market to play in? With raw land, there are certain factors that make certain areas more attractive than others, but that can also largely be dependent to your situation. Some, some areas of the country or even sub markets are super expensive, right? You go into Dallas Fort worth or Los Angeles or someplace. I mean, you're, it's going to be hard to pick up properties. There's other areas like west Texas, where there's just, thousands and thousands of acres of dirt, and you can buy things a little more on the cheap. So, we do a little market research and figure out where we want to play. Everybody that owns property in the world pays taxes on the property. 


 Mike
 The government agencies have a list of all of those people. You're able to tap into that in various ways. There's the gov, there's the county directly that has a tax role that you can piggyback off of. There are services that you can pay for them to do the work for you to provide you with a list filtered. However, you want to look at it. I want to find properties that are assessed between five and $25,000 or more, or some counties are better than other. They'll tell you if there's waterfront property or if there's, how has it zoned different elements. Essentially we come back with a list of names of property owners and we will directly outreach to them. There's various ways you can do it. You can, some people send a postcard, some people send, and I'm sure most of us have gotten either those mailers or those calls or something if somebody wants to buy your property or, or things like that. 


 Mike
 But, you know, we do that. We're, we're out there reaching out to people and saying, we usually put an offer in hand, we'll say, we'll give you $5,000 for this piece of property. We'll give them a few ways to contact us. So, there's a, at a high level, the business model is buying land cheap and selling land more than you bought it for. Within there's, there's different ways to do it. Once we find people that are willing to sell the property and we get it in our hand, and it's really just about marketing it and getting it out, there's all different kinds of channels as there are for homes or Zillows, and there's Facebook marketplace, all kinds of digital ways to put, put land out there. A lot of what I, what we will do and how this helps become more of more along the lines of the passive income business model is we own our finance, the property that we sell, probably 90% of what we sell will we'll honor finance. 


 Mike
 So, we'll offer a $99 a month or $250 a month for five years. We'll put together a contract and a promissory note with someone that wants to buy a piece of property, let them pay it off over three, four or five years. Then, once the upfront work is done, then it's just about maintaining the account, collecting the income. Once the sale w the way our business model works, w we maintain ownership of the property until the is completely paid off. We'll transfer just because if you're talking about a one or $5,000 piece of land, the process of trying to repossess, that really eats away a lot of the margin. We do it in that way, but, there's various ways to do it. If any of the listeners are familiar with other real estate business models, we'll in the land space, it's very similar. You have probably no shortage of people out there that will sell you a coaching program or tell different business models of how to do it. 


 Mike
 They have mentorships, masterminds, all different ways. In fact, when we get a little deeper into the show, I have, we have a landing page on our website where, anybody can go and we have a, a primer on land investing. If you want to get started in land investing, we have a few websites. You can go to some people that offer coaching packages. We went through a gentleman by the name of mark Podolsky. He calls himself the land geek. I'll give a shout out to mark. He really helped us get up and running and provided us great mentorship and coaching and all of that. Anyway, I have a document that we put together that, that people can go and download and get a little primer on it. Just if you're, land curious as I'll say. Yeah. 


 Josh
 Yeah. So, so you started in this and, you would buy a piece of land and then someone would lease to own, right. Rent to own kind of model. What kind of clientele, like give an idea for an avatar of someone who'd go, listen, I liked the piece of land. I'd just rather pay you monthly on it until it's paid off or whatever. Am I starting to build on it? My putting, a RV or a mobile home on it, what does that look like? Typically? 


 Mike
 Yeah. A lot of that is first and foremost county dependent. Some counties will allow, they have different restrictions. We will usually not allow any hard development. If you're going to build on it a house or something like that, until it's paid off, we have on occasion, we have a rider to our contract where we will do it, but it's pretty restrictive in terms of, having to have certain levels of insurance requirements, different things like that. It's just kind of risky. If we're the owner and someone else is doing work on a property and they get hurt, or they start a fire or something happens, we're ultimately liable for it and it's our business at risk. We try to avoid any of that type of stuff. In terms of camping, mobile homes, campers, different things like that. I mean, yeah, we don't mind at all. I mean, it's pretty much yours. 


 Mike
 In our contract, it's written in such a way that it is yours to use, as long as you're following the rules and regulations of the county, it's essentially yours. You're just paying on a note with, the exception of going that step of actually building a structure on it. 


 Josh
 Got it. 


 Mike
 It's permanent. 


 Josh
 As you guys are managing this, you guys, you guys are acting like the bank, right? So you acquire those properties. Give us an idea of what a typical land deal might look like that, as you guys you've been doing it for about seven years now, 5, 6, 7 years. Yeah. Okay. Give us, if you kind of compiled them all together in like an average, give us an idea of what an average land deal would look like in terms of like how much you bought it for what kind of monthly reoccurring revenue does it produce. Maybe on the flip side is you take it back and then flip it, give us an idea of like best case scenario. 


 Mike
 Sure. The lamb business is awesome. We have purchased, we've gotten properties for free people that just the, if you'll go through the process of getting it out from under us, we'll give it to you. Wow. We've bought properties for, hundreds of dollars. We've bought properties for tens of thousands of dollars. After we spent of time in the business and understood the process involved from end to end, we honed in on the fact that the majority of people will typically spend around a car payment type of monthly payment. We try to keep our properties priced around two 50 a month or so. The logic there was really for a few reasons, one, the amount of work that goes into setting up all of that to buying it, marketing it, selling it, putting the contract together and getting everything done is the same, regardless of what you're doing. 


 Mike
 To do, we've done some where we've sold for $50 a month or $900 a month. It just, it's a lot of work for the payback. Yeah. The flip side of that is there's not a whole lot of people that can afford to pay a thousand dollars a month or more on a note. They're out there, but it just takes longer to cultivate and to get that. We kind of honed in on this sweet spot. That's where we try to keep our payment, where we also try to target is to get our money back in less than a year. That, hones us into properties that we can buy for two to $4,000, let's call it. That's some combination of a down payment, which, sometimes people are willing to pay a thousand bucks down or something to get started, but we, we try to recoup our costs in less than a year. 


 Mike
 Everything after that is just pure profit. Yeah. A lot of what we do is let's say, a few of the areas where we frequent in terms of buying and selling properties, we can pick up a property for, let's just say $5,000. Well, we can then sell that for 25 to $30,000 on the market. So, our ROI on land is triple digits per year easy. So, after we get that money back within eight to 12 months, there's just great. It, as they say, in real estate, you make the money on the buy. So, we're out there and we're not super picky about it, but, we definitely that we have a ceiling on the offers where we go, but we know, beyond a certain amount, it's just not as profitable. Now, there are some markets where we'll squeeze our margins and we'll just agree to buy properties more expensively, knowing that we'll make less margin, but I mean, we're talking 150, 200% annual return. 


 Mike
 There's a lot of room to play in there. And, and so that, but that's typically, lately that's what our business model has looked like. W we'll pick up a property for four or $5,000, and then we'll be able to sell it for, I don't know, 20 ish thousand. Usually that's paid out over four or five years. Just really depends on the person. But, but like I said, we try to put a target out there around two 50 to $300 on a monthly payment. Then, some form of a down payment, which we can adjust over time. It just, as with anything, it's a little market dependent, there are some markets where people are willing to pay a little more. There's other markets where there's just not as many buyers, but I can say, in this business we bought all kinds of properties and we've sold them all for a profit, I mean, so it's just, it's been a great business and a business model to get into and really as created a lot of wealth for us. 


 Mike
 Super cool man, good job putting that together. Thanks. We had a lot of help out and it wasn't my invention, but it's certainly, I mean, but I do know a lot of people that start and don't see it through, there's a lot of dabblers as there is with any endeavor. So, I do give us credit for being in this for the long haul and making a, a longterm business out of it. It has largely contributed to enabling the lifestyle that we have today. 


 Josh
 Yeah. As you're getting this, you see some people succeed in real estate and you see some people kind of dwindled out, you say I dabbled with it, right. Yeah. You come at it from a operational goal-driven right. Metric-driven approach. That's it sounds like that's kind of your superpower. 


 Mike
 What is it? It is a strength for sure. Yeah. Yeah. 


 Josh
 What's, what's the wife superpower. This is a chance to get some brownie points with wifi. 


 Mike
 She has a lot, as I mentioned earlier, first and foremost, she's a super positive supportive person. I've had the pleasure or displeasure of having two wives now, and I have a different perspectives, but it's amazing what having that support can give you in the world of business. She's a doer. She, she latches on to tasks and objectives and goals and gets them done. I'm a bit more of a visionary. I will think about things. I strategize. I enjoy getting into the details of some areas. If we're looking at process flows, how are things working? Where, where can we tweak to make things happen? On a day-to-day basis task to task, she compliments me in that way tremendously. It's great to have somebody that can help you execute your vision. 


 Josh
 Awesome. In the years of your deal-making, you and your wife are out there in real estate investing and putting deals together, building businesses best deal, worst deal, 


 Mike
 Best deal. We put an offer out on a property in Northern Colorado. We ma we mailed to, I don't know, let's say 250 property owners. We had a guy respond and he said something to the effect of, he sent us an email back and he said, you guys got this property totally wrong. I have, I have property in a different county. He was in Colorado, but I've, my property is over here. And I am looking to sell it. It's a riverfront property on a fly-fishing river that flows through Southern Colorado. He was disgruntled with the HOA that he was in and just wanted a tax write-off. He said, I'll, I will basically give it to you for a few hundred dollars. He owed of HOA dues, I think on it. We got him down, we just highlighted it to him. He said, I'll net it out in the price. 


 Mike
 These were hundreds of thousands of dollars, lots in this gated HOA community riverfront. So, for a few hundred dollars, we picked up this riverfront property and were able to even sell it at a discount to, what other people were selling. It just cause we didn't want to be, we didn't want to sit on it for too long, but we sold it for five figures and just made a huge return. Somebody paid cash, they wanted to build a, a second home out there on the river and do things. So it was amazing. I have a hard time thinking about a horse deal in the land business, just as I mentioned, we have sold everything and fairly quickly. So they're there. It's really hard to find a bad deal in Finland. I, I know people who've bought properties that maybe have environmental issues or something like that. 


 Mike
 We haven't, we haven't bumped anything like that. Yeah, I mean, there's a saying that one of the guys in our business likes to say there's a pig for every barn. So, it doesn't matter if it's a piece of red, Texas dirt or a mountainous or whatever, but yeah, it's. 


 Josh
 Do you guys stick within a geographic region or are you nationwide in terms of your acquisitions? 


 Mike
 We are not nationwide. We're not nationwide because we don't want to be nationwide. We just focus. We focus in on a few areas at a time and then we continually every month or two look to expand our reach . So, some of the counties that we're in there are tens of thousands of landowners. You can really, and what we found also is if you just stay in a lot of times, people aren't ready to sell today, but a year down the road they are. If they've seen your name a few times, then they're gonna, they're going to give you the nod kind of thing. We, we try to go deep in a few counties and then we explore other markets just to look for other good opportunities. Sometimes we just say, this isn't working very good, but we just try to keep it, keep it fresh over time. 


 Mike
 I would say, more likely our business model is to fewer markets with depth. 


 Josh
 Okay. Got it. You moved into looking at other types of assets, right? You were looking at self storage and all these things, mobile homes, and then you multifamily based on for taxes because when you're flipping land or something like that, there might be some huge tax windfalls that come your way. You have to, you were looking at tax incentives and you said, multi-families for us. Give us an idea from when you got your start in saying, that's where we're going to put our flag to now, what kind of volume, what kind of milestones? What, what have you guys accomplished in multifamily investing from where you started to now? 


 Mike
 Yeah. We had a hard time, I had a hard time deciding which asset class to go into. There really, wasn't a clear delineation that said, this is the best. I'm a person who can go deep into analysis and get PR per, analysis paralysis . At some point I just said, look, let's just go multi-family. We started w w I believe it was in January, we kind of took this decision and said, let's explore multifamily. We took about six months to do our due diligence in the industry we started looking at and we wanted to follow a similar business model. We said, let's get a mentor group or a coach let's accelerate our learning. And, when you think about doing multi-family deals, or at least the way were thinking to do them, which is a a hundred unit plus your in the millions, if not tens of millions of dollars on a purchase and acquisition. 


 Mike
 The cost of making a mistake can be huge, ? We knew for sure that we wanted to get a coach. We started exploring what are the different programs out there? We attended a few bootcamps, we can seminars trying to network and figure out which one we felt would best for us. We settled in, on a group called think multi-family, it's out of Dallas Fort worth. It's more of a smaller boutique multi-family. You work directly with the founder of the group. He is your coach. He partners on deals. Some groups were very restrictive in terms of, when you start, you can only do deals as a passive investor. Then, if you have a deal, you have to bring it to me, are the things, this one, this group has a lot more flexibility. For various reasons, we chose to go with that group and that process took five or six months before we kind of found and said, okay, this is the one for us. 


 Mike
 As I mentioned for us, our journey was about building out that network, doing a lot of education and research into what makes deal successful. How do you find, good markets trying to find partners that we wanted to enter into deals with. I would say it took us another three months to start investing as passive investors with different people. 


 Josh
 Five months to go through the program and then an additional like three months to kind of go, okay, we're in financially. 


 Mike
 Yeah. Yeah, of course. Say by the fall of that year, we were, we passively invested in a couple of deals and one of those passive investments then, parlayed into working on the general partnership on another deal with some people that we had invested passively in. Cool. We have, now it's been two and a half years that we've been in the multi-family business. We have partnered in right around 1,500 units. That equates to it's six partnership deals. Some of those deals have multiple properties within them, right? We may, one syndication may buy two adjacent properties or a couple of deals. There's, 150 to 200 units on average, across those deals. I think one of our deals has 360 units as one investment. Some have a hundred. So, that's what it looks like today. I would say we entered it. We, we landed our first deal as a lead sponsor or one that we brought to the table. 


 Mike
 We, we won the offer last summer, and then we closed on it in November. I think we got our LOI accepted in July or something, and it took about 90 days to close in November, closing on another one right now in Fort worth. We have a great property. So that's hometown for me. I was excited to get a deal there. That'll close here in the next 60 days, let's say. As were talking about before the show, I mean, it feels like the deal flow has accelerated throughout COVID and continuing to this moment. Now I will say here's where the advantage of good networks come into play because we are still active in the market. I have brokers reaching out to me on a near daily basis about deals because their buying pool has shrunk tremendously with the uncertainty in the market right now. Just lending terms are vacillating a bit, the lenders are cautious in what kind of terms they're giving. 


 Mike
 I think it spooked a lot of the potential buyers out there and for the properties that are out, whereas it was hard to get the time of day of brokers for some period of time. We're, we're finding now that, they're actively and personally shopping their deals that people they'll call me up and say, Hey, I've got a deal over here. I think it fits your model. You got to give it a look, those kinds of things. It is a good time to be in the market. However, it's a, it's a risky time. You have to be very cautious about how are you underwriting a deal? What are your assumptions going into this versus where the market may or may not go. We're really taking our time to do some in-depth underwriting. I'm hearing more and more properties are trading at a discount versus the asking price. 


 Mike
 They're retraining within the contract period when lending terms come in. So, it's just, there's a lot going on right now, 


 Josh
 Yeah, so as we're looking at the market and the uncertainty, right, more and more deals are coming your way. So, more opportunities are coming your way when it comes to the coaching programs, you're, you're going through and being connected in the industry. What are you hearing? The leaders of industry and the people who have gone through multiple market cycles, what are you hearing from them in terms of future deal flow and where to invest and what to invest in, 


 Mike
 In terms of asset classes to invest in? So, yeah, it's interesting. I, there is a lot of, there are a lot of people out there in my opinion, that really try to capitalize on the fear in the markets in, that's almost irrelevant of what market cycle you're in. Somebody's tapping into that. It's right now, obviously we have inflation and everybody wants to be talking about inflation while it is a fact that it's here and it's a presence. There's not a whole lot that you and I are going to do about it, unless enough of us decide to stop buying things. We can, we can force inflation to go down. I remember when COVID hit a couple of years ago, the group I'm in and the leader of it, mark Kenney, who started the group, he is quick to say, no one knows what's going to happen in the future, right? 


 Mike
 I mean, everybody has a prediction, but no one knows. It's really up to us just to do a good analysis in our underwriting, make sure we're using good conservative assumptions and we're going to stay in the market. And we continued to buy throughout COVID. I think it's fair to say an overwhelming majority of people thought that there was going to be a crash. It's going to be another 2008, 2010 market cycle, where we're going to be picking up properties on the cheap, well, that didn't happen. Properties kept accelerating in price, cap rates, compressing, and, it's where we are today. It's easy to step back and think, okay, well next year, for sure the market's going to crash. And, cap rates are going to go down and prices will relax, but we just don't know. We enter into solid businesses and business plans on our value ideals. 


 Mike
 I, I do think it's, I personally think it's, I see a lot of people underwriting deals, maybe not using the exact same assumptions that we've gone through in the last couple of years with double digit rent increases and those kinds of things. I think it's really irrational to think that any level of that can continue. I mean, people are not, they can't pay rent today hardly. To think that rents are going to continue to go up double digits across asset classes, at least things are going to flatten out. I still think multi-family is a wonderful investment asset class, just because of the housing shortage, the widening and, and, and continuing to widen gap between house prices versus what people can afford. The rental market is going to continue to thrive. Now, it's arguable, if there's any one particular, I know there's a lot of build to rent solutions going on right now and conversions and things like that. 


 Mike
 I think multi-family is a good, safe space to be in. We will have to see in terms of, within multi-family you have ABC and D class properties, one of the core principles that we hold to is it's nice to be in the BC space, just because if people on the luxury side start to get squeezed, they might step down into a B. Ideally, if people and their income situation continues to lift, they can step up into a CRB. I think it's good to not play on the fringes, however, the wealth gap continues to widen. And, and so, people at the upper end of the income continue to do well, I do think, well, I don't know that I think, I mean, it's just inevitable that our market behaves in cyclical fashion. We are at an above average timeframe from what the average cycle goes up and down. 


 Mike
 I do think we're do the, similar to the stock market study after study shows that people who try to time the market get the worst returns because you can't time the market. I think you just have to keep playing and you take your, your, like your base hits and your doubles and you keep going, and then you get an occasional miss and an occasional home run. So I'm still bullish on multi-family. I think storage is probably a good safe space. When you look back historically, both storage and multifamily asset classes have performed well in recessionary time periods. I think those are good, safe havens. I am not in the stock market currently. I got out a few years back and I don't know that I'll go back. I just don't, it's a little too turbulent. I do think it will get hit the hardest if, and when something severe happens, but it's going to be interesting to watch. 


 Mike
 I mean, I am cautious in that there are so many, let's say downward forces on us in terms of a geopolitical war going on in Russia, Ukraine, we've got China coming on as a strong competitor, economically, potentially militarily. Within our own country, there's just, heightening tensions, inflation people saying really, recession, stagflation. There's just, there's a lot of warning signs out there, but at the same time, I don't think you want to get caught on the sidelines. I think with inflation and different things there, you want to invest in good, safe assets that make it through recessions, if not thrive through those time periods. It's, I I'm going to stay in real estate. I think it's historically, when I look back, it's proven that it's pretty resilient. You have to know your markets, you have to diversify as best you can and hedge against certain things, but it's, all in all it'll be good and just take steps to protect yourself. 


 Josh
 Super cool, man. Let's do this, Mike, as people are listening in and they want to connect with you, learn more about your views of where the market's going. Maybe even participate in some of the deals with you, or learn from your background and land and multifamily. What's a good place for people to connect and do deal with you. 


 Mike
 Yeah, I'd love to. I mean, it's kinda, like I said, it's what we're about helping as many people as we can do just that. So, and whether that's through actual investing with, or resources that we can make available education and, or just, talking things over, we have put together on our website, which is Deaton equity partners.com a landing page. If you go to Deaton equity partners.com/freedom, we tried to make that a one-stop shop. I have my contact information, my email social handles. There's a couple of E publications that you can download. One's focused on land if you're interested in and maybe how to get started at a really high level. Similarly on multi-family we've got a primer on the benefits of multifamily and things there, as well as if you want to sign up for our newsletter, if you want to join our investing group, things like that, it's really just one stop shop that anybody can go to. 


 Mike
 Otherwise you can hit me on LinkedIn. It's just, I'm active there. We have a company page as well. That's probably the best source for me. I'm not super active on Tech-Talk or in any of those probably more than I should be, but I'm not Tik TOK, but the others, Instagram, Facebook, things like that. 


 Josh
 Yeah. Got it. What's a question I should have asked you during this interview that I completely screwed up and did not ask, 


 Mike
 Oh my God, there's so many, 


 Josh
 So many scrubs, Josh. He should've asked me all these questions. Why pick one? 


 Mike
 I would say really, let me think about how to phrase this. Isn't a question, but the most important thing that investors can and should look for, okay, go for it in a deal. And, and this is I, I come from it from a multifamily perspective, but for me in our journey, we've been in a lot of good deals and we have been in some, I would say one that just really hasn't worked out the way it should be. For me, it all boils down to understanding who is the team behind your investment in particular, the lead sponsors. I tell so many people take the time to get to know who is running your deal and their background and their track record, because any deal and look fantastic on paper. If you don't have a team that's going to execute it's not going to materialize. It, depending on the deal, one mistake or what can seem like an innocuous mistake can really unravel a deal. 


 Mike
 Whether it's not getting units turned in a faster, fast amount of time, not being able to drive a property management company to hit the metrics that they need to hit to make a deal successful. So, there's several things that you really need a responsible and experienced team driving. So, more so than the business case would say, get to know the people behind your deals because they are gonna make or break it. 


 Josh
 Super cool. All right. What we'll do fellow dealmakers out in the audience, listening in, if what makes sane resonates with you? All this contact information will be in the show notes below. You can connect directly with him, say, Hey, I heard you on the deal scout, thanks for sharing your knowledge with us. We want to find a way to do a deal. Now, if you are looking at a deal, working on a deal or want some help with the deal, you can always head over to the deal scout.com, fill out a quick form and maybe get you on the show next till then we'll talk to you all on the next episode. See you guys. 

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Mike Deaton

Owner

In 2016 Mike and his wife escaped the corporate world and dove full-time into the real estate market together. They’ve since launched two real estate investing businesses across multiple asset classes to combine tremendous cash-flowing financial returns with incredible tax benefits. They are currently active land investors as well as partners in more than 1,200 units of multifamily assets. As real estate entrepreneurs, they love enjoying ultimate lifestyle freedom while delivering on their mission in making significant impacts to both investors and communities. When they’re not busy adding value and serving others, you can find them at home, hiking in the mountains of Colorado.