Time is the one commodity that everyone has, but not everyone spends wisely. What future do you envision with the time you have? Is it one of a lifetime of running in the rat race… or is it one that truly embodies the most ambitious dreams you...
Time is the one commodity that everyone has, but not everyone spends wisely.
What future do you envision with the time you have? Is it one of a lifetime of running in the rat race… or is it one that truly embodies the most ambitious dreams you have for yourself and your family?
Learn how to make those dreams a reality in the latest episode of the Cash Flow Pro podcast, where we enjoy the esteemed advice of Mike Deaton, founder of Deaton Equity Partners. Based out of Woodland Park, Colorado, his firm invests in multifamily syndication across the country, granting investors the opportunity to earn passive income under the guidance of experienced professionals.
In this episode, we discuss:
If you too seek to be a Cash Flow Pro, then tune in to this episode to Mike’s wisdom and take one step closer to securing your own financial freedom.
Find your flow,
Resources mentioned in this podcast:
Casey Brown 0:00
Mike Deaton 0:01
I have actually I think for one year, a lot of people use squad cast, which is kind of the normal one that I see a lot or some people just use Zoom, but it all appears to be relatively the same.
Casey Brown 0:12
Yeah. All right, cool. All right. Well, we need to stay on until it says uploading 100% at the top afterwards, so Okay, here we go. Hello, and welcome to the cash flow pro podcast. I'm your host, Casey Brown. And I am here today with Mike de Haan. And he is a specialist in off market properties, which is what everybody wants to know about. Everybody wants to know all about how do you find the elusive the ever elusive? off market property? Mike, welcome. How are you today, sir?
Mike Deaton 0:46
Hey, Casey, appreciate it. Thanks for having me on. Lately, app certainly can't complain. Yeah, yeah, we
Casey Brown 0:52
were in the business. Basically, everybody's hunting this, this eight legged animal called the off market property. And it just, it just seems like it's always just out of our reach. But it seems like you have mastered the process. Because obviously you've you build a business and, and before the show, we were chatting in it, you know, you're in three markets, you're expanding to four, you are building this off of again, the thing we all want the off market property the the absent owner even possibly property. So. So tell us a little bit about your what you got going on and the market you're in. And maybe even, even if we can just give the listeners just a little bit of a, an insight into how to do this, maybe they can maybe they can start their own and go from there. So tell us a little bit about it.
Mike Deaton 1:45
Yeah, absolutely. So I've been running my full time business now for about two years. The, I guess prior to that, I had an engineering background, you know, I didn't really come from a real estate family or anything like that. I started dabbling in real estate, the traditional way for a couple years back in like 2018 2019. And I was going through the process of you know, making offers unreal, with realtors, buying from wholesalers doing the traditional thing, decided that that was not going to get me where I wanted to be with my financial and basically lifestyle goals. So I decided to go off market and start pursuing my own opportunities. From there, you know, I was able to sort of queue into the marketing processes pretty quickly and just sort of see the potential and like sort of how to build the structures, I think I was greatly helped by my engineering background. But as I dove into it, and started to put the ones and zeros together, I quickly realized it wasn't actually that inherently complicated. And what was more important than a lot of the really sort of tricks and tips and the detail process everyone tries to do. Ultimately, what it comes down to is consistency over time. You know, if you have more shots on goal, you're going to have more opportunities. So that's kind of been the foundation for our business since the very start, is, you know, so many people in their investing, they're trying to find like the secret sauce, that's going to get it. But honestly, we do just the most basic style of marketing, you could think of, you know, we pull the same general lists, we do direct mail, we have a little bit of structure to our direct mail. And that's allowed us to do, I guess, coming up on 100 deals over the last couple of years. Yeah, we're, I think, if everything that we have in escrow, we currently have 15 in escrow, that should put us I think 96 If all those close since we started in January of 2020. So you know, and that's all just from most traditional marketing you can think of right and nothing too crazy. And the one competitive advantage that we've had, is, you know, we basically just take the most basic philosophy of marketing, you know, like, the boilerplate stuff that people do, and we tweak it just enough so that it stands out, and it makes us look, you know, a little bit different than from everybody else. Yeah,
Casey Brown 4:04
yeah. So So you know, and of course, I think we're all familiar with with the list buying and so on and so forth. And I'll get offer a one of my secrets out there because, you know, I come from a real estate sales background, real estate, like like as an agent or broker, rather, that type of a background and one of the things that that I always found to be most beneficial was was buying the lists from the property tax assessor. Okay? It's almost like all of these list brokers are fed from the person who actually sending the tax card. So but with that being said, it's how you contact them, how often you contact them what your letter says, all of that plays a part. So I know that when you're talking about and, like, the thing is that everybody wants to scale. Everybody wants to just step right into something and do something at scale. They don't want to stop and Say, Hey, maybe we need to do this, or maybe my letter needs a little bit better presentation or maybe, you know, whatever the case may be. So I'm certain that that some of those tactics are very basic stuff that you're talking about. Correct?
Mike Deaton 5:14
Yeah, exactly. And it's really small things like, you know, tweaking the copy to make it relevant to the local market that you're working in, you know, am I and relevant but not blanket like, you know, you, let's say you're mailing to, I don't know, Seattle, right. And you're not gonna say something about the space needle, right? That's too general. But you know, let's say that the Seahawks just won a playoff game. And your mailings going to be hitting right after that, put that in your letter, right. And then suddenly, it makes you feel that much more local. And that's going to vibe with people, right. And you can do that same thing in every market. So just look at what's going on in those markets. Like what events what, you know, if there's been like a weather event or a sports event, you know, if there's like a festival going on, you know, whatever it could be, and just tie that into your marketing. And that helps you stand out just that tiny, little bit. And when it comes to marketing, right, if you get like a 5% better response rate than everybody else, especially at scale, that's gonna come out to hundreds of 1000s of dollars in revenue, if not more than that. That's right, you know,
Casey Brown 6:17
I percent on 1000 is just, I mean, 5050 properties, right? You know, ought to be about one a week, I mean, you know, all sudden, now you're in in, you're just, you're just doing what's what's just a little bit better than somebody else. And I'll tell you, you're really speaking my language from the from my real estate sales background, I mean, you really are just talking exactly saying exactly what I said. And I'll show you, there's an object that's actually sitting on my desk that I'm going to show the, obviously, I'll tell what it is for the listeners. But for the YouTube audience, I'm going to show you this object and this object is, and I'm going to see if I can get Mike to agree that it is probably one of the most, it's the object that has gotten me more off market properties, and in front of more of an off market property audience than anything else. And that is this right here. You know, this is an ink pen, this is a pin. And let me tell you what I do with this pin. This pin physically signs, each letter that goes out in bluing. Okay? It physically signs it, because because when that person opens that letter, they instantly have a connection, they instantly know that Mike wrote and signed this letter. Now, you do that at scale, you've got a pile of letters this high, and you just work your way down through them, and you sign them. But I'm telling you, it it resonates with people, the fact that you took time to write this letter. So Mike, what's your thoughts on the personalization of that stuff? Psyche says you have to connect through and you can connect through an event, you can connect through a location, you can connect or something coming up. But but the more personalization, and like you said, if you get a 5% better response rate than the last guy, I mean, you're talking about 1000 10,000 hours, a sudden, hundreds of properties, hundreds of 1000s of dollars.
Mike Deaton 8:10
Yeah, I mean, it's those little things, right? Like that's, that's exactly spot on, and me doing at scale. So for example, we all send 30 40,000 pieces of mail a month across our various markets, right? That's not really doable for me sit there and write with a pen. But there's, there's still little things you can do to stand out amongst everybody else that's just going to whatever mail house provider and sending out like a yellow foreclosure postcard, right? Or they're sending out like a signed envelope that just has boilerplate copy on the inside, you know, maybe reach out to your mail provider and say, Hey, can we do a custom envelope that has, you know, like, a photo on it that's represented with the area, you know, can we do it of, like, tie yourself into it make kind of like an emotional thing is like relatives do maybe show like, a photo of like, your company, or your family? Or you and your dog? Right? We actually did a campaign with that that did very well. It was my dog's name is PD, we did PT buys houses. And it was as pictures of me and my dog, right. And people were calling in off that, because that resonated with them on a more personal level than just like the spam that everybody else sends out. You know,
Casey Brown 9:17
one of the things that that my is always in my mailbox and I'm sure it's if it's in my hands and everybody else's as well. But it's a it's an oversized piece of like thicker cardboard, and obviously works that they wouldn't be doing it. And it's got a it's got a car key tapes, too. I've seen you one or Come down, come down and see if you've won, whatever and I'm like, really, that thing wouldn't is I'm like, okay, alright, so I just don't, I guess I guess obviously, like I said, it works because they continue to use it. It's been it's been the go to for the last several years. But one thing, one thing and of course now again now now we're we're talking a little bit different language when you're saying when you're saying you're sending 40,000 litres of milk was when I would send off market stuff I was sending like, yeah, you know, like 1500 2000. I think the most I ever did at one time was like 6500, maybe something like that. And it was a massive response. Because I'm coming from the sales aspect. I'm not coming from the hey, I want to buy your house. So so with that being said, one thing that I did was was I took my spreadsheet of names and addresses, and I mail merged it. And so now my letter reads, dear Mrs. Jones, my name is Casey Brown, and I'm interested in blah, blah, blah. And, and when I did that, I only got, I only was able to narrow down like a percentage difference in response rate. And it was like, it was like a 30 or 40% difference in response rate, like all of a sudden, now these people were like, they were like, Okay, well, he, he, I got their attention, because I addressed them. And then now that and like you said, the little things that maybe you can't simply take an ink pen and sit down and sign 40,000 pieces of mail, it's just not That's not that's it's doable, but it's not, it's not a reasonable use of your time. But something like mail merging, and just just sending the letter to Dear Mr. Jones, or Dear Mrs. Jones, or whatever the case is. And then how do you feel about a return address? I mean, do you address that very, very regularly, like you just don't put a return address on it? Or do you? Well,
Mike Deaton 11:24
we put a return address on everything. Because a big part of our business as well is going through the return mail, and manually manually skip tracing those and finding the correct mailing address they should be going to Yeah, so that's another sort of detail what we've done that a lot of to be more competitive as well. I don't know if I need to dive too deep into that just because it's kind of boring, but
Casey Brown 11:49
it's a tertiary.
Mike Deaton 11:51
Yeah, but we all we always have a return address on stuff. And again, though, like we do it as a return address to an individual, not to a company, because that makes it look that much better. And what we'll do is we will kind of rotate who that return person is just for depending right? So sometimes it'll be me, it'll be my partner, sometimes it'll be my sales manager. You know, it just it just varies
Casey Brown 12:13
a lot. You guys just take this, take all these little tidbits and use them this is stuff that that just like Mike, I've tested, Mike's tested, everybody has tested, you can take these little things and go out and find your off market properties. Don't Don't send a postcard and pepper it out there and then be like, Oh, well, I didn't get a response, take these direct methods of contact and use them. Now, let's talk a little bit about the list. The list is always that's kind of, in my experience, that is the factor that always gets just kind of shifty. Because some list brokers and I've had some decent luck with some I've had some not so decent luck with others, the ones that you don't have luck with, you can burn through several $1,000 really quick. Well, let's talk list. Where do you find the list? And and then on top of that, what criteria? Do you filter that list by?
Mike Deaton 13:22
Yeah, so we do a very general marketing sort of list, especially because we're pursuing mostly residential stuff. So a lot of our stuff honestly just comes from Prop stream. We just pull from a general, you know, all the niche lists that you can go watch any YouTube video, and you can see right the bankruptcies, the liens with equity, all that sort of stuff that makes up the core foundation of our list. Now, one of the big things that we do differently, though, is the we some of the more popular lists, we basically try to get ahead of them before they become publicly recorded. Yeah, so we have VAs that will go into the court records of our target markets, and will basically try to predict people that will be showing up on lists here in the future. So they go and they see people that have gone to court for divorce, they're going jail, they're going to court for a felony, right. They're going to court for like a bankruptcy. You know, they have a lien, Liz pendens, or a lien that they are currently battling and something that isn't necessarily recorded yet. Because so many of those list providers are behind. You know, they're going to be three to four months down the road. You're gonna mark Yeah, exactly. We're already on them before probably honestly, before the sellers even know they have a problem. Right? Because we are predicting that when we mail them sometime down the line, that will be an issue for them. And you know, sometimes that backfires, like people will call them they'll be upset that we know about their divorce, all this sort of stuff. But you know, unless they say like, Hey, don't ever contact me again. We just keep mailing them an informer for four months down the line. They're like, yeah, that divorce was really bad. You're right. I need to get rid of this house. Now, you know, and the opportunities that come from that are unbelievable. We got a deal this, me and my business partner, we close on it at the end of December. It was an eight unit apartment complex. Straight off the divorce list him and his wife were going to divorce for going to court for this divorce. And they had to liquidate this property because they needed the money for XYZ, whatever their conditions were. So we bought this property for $75,000. As it sat, it was worth six about 700,000 rents were super low. We put literally $0 into it, got it up to market rents. Now it's worth approximately 1.2. Yeah, right. But in the end, the reason we got that deal, you know, because we were ahead of them, they had talked to no other investors. And they basically called us and said, hey, you know, I know at the middle of December, we need to close this by December 31. I'm gonna like, this is what we're gonna need to be able to do it. And they said, Cool, we don't care. Take my property.
Casey Brown 15:55
Yep, there you go. Now, let's so so yeah. Now do you have like subscriptions? So for instance, if you if you don't mind, let's, let's just pick one of your markets, let's say, let's say Knoxville, okay. Do you have subscription to like their courthouse records? Do you go through an attorney? How do you how do you access those those records? Because I know sometimes, you know, for instance, like around here locally, of course, they're behind a paywall. And I'm sure that that's, that's one of your tactics to correct.
Mike Deaton 16:29
Yeah, occasionally. So down there in Knoxville. We have we like, if you look at the portal for the, like the general court system down there, you can see, it doesn't give you all the information, but it gives you a name, and it gives you what they're going to court for. And that's enough for us to get what we need to get, you know, because what we do is we just, we see the issue, we take the name, you know, we go into just a basic skip TRACE program, like reviews, free people search, we have you Spokeo you Google there, you look up their name with the location. And you just basically see if they're tied to any properties. If they are you take that address, you go and you tie it to the county assessor website, you see if they are the actual registered owner, boom, done easy enough. So it's
Casey Brown 17:18
like type it in our program. It's the letter sender or something like that. And we send it out.
Mike Deaton 17:24
Yeah, so we just add them right into our database. And they become part of our large list that we mail every single month.
Casey Brown 17:30
Right. And of course, now those lists are segmented, I'm assuming based on based on lifestyle of their life event or whatever.
Mike Deaton 17:37
Yep, yeah. So how we structure our mailing, like bigger picture, is we do what's called list stacking, which is pretty common. So basically, every single lead has a tag for what their potential motivations are that show on the public records, right. So they have a bankruptcy, it'll be tagged as bankruptcy, if they have a lien, I'll be tagged, they're an absentee owner, that'll be tagged. And then what we do is basically everyone that his three tags are higher, that they have more potential motivations, they get a more personal piece of marketing than everyone that's less than that, right. So if they're more of like a general, like less potentially motivated, they get cheaper marketing, right. And the people that are stacked, they get very personalized marketing, which is generally in the form of a handwritten letter that looks exactly like you know, it's or like, sometimes we even send ones that are written by a pen with a robot. So they will, so that's the really motivated ones will get those plus a piece of boilerplate marketing, like you know, P buys houses, or you know, a postcard, so they're seeing, hey, this company sent me a branded piece. So I now know who they are. And the owner sent me a handwritten letter that they must be really interested, but then the ones who are probably less likely to do business with us are only receiving kind of the general stuff. So that's kind of how we keep our balance in check. And we're not spending a huge amount of unnecessary money.
Casey Brown 18:57
Man, that's, that's, that's awesome. And there's, there's a lot of people that yeah, keeping that balance in check is just is crucial. Because, you know, we sense or whatever the, whatever the going rate is now for a stamp. I mean, it just yeah, you can burn through some capital real quick. But you know, man, that's, that's, that's awesome. And those processes, those processes and those niches, there's riches in the niches. I mean, let's get and you know, you've just, you've definitely just snitch so far down. And the the value of that data is, is unspeakable. I mean, it just, you know, even if you can just you can think of so many different ways to use that and you've really maximized it by by by chasing the real estate part of it. So So yeah, so So let's talk about like you said, I think he told me, you've done how many since the first of this year how many in the last two years transactions close transactions.
Mike Deaton 20:00
So, like actual clothes, we're sitting at about 80. We have like 5081. I think we have 15 in escrow, assuming all those clothes, it'll put us at 96. So you know, and I think actually, I got a Slack message or sitting here. I think my guy got another contract right now. So, so that'll be 97. But yeah, and that since we we started officially mailing in February of 2020.
Casey Brown 20:24
Wow. So so a little over two years, I guess. Yeah. So. So let's chat a little bit about the I know you had said sometimes you might keep wanting to rent or you might keep some Duran or you just like you said, you purchased a multifamily that that you that obviously ended up hitting a home run? What? How many rental units do you all have right now?
Mike Deaton 20:43
Yeah, so currently sitting at 42 rental units, I'll be bought in the last couple years, I guess not all of them, a couple of them. I bought 2018 and 19. Back when I was doing it, the more traditional method. So the way I have 40 rental units, you know, we typically have three to four flips going on at a time. And then a lot of the stuff that we don't want to take down either because of, you know, location or project size or whatever, we'll wholesale those.
Casey Brown 21:12
Sure, sure. Yeah. Just just move them out of the way make a little bit move on. Yep, exactly. What so one of the things that resonated with me when we were first chatting earlier was hard money loans and and you know, your relationships you've got with hard money lenders, and the your ability to to be able to say, because that's always been, you know, I used to have a client that everything he did was cash, everything was it was cashed to the at the closing day now whether he went back and refinanced it, or went back and rolled it into some Mills, or we really, truly just kept it and kept it paid off. You know, the hard money stuff, and being able to move quickly is a key to this type of business model. Because exactly like you said, Somebody calls and they're like, Hey, man, $475,000 is not something, somebody, a lot of people can just just break off and closing 12 or 1415 20 days, whatever it is slide people can close in a lifetime. But the thing is, is that access to that money is really crucial and your ability to close fast. So how did you cultivate or begin to cultivate the relationships with the hard money lenders so that they could build that trust with you?
Mike Deaton 22:24
Yeah, so I think the tricky thing with hard money lenders is everyone always wants there to be a quick way to sort of start building that trust, right. And, you know, I used to work for a hard money lender, like doing sales. And so I would get the same spiel from so many guys. I say, Guys, guys, people in general, but we're knew that they thought that, because they could, you know, they had big ambitions, that they were worthy of, you know, special treatment, right. But at the end of the day, you know, with a lender, they want you to put your money where your mouth is they want to see you have a track record. So one of the biggest ways that I say with like to build these relationships with hard money lenders, is, honestly just start buying deals, work with them be over the top and your communication with them and make their lives as easy as possible lending you money. And then surprise, they're gonna give you way better rates down the line, you know, and one of the most common questions we get is, you know, how are you buying all these properties? Do you guys raise money to do all this stuff? And the answer is no, we don't because we get hard money loans now cheaper than any private investor would ever want. Sure. Yeah. And sure, and sure, we have to sometimes come up with a downpayment. But we can raise that if we want to, because it's easier to raise 50 or $60,000, compared to $400,000. Right? Sure. But I mean, we get hard money loans right now. I think we're closing on one next week. And our rate is seven and a quarter interest only. And then one point, and no doc fees. I mean, most private individuals are wanting eight to 10%. And then maybe
Casey Brown 23:56
you lead your you lead your opportunity with a 7% preferred return and you're gonna I mean, you're gonna raise a little bit, but it's gonna, you're definitely gonna have to move through the numbers pretty quick to make that happen. Yep. Especially in especially short term loan, you know, people think 7% Well, you're not getting a prime, FHA backed VA backed mortgage, that's 30 years, you're paying 7% of $100,000 you're paying less than, you know, what, 700 or a month, so really, it's really works out pretty good. So Well, yeah. Well, hey, you had asked that, you know, when we first started this discussion, you were you wanted to talk a little bit about your podcast and, and, and, and I think that's what we determined was the best way for people to reach you. So tell us a little bit about that. And tell us a little bit about what you got going on there. Yeah, so
Mike Deaton 24:45
me and my business partner. We have a real estate podcast podcast. It's called the collecting keys podcast. We kind of started it as you know, a passion project just because we're big podcast consumers. And I know I've been guests on several and I enjoy The process of it. So we started our own. And it's, you know, it's kind of in the weeds about, like, what our business is and how we run it, and what it's really like to run an off market full time business like this. So, you know, there's a lot of marketing talk, a lot of talk about the insane stories that happen, and you're dealing with off market sellers, you know, like, we have stories like you, you wouldn't believe with some of the things that have happened. So talk about that stuff, you know, we go into our business practices and kind of what to realistically expect if you want to do this. So, you know, 30 minute 30 to 40 minute podcast every Wednesday, anyone wants to go and subscribe to that, that would be awesome. We'd love to, you know, keep growing, that it's growing pretty rapidly. And, you know, there's, there's some info on the podcast as well, if you go to collecting keys, podcast.com. And on there, we actually have like a free five step guide, which is the basic blueprint for how we built our business. Sure. And, you know, it gives you the very, very basic, like high level, that's 100% cookie cutter, what are businesses, so yeah,
Casey Brown 26:06
man, those I tell you, again, those off market properties is gold, all you have to do is breathe the words off market properties, and people like how it perks their ears up, everybody comes running. And here we go. I mean, that's just what freaky real estate people talk about is, I mean, it's just the things that get us going is, is probably things that a lot of people don't even know is out there. So but man, everybody goes through life events and and and even if you're, you're here, and you've made it here, and you're listening, and you're going through one of those life events, you know, we've all been there. We've all had the trials and tribulations and guys like this will come in and buy and and, you know, for a profit for him might be a huge relief for you. Okay, so it's not all negative. It's not all about profit is not all about taking advantage of people it's about. Maybe you are at a spot in your life where hey, I just want this over with I just want this done. My care can take care of you. And I guarantee you, they will do it in a process that will be fast, helpful, and they'll guide you along the way. So Mike, I want to thank you again for being on our podcast, the cashflow pro podcast. And again, go it's collecting keys, right k e y s portal, collecting keys podcast.com and check him out. Give him a subscribe and reach out to him. And if there's something they can help you with, man, I know there'll be glad to do it. So, Mike, thanks again. And anything else you want to add?
Mike Deaton 27:37
Yeah, so um, yeah, that picture to reach out and also to you if you want to follow me on Instagram. Like if you want to ask any questions to me, that's the easiest way to reach out to me directly. I met Mike underscore invest on Instagram, and just shoot me a DM I love chat with people on there. And, you know, like, obviously, I'm an open book. So wherever you're at in your real estate investing journey, I'd love to, you know, just chat and to help you out and
Casey Brown 28:00
we do appreciate it and thank you all for listening to the cashflow pro podcast. We hope everybody has a wonderful day. And Mike, thank you again so much.
Mike Deaton 28:08
Awesome. Thanks, Casey. Appreciate it. Have a good day.
Transcribed by https://otter.ai