Cash Flow Mastery: Essential Investment Strategies for Business Growth

John Harcar (00:01.769)
All right. Hey, guys, welcome back to our show. I’m your host, John Harcar. And I’m here today with Mike Deaton. And what we’re going to talk about besides Mike’s journey through business and real estate up to where he’s at today, we’re going to talk about, you know, really picking your lane and take action, man. Simply just get the ball moving. Remember, guys, that investor fuel, we help real estate investors, service providers, all real estate entrepreneurs, two to five X their business.

And we do that by providing tools and resources to grow the business that they want to live the life that they want. So Mike, welcome back to our show or welcome to our show.

Mike Deaton (00:38.731)
Thanks, John. I’m happy to be here and talk shop with you.

John Harcar (00:41.621)
Yeah, me as well. I love talking real estate and I love our kind of theme about picking your lane and just taking action. I think that’s what a lot of people struggle with. But before we get started and get into all that, why don’t you kind of give our audience a little background on you, you your experience in business and real estate and what got you to today?

Mike Deaton (01:00.77)
Yeah, you bet. So I went a fairly normal path. I graduated college, went into the workforce, W2. I worked in big tech. was with Motorola when Motorola was big, Nokia, Microsoft. I worked in operations and supply chain. So I got an MBA while I was doing all that. I had a very business and I don’t know if it’s the normal so much anymore, but what used to be the normal path, right? You get a job, you feed your 401k, you invest in stocks and bonds.

you build enough so that you can retire someday and you do that. Well, in 2016, the rug got pulled out from under me. I dodged a dozen layoffs, been on the other side giving layoffs and pink slips and I got let go myself. It wasn’t a total surprise. I kind of knew it was coming from my boss and I even worked it in such a way that if one was coming, I was okay with being on the list because I was really burned out.

John Harcar (01:42.677)
Mm-hmm.

John Harcar (01:55.488)
Right.

Mike Deaton (01:55.662)
Well, that year, my wife also got let go from her company. And so we both found ourselves in the summer of 2016, out of work, no paychecks. We didn’t have a side hustle. We didn’t have any income coming in. And so that was it for us. We had no income coming in. So my initial knee-jerk reaction was to go back in the workforce and really get into the job. But that process was really making me ill, like my nausea and all this stuff. And so we’re…

John Harcar (02:03.584)
Whoa.

John Harcar (02:07.435)
Mm-hmm.

John Harcar (02:20.555)
The stress.

Mike Deaton (02:21.71)
Yeah, interviewing what kind of company culture were you going to get back into? Were we going to have to relocate from Dallas where we were living at the time? All those things were swirling and just making me unhappy. And fortunately, we were able to take a pause and we just said, OK, what do we want out of the rest of our life? And it wasn’t that. we didn’t really have any entrepreneurship experience. I had recently reread Rich Dad Poor Dad, so it had awakened this concept of

John Harcar (02:25.323)
Yeah.

John Harcar (02:45.217)
Mm-hmm.

Mike Deaton (02:50.638)
cash flow, get on the other side of the quadrant, where you can be an entrepreneur, an investor. And we decided to take the plunge. And for us, I had been doing a little bit of research behind the scenes and land was at the forefront. And so we just decided to go all in on land. And the beginning of 2017, we went in. We put a budget, we put a timeline, we got a coach, we ramped up a business. And so that was our pivotal moment where we really made the choice.

to do something different and land was what we picked.

John Harcar (03:22.571)
got it. And I’d love to go back and you kind of already answered the question that little purple book a lot of people tell me about. Was there any other I mean, you obviously you’re in I think you said you’re in tech in college and then you’re into the W-2 world. Was there any other influences in real estate outside of that that book? I mean, did you have any family members, friends, anybody that was flipping houses or or had rentals or anything like that?

Mike Deaton (03:28.279)
Yes.

Mike Deaton (03:45.806)
Interestingly, I’m going to say no. However, this is going to be weird. I grew up like my parents were the OG flippers. We, we, when I was a kid, we lived in about 20 different houses in Fort Worth, Texas. Like they would buy an old house at the time for a couple thousand bucks. We would live in it, fix it up. I wouldn’t do it, but they would fix it up. We would sell it and be on to the next one. My dad then in the eighties,

John Harcar (03:54.377)
really?

Mike Deaton (04:13.774)
The metroplex, Dallas-Fort Worth Metroplex kind of took off in Arlington, Texas, which is in between Dallas and Fort Worth, really started blossoming as a suburban place. And my dad became a general contractor and built a lot of spec homes. Well, I worked for him my whole teenage years. I I did all the subcontracting you can think of. It just never occurred to me ever to start my own business or to go into the family business. Things got tough by the time I got into college.

John Harcar (04:27.937)
Okay.

Mike Deaton (04:41.964)
savings and loan crisis, big box home builders came in. My dad struggled as a home builder, and I think I saw that. just, I just had a different path in mind. I wanted to be a doctor. I wanted to make a big salary and all that stuff. it just, so I had the influences. They were just never front of mind. And really it was Kiyosaki and Rich Dad and Poor Dad that sparked that, along with some others like Pat Flynn, Smart Passive Income. He’s not really real estate.

John Harcar (04:45.384)
huh.

John Harcar (05:01.025)
Okay.

John Harcar (05:08.737)
Mm-hmm.

Mike Deaton (05:10.188)
But he was big when I was digesting a lot of content. And he was also promoting side hustles, doing other things, being an entrepreneur. So it all kind of came together around that.

John Harcar (05:20.715)
Okay, and you said you were doing a little bit of research prior to jumping in and maybe researching land. What was the biggest appeal for land to you guys versus flipping homes, building ground up construction? I mean, that type of stuff.

Mike Deaton (05:36.27)
Yeah. part of my process had been listening to podcasts like this, where you hear other people tell their stories. I had heard two separate people on different podcasts talk about landflipping, and they were making just crazy returns on their investment, like high triple digit returns on money. put 20,000 in, they get 80,000 out. And so it really sounded appealing to me. And the process of…

I bought a toolkit to understand a little bit more about how to go about the business. We went to a boot camp. We found a coach, like I said. it it seemed like an easier entry point into the world of real estate than all the baggage that comes along with different forms of asset classes, right? Getting a loan, hiring contractors, the legalese that goes around it all.

John Harcar (06:25.483)
Right. Right.

Mike Deaton (06:31.414)
surprises happening along the way. Land really eliminates all of that. You just purely buy. You make your money on the buy, as they say, right? You buy something under market value and you flip it. And we were skeptical when we started, but I mean, after a few deals, the model proved out and it actually worked. And so it wasn’t long before we built ourselves a income stream coming out of it.

John Harcar (06:39.755)
Mm-hmm.

John Harcar (06:54.699)
That’s awesome. So you got a coach. is your real estate or your land coach?

Mike Deaton (07:00.684)
We went through Mark Podolsky and the Lang Geek.

John Harcar (07:02.689)
Okay, awesome. Why was it important for you to have a mentor or coach? mean, with obviously YouTube U, all the other stuff that’s out there, why was it important to have a mentor?

Mike Deaton (07:14.798)
Yeah, so this was 2016 and you know, the internet and YouTube and all these self-education models weren’t necessarily flourishing like they are today. I mean, today you can almost find anything. We just had the mindset that we wanted this to be our full-time business and we wanted to go fast and we wanted to make limited number of mistakes, if any. And so getting a coach was a no-brainer for us. I mean, we went in, we did the same thing.

John Harcar (07:26.923)
They weren’t as prevalent, yeah.

John Harcar (07:39.393)
Mm-hmm.

Mike Deaton (07:43.886)
I’ll fast forward a little bit, but we’re into some commercial investments as well in multifamily. And we did the same thing. I we found a group, we found a mentor, somebody who’d done it and just kind of partnered and were able to accelerate the journey. I mean, I wholeheartedly encourage anybody that is serious about, I mean, you can lose a lot of money in investment world. And just because you have a coach doesn’t mean you’re not going to lose a lot of money, but you can hopefully avoid, you don’t have to reinvent the wheel and you’ll just go a lot faster.

John Harcar (08:03.521)
And yeah.

John Harcar (08:07.36)
Right.

John Harcar (08:13.673)
Well, you avoid their mistakes, right? And you know what? A lot of people don’t do it is because they have to invest into it, right? But think about it, you know, investing a little now versus losing a lot later. So awesome. So you got this land now. What were some of the struggles that you guys were running into as you were starting this land business? You got the education, you got the, let’s go. What walls were you running into?

Mike Deaton (08:23.886)
Exactly.

Mike Deaton (08:37.804)
Yeah. Yeah. So we were first time entrepreneurs. The model is the model, as with almost anything, right? There are processes. And if you follow the processes, you generally are going to have success. So some of our stumbling blocks were self-doubt at the beginning. And admittedly, our coaching

John Harcar (08:50.305)
Mm-hmm.

Mike Deaton (08:59.182)
It was very clinical. It was very nuts and bolts. We didn’t get a lot of the softer side of things that were helping. Hey, what are you stumbling on? What are your obstacles? How can we pull you through? And so my wife and I were able to lean on each other and we like personal development. And so we were able to kind of pull ourselves through some of those things. But I would say, you know, just the doubt of starting up. took us about six months to go full cycle, to learn the processes, to get some offers out, to transact a purchase. And then it took us a bit to sell our first property.

John Harcar (09:08.235)
Right.

Mike Deaton (09:29.25)
There wasn’t anything in particular that made it hard. It just, for whatever reason, didn’t click for us right away. And so we kind of had to grind it out to get that first sale. Once that happened, things unlocked, and we’d kind of gone the full cycle, and things went really quickly. A few other things like a big part of land is picking a good market. And so we had this old adage in real estate, invest in your backyard.

where you have boots on the ground or a place that you’re really familiar, right? And so we were living in Dallas-Fort Worth and we started looking in and around the Dallas-Fort Worth Metroplex. It just wasn’t a fruitful land market for us in some ways. And so it took us a while to dial in a good market. And that was one of our biggest process-related obstacles, but mostly it was really around just mindset, getting those small early wins and building the confidence that it was gonna work. But then once it did,

John Harcar (10:22.529)
Mm-hmm.

Mike Deaton (10:25.698)
things really took off. it’s similar in most businesses and startups.

John Harcar (10:32.033)
Okay, and then what were you looking for specifically in the land that that Dallas area wasn’t giving you?

Mike Deaton (10:40.622)
Well, so, you know, the land business model is, or at least at the time, and it still is now, it was about, similar to house flipping, you mail out offers to property owners off market, they’re not looking to sell, and so you’re just cold reaching out to off market property owners, and you’re making them a low ball offer, 35 % to value, 40 % to value, and so it’s really a

numbers game and some statistics. And so you may send out thousand offers and you may get two percent response rate. And so it just takes a little bit of time, but that varies market to market. And so a lot of the Texas properties that we were looking at in Northeast Texas were highly valued. And so as you go up in value, that ratio changes a little bit because the sellers are a little more sophisticated. I mean, if you think about it, you own a hundred thousand dollar property or two hundred thousand dollar property.

John Harcar (11:14.561)
Mm-hmm.

John Harcar (11:31.851)
right.

Mike Deaton (11:35.726)
you’re less likely to liquidate it than if it’s 50,000 or 30,000 or even 5,000 in some cases. it was just, that was one aspect of it. We did find some pockets where we had good success, but it was too much success, which raised a red flag. And once we started looking at the properties, were some excessive back taxes. Some of them were in HOAs where there were back HOAs accumulated. And there were just some things that made the numbers not work. And so it just took us a while to kind of…

dial in on a healthy market that we camped out in for a few years.

John Harcar (12:10.721)
Okay. And when you’re when you’re buying the land, are you doing improvements on it? Are you having to rezone it? I mean, what does that whole process look like? Are you just buying low and kind of wholesaling it off? For a profit.

Mike Deaton (12:24.162)
Yeah, our model is purely flipping. And so we go out, like I said, make the offers and let’s say somebody has a property that’s valued at $20,000 on the market. You know, you go out and you can, there’s ways to go and evaluate nearby comps, what have properties been listed for and or sold for. And so let’s just say, for example, it’s, 20 K. Well, we would go in and make an offer of say 8,000. We’d send somebody an offer and say, Hey, we’re willing to buy your property. We’ll, we’ll make you an offer of 8,000. And

plus or minus a little bit, that’s what we usually stick to. And so in that case, we would buy it for eight, we would immediately turn it around and resell it for 20. And so we’ve got 12k baked in profit, probably about 90 % of what we sell, we own or finance. So we carry the note. And so we’ll even put a premium on top of that, we may sell it end of the day for 30,000 or 35,000, because we’re financing it. And so we just like to stack up, yeah, the passive income and sort of a passive income, but stacking up the notes.

John Harcar (13:17.857)
Got it, that was… Yeah.

Mike Deaton (13:24.32)
over time, that gives me lot of peace of mind just knowing I have five years of five-figure income ready to come in or however it stacks up. But that’s the business model. It’s so simple. We don’t deal with contractors or we don’t have to deal with the city or the county in terms of entitling or rezoning or all that stuff that comes with it. We’ve thought about it and dabbled with it, but we make so much just doing the flips that it really doesn’t…

John Harcar (13:52.117)
Yeah.

Mike Deaton (13:54.339)
It doesn’t pay off our sanity versus what we would get out of it.

John Harcar (13:56.481)
Mwahahah

So what does your business look like today? Like what does your team look like? Where are you guys focused?

Mike Deaton (14:05.986)
Yeah, we’re small. mean, my wife and I keep it small. have, we’re real estate professional status, which means we put a certain amount of hours into our businesses actively so that we can then get tax, additional tax benefits. And so usually that means, you you have to be putting in at least 15 hours a week, I believe it is, into your business. And so we stay pretty active today. And so when we started out, we were full time. We were 40 hours a week.

Plus or minus, whatever, both of us doing, learning a lot, but also doing the things. After a few years, you can use VAs in this business. There are standard virtual assistants that you would find anywhere, Fiverr, Upwork. There’s also land-specific services that will already know the processes and you can plug in. There’s ways to use it. We don’t use a lot of those too much anymore. There’s a lot of automation that we leverage. So when we send out offers,

We just do that bulk one time and we’ll set it and forget it and those will go out. We like to do a lot of the client interaction. So if somebody’s interested in selling their property, we’ll reach out directly. If somebody wants to buy a property of ours, we like to talk to them directly. So we don’t add a lot of overhead into our business. We just keep it really simple. And we like it that way. We coach a lot of clients today and…

We teach them the same. I have talked to a lot of land investors who just get underwater very quickly because a lot of coaches teach, sign up for the service, get this VA, do these things. Those are advanced tactics. mean, you really can’t do that until you’ve got your foundation set and you’ve got some cash flow.

John Harcar (15:44.799)
We got some money coming in the door to help pay for some of that stuff too.

Mike Deaton (15:47.662)
Yeah, exactly. so at the end of the day, it’s a business. And that’s where my business and operations experience, I leverage a lot of that in hours. And so we’re really lean. We focus probably 75 % of our transactions happen in Colorado just because we love Colorado. It’s where we live. We love the pine trees, mountain areas. There’s different markets where we can plug into. But we transact all over mostly the Southwest, like Texas.

John Harcar (16:11.167)
Me too.

John Harcar (16:15.968)
Okay.

Mike Deaton (16:16.749)
Arizona, New Mexico, going up north a little bit, Nevada, Utah. But our clients are everywhere. mean, East Coast is great. Southeast is big. There’s just land everywhere. I mean, and you can tap into markets that fit your goal, whether it’s, you know, $1,000 properties or $100,000 properties. There’s a way to play the game.

John Harcar (16:38.493)
Awesome. So let’s talk a little bit, you know, real fast about our topic, which was kind of picking your niche and at least just taking action. Like why is it important to pick, to pick a niche, pick your lane.

Mike Deaton (16:49.516)
Yeah, so I talked to a lot of people that are interested to get into real estate, and they almost have this paralysis of, should I do short-term rentals? Should I do passive investment? Should I do land? Should I do whatever? And it can be overwhelming, because there are so many options, and real estate is so flexible, and it’s such a great way to build wealth, that I don’t want to shortchange the amount of research you should do, but at some point,

John Harcar (17:08.289)
Mm-hmm.

Mike Deaton (17:16.526)
you have to put your toe in the water and try something out. know, land is one where you can start for, I don’t know, $5,000 plus or minus if you want and get things going versus, you know, a short-term rental where you may have to put down a larger down payment and then fix it up or add bezel and whistles all the way up to a commercial investment that may require $100,000 minimum investment or things like that. And so obviously there’s different levels of research.

One of the reasons I like land is because, unlike other investments, there aren’t so many partners involved. And so in a multifamily deal, what we’ve learned is the people that are running the deal are more important almost than the numbers. Because regardless how the business case looks or works, if you don’t have the right partners, they’re not going to execute on a business plan. And so it just adds a really big layer of complexity. And so all that to say,

John Harcar (17:58.347)
Mm-hmm.

John Harcar (18:10.869)
Right.

Mike Deaton (18:16.278)
At some point, you do have to just kind of get in. But depending on the level of investment, you should probably proportionally scale the amount of research that you’re doing before you just plunge in. I I wouldn’t encourage anybody. There’s so many syndicators out there today that I wouldn’t just jump in to somebody that you haven’t properly vetted or a deal that you haven’t vetted. And so there’s a base level of education that you need to understand, a language of the investment, if you will.

John Harcar (18:37.696)
Yeah.

Mike Deaton (18:45.784)
But at some point, there’s no way to know which you’re going to jail with until you do it. So if self-storage calls to you, get into self-storage. Start passively. Yeah. So it’s one of those where you kind of got to go. And I’m the world’s worst. I will analysis paralysis to death. At some point, I have to say, all right, we’re just going.

John Harcar (18:55.593)
Yeah, start learning. Yeah.

John Harcar (19:06.145)
Hahahaha

Well, my next question is going to be because you mentioned, you know, before we jumped on the air, you guys took a little bit of a hiatus and you’re kind of figuring out which way you’re going to go now. So which way are you going? Which way you jumping into next?

Mike Deaton (19:21.614)
Good, good. I don’t know. It’s, you know, we’ve been so busy. We just ramped up our coaching business late last year and we’re doing land. And so we haven’t intentionally sat down and really thought about things. I already have a baseline of information with multifamily. And so it would be an easy one to get back into. The deal flow is just not quite there yet. It’s getting there, but just…

Since there’s a lot of distressed properties coming onto the market, and so I think it will be a good time just because of the way the business model works with bank lending and a lot of the refinancing that’ll have to happen. I personally like the idea. So syndication is a lot like flipping. You’re in a deal for five years, six years, and then you get your money out ideally, and then you’re putting it into something else. I like the idea of something that I would own.

John Harcar (20:07.019)
Yep. Yep.

Mike Deaton (20:15.446)
long-term, however long I want to, minimal to no partners. And so, you know, if that’s a small multifamily or even a short-term rental, a vacation home, somewhere in that lane is probably where we’re going to gravitate.

John Harcar (20:28.915)
OK, awesome. What do you feel are your keys to success?

Mike Deaton (20:36.898)
Gosh, so I would say really just business fundamentals is a starting point. It’s all about cash flow. If you don’t have cash flow as an active business person, your business is going to crater. so, you know, land, there’s a lot of different ways to play it, both on the buy side and the sell side. And so it’s really about optimizing the variables to make sure things are cash flowing. Beyond that, it’s just trying to keep your feet underneath you and

If anything, I may be overly cautious. Like I sometimes think I could probably take a few more risks and grow faster, but man, we’re comfortable. We have a beautiful house. We live in the mountains. We get to travel. My wife’s from Romania, so we go to Europe for like six weeks every year. Life is good. And so it’s hard to really grind and risk too much because life is really good.

John Harcar (21:30.241)
No, it sounds like it, man. It sounds like you got a great business put together. If folks that are listening on this want to get in touch with you, if they want to learn more about you, maybe you’re coaching or stuff like that, how do they get in touch? What’s the best way to reach out?

Mike Deaton (21:41.976)
So we have a website, it’s flippingdirt.us. And if you go to flippingdirt.us slash freedom, I’ve made that a bit of a landing page for podcast listeners. It has our contact information. You can schedule a meeting if you want to talk shop or anything. I have a few resources. If people are interested in land, they can understand high level how that works. But that’s really the best one stop shop just to however people want to get in touch, whether it’s email, a phone call, or text. That’s the best jumping off point.

John Harcar (22:09.633)
And he says flipping dirt dot US forward slash freedom. Sweet guys, I hope you enjoyed this show. I appreciate you coming on here and sharing all this information. Man, it’s incredible. You guys take some good notes. I hope you took some good notes and reach out to him if you got any interest in land flipping. It’s a great business from all the people I’ve known that have been in it and that are in it. So Mike, thank you again. And guys, we’ll see you on the next one. Cheers.

Mike Deaton (22:13.485)
That’s it.

Mike Deaton (22:35.63)
Thank you, John.