David started like a lot of us, read Rich Dad Poor Dad and started taking action with real estate. He started driving for dollars, and looking up the owners at home after driving. Realizing that finding the owners was taking too long, David went to work on a solution. The outcome was the DealMachine app, which can look up a property owners information for you in real time, while you’re still in front of the property. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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David Lecko Background:
– CEO of DealMachine, a real estate investing app that puts you in touch with any property owner via direct mail, phone, and email
– When you see a house, simply take a photo and instantly see who owns it, then choose how you want to get in touch with the owner
– DealMachine launched in the summer of 2017, and users report making as much as $25,000 over the last 4 months
– App finds houses that are run down, and contact the owner via dealmachine and then sells the properties to an investor
– Based in Carmel, Indiana
– Say hi to him at: dealmachineapp
– Best Ever Book: Top of Mind by John Hall
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TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, David Lecko. How are you doing, David?
David Lecko: Hey, I’m doing great. How are you?
Joe Fairless: I’m doing well, and nice to have you on the show, my friend. A little bit about David – he is the CEO of DealMachine, which is a real estate investing application that puts you in touch with any property owner via direct mail, phone and e-mail. So when you see a house, you can take a picture and instantly see who owns it and then choose how you want to get in touch with the owner.
David is also a real estate investor. He has a five-bedroom primary residence and he rents out three of those bedrooms, and he’s also about to close on another property. He’s based outside of Indianapolis, Indiana, in Carmel, Indiana, and you can say hi to him or learn more about his application at DealMachineApp.com, which is in the show notes.
With that being said, David, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
David Lecko: Yeah, of course. I read Rich Dad, Poor Dad back in 2015, and I got interested in real estate. I went to my very first meetup, and they actually had this segment of the meetup that everyone would share their goals for the upcoming year, and the crowd would vote on who had the best goals, and they would win an iPad. I actually won the iPad on my very first meeting. My goal was to earn $3,000 a month in passive income, because I knew that that was my expensive, and then once I got to that point, my living expenses would be zero and I would be free to work on some of my passion projects and crafts, which is software development.
So along that path of looking for how do I get a few homes that are going to produce $3,000/month, I started doing this deal finding technique called driving for dollars. I’m sure a lot of you have heard of that before, but if you haven’t, it’s basically a technique where you look for an abandoned home, and you want to get in touch with the property owner and offer to buy it, because if it’s abandoned, they’re probably making money on it and they might need to sell it quickly.
So basically, I was doing this technique and writing down all these addresses, and I just realized I kept procrastinating looking up the owner and setting up the printer. I didn’t even have my printer set up. It took me a whole episode of Friends to sit down and look up all the information that I needed. That’s when I realized the driving for dollars process was just taking me too long, and that’s why I built an app. I had a software background and I just built it for myself. Then some friends wanted to use it too, and that’s what became DealMachine.
Joe Fairless: So take us through how it works.
David Lecko: If you’re in front of the house, you can just use your app to take a picture of the house; then it will look up the property owner right there. You can tell if they bought it recently or if they’ve owned it for a while, and how much they own on their mortgage, to decide if you want to send direct mail. If you do wanna send a direct mail to the owner, you can just press a button in your app.
The direct mail is actually a lot more personable than a traditional postcard or yellow letter than an investor might send, mainly because it features a picture of the house that you took with your smartphone, and that leads to a little bit higher response rate, we’ve noticed.
Joe Fairless: Is there a way to simply take the picture of the property, have the owner be pulled up with their contact information and then not send them a direct mail, but then export that spreadsheet to your desktop?
David Lecko: There is. There is a website companion to the application on your smartphone that you can actually export all of your data to if you wanted to. But we found a lot of the users that are doing really well with DealMachine appreciate the one-click and then they’re done, and they don’t have to take any additional steps, or use any spreadsheets to handle the direct mail or follow-up.
Joe Fairless: Oh yeah, absolutely. That certainly serves a need, and bravo for you coming up with it and identifying the need through your own experience and then actually doing it. It’s one thing to have the idea, it’s another to actually execute the idea. Money is always made in the execution, not in the idea.
The reason I was asking about that is because that would be your typical consumer, because I imagine most of your clients are single-family home investors, whereas I’m thinking of apartment communities, and I wouldn’t want a postcard being automatically sent out to the owner, I’d want to personalize it a lot more, since I would do much less outreach, but I’d want it to be really high-quality… But it would certainly save my team time if we had the ability to be in front of the property, the apartment community, take a picture, and then it automatically looks up the information so that we don’t have to then go on the county website to do it.
David Lecko: Right, right. I think another thing that your team might use, since you are doing more targeted, is if you wanted to get in touch with the owner right away, or if the county record showed the owner as living there, but you can obviously tell they don’t, we offer an enhanced search option; a lot of listeners may be familiar with the skip trace terminology, which basically means you can obtain the user’s landline and mobile phone number, e-mail addresses, as well as any other properties that they own, and that’s also possible within the app… So again, you don’t have to submit a bulk list, or you can just get the information right there in front of you.
Joe Fairless: That’s great stuff. I’m on your site. For that skip tracing component – what’s the cost for that type of service?
David Lecko: Actually, we have a couple monthly plans. I’ll start with saying if you just wanna try the app, it is a couple free postcards that you can send to yourself just to test it out, and then after that it’s $2/postcard, and if you wanna do 55 or more, then you can start getting a significant discount in those postcards. So we have a $99/month plan that includes 55 postcards per month, as well as all the owner lookups, and that includes 15 of those skip traces as well. Additional skip traces are 99 cents.
Joe Fairless: Cool, that’s interesting. How has it been received so far?
David Lecko: We are about four months old on the app store, and we have 30 subscribers that are on the $100/month or on the $250/month plan. We’ve noticed that the best users are the ones who are part of a coaching program, or they already know what they’re doing. We also have a lot of users that are just like trying it out, but we’ve really noticed that a lot of people have success when they already have a plan and they’re already driving for dollars.
They can just really appreciate the convenience of what the app does.
Joe Fairless: Bravo! What are you doing to get the word out, besides having conversations on podcasts?
David Lecko: We’ve started using Facebook ads, and we turned those off about three weeks ago and it’s grown organically through some of those coaching programs where some of our Facebook ad viewers were already a part of. So they’ve just been sharing it — you actually get $6 of credit each time you share the deal machine app with your own promo code, and then you earn $6 of credit, as well as the other person who uses your promo code to sign up. So that’s how we’ve actually gotten a lot of our users, is through that sharing.
Joe Fairless: Let’s talk about the mechanics of the technology and how you’re able to pull in this data… I believe you’re scraping the county websites in order to get that information. How does that work exactly?
David Lecko: We have three different types of data sources, and the very first level, you’re absolutely right, is we have links in order to get that information from the counties. Some counties don’t have all their info online, and that’s when we rely on the second tier data provider, that is already built a system to gather that information, even if it’s not available online.
Then the third tier of information is coming from a skip trace type provider where we can actually find out their phone number, e-mail, and then any additional properties they own, which is especially helpful if the county record says they live in a property that you can clearly see as vacant. You can kind of expand your reach using those other addresses.
Joe Fairless: First level – county. Second level is what?
David Lecko: Data provider.
Joe Fairless: Data provider. So you have to pay for a service on your side to get access to that information, and then you provide it through the application?
David Lecko: Yes, that’s true. And we actually don’t technically charge for the owner look-up, and we really just eat that cost and pass it on to somebody who’s using our app.
Joe Fairless: And then the third is the skip trace where you partner with a company that does skip tracing, and the same is number two?
David Lecko: Exactly. So the benefit is since we can partner with a skip tracing company, we can provide the one-off skip traces as part of the monthly plans, and then the additional ones at a lower cost than you traditionally would be able to just doing like a one-off skip trace.
Joe Fairless: What’s an aspect of the app that has evolved since you’ve launched it, and why?
David Lecko: It really started with just direct mail, and that’s all it did. So the most recent evolution is just finding more data with the skip tracing option, and that’s mainly because the more data you have and the more ways that you can reach out to the owner… We’re answering the questions and the requests that our users have. So everything that we’re adding is a request from what the users are telling us.
Joe Fairless: Based on your experience as a real estate entrepreneur, what is your best real estate investing advice ever? It doesn’t necessarily have to be as an investor, but as someone who has created a real estate-focused company, what’s your best advice ever?
David Lecko: Oh, man… I am reading this book called Top Of Mind by John Hall, which is not a real estate investing book, but he talks about whenever you have a product or a company, somebody else may copy that product or the service your company provides, but the thing they can’t copy is how you communicate to your customers. So I’m just becoming more and more passionate about helping real estate investor apply that to their business, especially because I see a lot of the postcards that say “Urgent notice! We buy houses!”, and I think that they can really start to cut through their competition if they communicate in a more natural way, that’s in line with their natural voice. So that’s one piece of advice that is just top of mind for me right now.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
David Lecko: Absolutely!
Joe Fairless: Alright, let’s do it! First, a quick word from our Best Ever partners.
Break: [00:14:12].01] to [00:15:04].22]
Joe Fairless: Best ever book you’ve read?
David Lecko: Well, I’d say Top of Mind by John Hall is right now what I’d say.
Joe Fairless: Let’s talk about quickly the primary residence that you purchased… Five-bedroom, you’re renting out three. Tell us about the business model of that.
David Lecko: Of course. I was super interested in real estate, and I was also renting a room, so I figured the best way for me to get started in real estate and investing was to buy a primary residence and have some other people help me pay the mortgage, and get used to what it’s like to have tenants and to respond when something’s wrong in the house. Basically, my primary mortgage is $1,300/month, and each of my tenants in each room pays $550. That allows me to provide them the best possible place in our neighborhood, where there’s not affordable housing, and it also helps me build equity in my property without costing me any money directly.
Joe Fairless: Oh yeah, you’re basically covering your mortgage. You rent out three, and each of them is $550, so you’re more than covering your mortgage.
David Lecko: Exactly. I actually pay the utilities too, so I don’t have a ton of cashflow, but what it did is it reduced my living expenses and allowed me to build equity.
Joe Fairless: That’s great. And are you at your $3,000/month income through real estate yet, or is that still a goal?
David Lecko: I’m still working towards the goal, and what I am really excited about though is that I don’t have any rents or living expenses, and I actually do cashflow a little bit from that property. I have saved up some cash to buy a second house with four bedrooms in an area that’s very popular for recent college grads to live. It’s a property that would traditionally rent for $1,100, but since it has four bedrooms, which is a rare find in this area, what I wanna do is I wanna rent out to a recent college grad for $1,500, and then he can rent to each of his buddies for $500. So as long as he keeps the house full, then he actually would live for free. That’s something that so far has worked for my primary residence, and I’m really anxious to try it for this rental property as well.
Joe Fairless: What’s a mistake you made on the transaction of that five-bedroom?
David Lecko: I can’t say there was a huge mistake. I knew the property was owned by an investor before I bought it, so I wish I would have slow-played the purchase a little bit more… But I was just really anxious for my first deal, so I probably played a little more than I would have had to. That said, it was the cheapest house in the neighborhood, so I still think I got a good deal; I just feel like I could have even paid less if I had just been less rushed in the transaction.
Joe Fairless: What’s the best ever way you like to give back?
David Lecko: I feel like it’s really addicting for me to continue working on the deal machine app, and totally let that be driven by what investors want. So I’ve just really been spending a lot of time talking with people, even if it’s somebody who’s not going to buy the app, or has bought the app, and just generally provide anything that I absolutely can to be helpful, whether it’s to build a feature in the app, or make an introduction to somebody that’s gonna be able to help them, such as find a lender, or find somebody that they could partner with on their first deal.
Joe Fairless: How can the Best Ever listeners get in touch with you?
David Lecko: They can e-mail me at David@DealMachineApp.com.
Joe Fairless: David, I’ve really enjoyed learning about this and learning about the origin of how it came about, as well as the functionality and just different technology in apps as real estate investors that we should be aware of… Because as real estate investors we’re looking to get some deals done, and if there’s a tool that can help us get it done more efficiently, then by all means, we should be aware of it. I’m grateful that you were on the show.
Thanks for talking about your business, how you make money, the evolution of it, and lessons learned along the way. I appreciate your time. I hope you have a best ever day, and we’ll talk to you soon!
David Lecko: Okay, thanks so much!
