June 28, 2023

JF3219: How to Use AI to Maximize Your Real Estate Investing Efforts ft. David Lecko



David Lecko is the CEO of DealMachine, an app designed to help real estate investors and professionals streamline and automate the process of finding and contacting property owners. In this episode, David discusses the pain points he encountered as an investor that inspired him to create DealMachine, how AI is revolutionizing the world of real estate investing, and three practical steps you can take today to incorporate AI into your life.

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David Lecko | Real Estate Background

  • CEO of DealMachine
  • Portfolio:
    • Nine single-family rentals
  • Based in: Austin, TX (invests in Indianapolis, IN)
  • Say hi to him at: 
  • Best Ever Book: Humor, Seriously by Jennifer Aaker
  • Greatest Lesson: Using AI to help with my own investing and content creation.

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Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, David Lecko. David is joining us from Austin, Texas. He is the CEO of DealMachine, a mobile app designed to help real estate investors and professionals streamline and automate the process of finding and contacting property owners. David's portfolio consists of nine single-family rentals. David, thank you for joining us, and how are you today?

David Lecko: Thank you, Ash. I'm doing fantastic. I'm having the Best Ever day.

Ash Patel: Awesome. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?

David Lecko: Yeah, my life before real estate investing sucked. I was actually working so many hours, I was the only software developer and tech support/Customer Success person for a small company. And I had to sleep with my laptop under my pillow, and I had to bring it if I wanted to go out to a restaurant or a bar, because I just didn't know when a bug was going to happen, and I was the only person who could fix it.

So after doing that a few years, I learned a ton at that job, but I was totally ready to move on do my own thing... Because I was basically putting in the work that you'd have to do to start a new company, but I wasn't the owner. So that's whenever I found out the owner of that company also had real estate, and I was like "Why do you invest in real estate instead of stocks?" And he said, "Because, rule number one, is you never want to lose money. And if you buy the property right, it will always cashflow, as long as you manage it well." So I set out to find my first rental property.

Ash Patel: How long ago was that?

David Lecko: That was in 2016.

Ash Patel: And what pain points did you identify to start DealMachine?

David Lecko: I actually looked for rental properties, and he was a little bit dismissive. He's like, "Well, I bought these in 2008. I'm not sure you can find a deal like that now." And it was true. I looked at what was for sale online, and I didn't see anything that would cashflow. The price that the realtor was asking was too high compared to what I could rent it for. So I just knew this property wasn't going to make me money every month, like he said should be my goal.

So I actually went to a real estate meetup and found people who were buying deals all the time, the only difference was they weren't looking for properties that were listed for sale, they were doing what's called driving for dollars. And they suggested that I do the same, which is looking for a rundown house and contacting that owner by writing them a letter, saying that you'd like to make an offer on it, and doing that enough times until somebody says yes, and gives you a discount, because they just really want that cash, they need to solve a problem in their life, and they would not want to fix it up and sell it with a realtor... So that's what I set out to do. I just didn't actually follow up though, because I was driving around so much, and having a freakin blast... But I missed out on what could have been a great deal, Ash because I drove by, and somebody else was working on it. I looked up who owned that property; it had just changed hands, they had just sold it for a price that would have been an amazing first deal for me... So I built this little thing on my cell phone that next weekend that was gonna let me pin the house, look up who owns it and send a piece of mail, since that was the part of the process I was struggling with. So that was back in 2016, and that's why I did it.

Ash Patel: What's the magic of your software? Do you use non-publicly-available information?

David Lecko: I think the magic is -- I didn't even make the software for anybody except me. It wasn't meant to be a business or anything like that. But the common advice was go driving for dollars, and it's like a struggle to do all those pieces. So I just made that thing everybody else was doing, easier. And there are some other options out now, once we had a lot of success... And I put it on the app store, because people just were like, "Hey, I wanna use that thing." And a lot of people found it that way. But it's just designed to make that process that you're already going to go out and do so much easier... And I think the true magic is just like it doesn't crash. The bar is not too high... It's the smoothest app out there available for that, and it's actually very, very simple.

We had, after a lot of growth, requests to build this feature, that feature, this thing, that thing... So many other features. But it actually made it harder for people to be successful, so we've spent a lot of time in the past couple of years focusing on the quality and the simplicity of the experience, so that you have confidence when you're doing this; you know you're adding the right types of properties, you know those postcards are getting delivered, you see when they're getting delivered... So the data we use is actually publicly available. We buy it from First American Title Company and get daily updates... And it's just way easier than looking at your county websites. It's mobile friendly, everything is in that mobile app.

Ash Patel: Does this app allow you to send out mailers as well?

David Lecko: Yes, it does.

Ash Patel: Okay. And then -- look I'm a non-residential commercial guy... Can I send this to retail strip center owners, or office building owners as well?

David Lecko: 100%. If it's an LLC, it'll go to where the LLC address is. And you can also skip-trace that LLC to get the owners and figure out who owns that LLC, and you can set it to those addresses, too.

Ash Patel: How much does all this cost?

David Lecko: It starts at $59 a month. The postcards are 55 cents; it's first class, and it includes postage and tracking.

Ash Patel: Alright, now let's dive into AI. Everybody is raving about using AI for real estate... What are people doing right, and what are they doing wrong?

David Lecko: Oh, that's great. The right thing is actually using AI. Because if you're not getting used to the actual new technology, you're going to be left behind. It's not going away. It's like not knowing how to use Microsoft Office, or Word, or Excel. So I think using it is really important. And you can use ChatGPT, but it doesn't know real estate data. But if you use the DealMachine AI assistant, you could chat with ChatGPT and it knows the real estate data when you've got the property open. So it can help you calculate things like after repair value, or if it would be a good wholesale deal, fix and flip, or rental property... I just used it the other day to write my rental property listing for a new property I just bought last week... So those are actually really, really good things. And if it makes a mistake, I think that you could just tell it that it made a mistake, and it's very good at fixing it. So I would say that's a good best practice, is actually just keeping an eye out for what it's producing, and utilizing it, and then just telling it that it made a mistake, and it'll actually correct it.

Ash Patel: What are people doing to get an edge over their competition with AI?

David Lecko: Well, just sheer speed. I think it takes some effort to comp a property, but if you ask the AI assistant, it could do that so much faster, give you confidence just to have more conversations. Or if you're getting hung up on "Oh, I'm not sure what to say", well, you can always ask the AI; you can tell it this situation, and it knows the real estate data that you're looking at the property there, and you can have it tell you what your cold call script should be, or help practice negotiating.

So I think that usually it gives you an advantage. It gives you a little bit of superpowers, so you can be more productive, and get over those beginner feelings of like, "Oh, I'm not going to do this because I have analysis paralysis", the AI can help overcome that.

Ash Patel: And when we say AI - let's just call it ChatGPT, because that's essentially what it is today.

David Lecko: That's exactly what we use. We use Open AI ChatGPT; the difference is it just knows the real estate data when you're talking through it through DealMachine.

Ash Patel: So your thoughts on using AI for social media posts, blog posts, and really content creation.

David Lecko: I have a really cool AI tool that I use for my podcasts... I give it the whole episode, and then it cuts five short clips, and it ranks them in order, and I use those to post reels. So that saves me a lot of time, because otherwise I'd have to watch the whole actual episode, find the best places. But the AI can tell me where the best places probably are based on the hooks that it detects, and the story that it can piece together. So that's called opus.pro, and I really really like that tool.

For the podcast descriptions, I'll often give it the whole transcript of my podcast, and I will actually say "Can you please summarize this podcast?" Sometimes I'll say like, "Oh, do that again, but please emphasize how this person got their first real estate deal", because that's what my podcast is all about. The DealMachine Real Estate Investing podcast, it's all about helping somebody get their first wholesale real estate deal. And so then I'll post that typically, and it's pretty good. I might just have to ask one or two times to tweak it towards my listener, who I know is looking for their first wholesale deal.

Ash Patel: Do you say please and thank you when you're talking to AI?

David Lecko: I do. It makes me feel better.

Ash Patel: It's amazing how many people do that.

David Lecko: They're scared. Yeah, it's like, they need to get on the good side in case the AI becomes evil.

Ash Patel: That's exactly what it is, yeah. They're worried at some point that if the universe changes, they want to be known as AI-friendly. That's awesome.

David Lecko: Yeah. It's just a good idea to be friendly in general, I think, Ash.

Ash Patel: Look, I'm the opposite. Siri has stopped talking to me for a day because of things that I've said. So I want to dive back into AI for social media posts, where people need to do their daily Facebook or LinkedIn posts. Your thoughts on that.

David Lecko: I actually don't use AI to write my social media posts. The meat of my posts is actually in the reel, the way I do mine, the short-form video. And then the actual description at the bottom is typically just a one or two-liner. So I'm not using AI for that currently. It doesn't seem worth the time to go make a one-liner from AI, if I'm counting on the meat of the post to be in the actual video.

I know Gary Vaynerchuk says if you're going to focus on LinkedIn, think of yourself as a news station, and you're reporting the news. And then I think AI can be very helpful to generate long-form posts on LinkedIn, for example, when you're reporting the news about stuff that happened. Add in your own stories, and then hit that as a post. That's what I think I would do, is use the AI to help save you time, but then add in your own stories that obviously it won't be able to know, and that would make a really higher quality post. I don't think you can just post exactly what the AI says, because I think people will find that out. They can kind of tell.

Ash Patel: Yeah, I agree with you. Your personality's got to come through in your posts, especially social media. People have to get to know you, like you, trust you through those platforms.

David Lecko: Ash, I want to know, do you use AI in any way?

Ash Patel: Great question. I have two people that work with me. My one employee is a college grad, 23 years old, uses it all the time. I've got two business partners that will literally send him tasks to do, and he'll rat on himself, and he'll be like, "Oh, I just plugged this into ChatGPT, and here's what it spit out." And meanwhile, they're like, "Oh, my God, the bio that you created for me was incredible." So I taught him "Stop ratting yourself out. Take credit for it."

David Lecko: Yeah, exactly. ChatGPT is a lot better. I've used it as well. It's just better at summarizing things, or writing a bio... That's great to hear you guys are utilizing that.

Ash Patel: I'll use it for cleaning up things. I don't use it for content creation. I write my own newsletters... And -- God I spend four or five hours on each one, and it's a page long. But I need that still to come from me. I don't plug that into the ChatGPT at all. It's got to be me, it's got to be my nuances, how I talk... So there's no substitute for that.

David Lecko: Sure.

Ash Patel: Where do you see this going next?

David Lecko: I have a friend. She's an author, her name is Tiana Lawrence, and she's written four books. One of the most notable ones is actually "NFT's for Dummies." She's really smart. But she previously recorded audio books, bBut she just actually signed up for a service to have AI narrate her next book, called Stubborn Joy. Actually, she just did a two minute recording, so the AI could understand what her voice sounds like, and then it narrated the whole book in her voice. The whole book. So it literally saved her however long it takes to narrate a book; hours and hours. And she's going to be publishing that. It sounds just like her. It's absolutely incredible.

Ash Patel: Yeah. Joe Fairless' team, they were playing around with that... And they have him recording a Burger King commercial. So yeah, it's truly amazing. Alright, David, so there's a lot of people out there that maybe have never used AI, ChatGPT... What's your practical, step by step advice? How can they start incorporating that into their workload, into their day, maybe into their scheduling?

David Lecko: Yeah. Go to Open AI and create an account. Go get the mobile app that Open AI I published last week, and get that on your phone. Make your homepage - instead of Google, make it the Open AI ChatGPT page, so that's the first thing that comes up. And then get used to asking your questions on chat up to instead of Google. That's going to be a great way to just build that muscle memory, so that you get used to using this new technology.

If you're actually seeing that it gets something wrong -- it's important to know AI and generative AI works. The way that it works is it's always trying to give the very best word. It analyzes what the best word to say, is one word at a time. So if it's wrong, it's very confidently wrong; if you catch it being wrong, you just have to say, "Hey, I think you messed up there." And if it does do the wrong word, it can go very far down the wrong path. So you might just be surprised at how wrong it is. But it's very good at correcting itself, because if you say "Hey, I think this part's wrong", it will then do the other path for that word slot, and then it will be very accurate the rest of the way, and they'll even say, "Oh, I'm sorry."

So knowing that generative AI is always doing it one word at a time, using weights to figure out what's the best actual word to go next, that kind of helps you understand why it's wrong sometimes, why it's so confident about it, and why it's actually pretty good at fixing itself.

And also, these things aren't very good at math sometimes. But one really good way to actually make it better at math is to use what's called recursion in your prompts. So if you said, "What's three plus four, times seven, divided by 12, times nine?" Some math problem like that; it would probably get it wrong. But if you gave the same prompt, and then you said, "and show each step of the way", now it's gonna break down the order of operations for doing the equation, and it'll get it right. So it's amazing, it's the same question, but just by adding "and show the steps along the way", increases the accuracy significantly in the actual response. So that's why prompt engineering is becoming a new job, is because if you have a little bit of understanding of how it works, then you can actually increase the quality of the outcome, the output of the generative AI. So the very first step is just get used to using it, like I said, by getting that app, and getting that homescreen set to the new page instead of Google.

Ash Patel: Great advice. And like you said, you have to do it once. I just did the same thing with the Wall Street Journal. Every time I open up my browser, it pops up. Because otherwise, it's one of those afterthoughts that I may or may not get to. This time it's thrown in your face. I love your advice, yse ChatGPT instead of Google, and that forces you to start using it if you don't already. How is DealMachine using AI?

David Lecko: So like I said, I use it to break down my podcasts and create the descriptions for that... And then in the actual app, there's also an assistant; you could chat with an AI assistant. So when you're looking at properties, you can ask it questions like "How much should I offer on this? This is the type of deal that I'm doing." So we've incorporated literal ChatGPT with the real estate data that we have, so that the AI is smart enough to start answering your real estate questions.

Break: [00:17:35.06]

Ash Patel: How long has DealMachine been around?

David Lecko: DealMachine has been around since 2017, but the AI assistant - that came out a month ago.

Ash Patel: What's the feature that you're working on next?

David Lecko: It's so funny... For five years I thought we should do this. A lot of people send direct mail to homeowners from DealMachine. And you can tell when that mail gets delivered. But if you're brand new, you're probably putting your cell phone on the mail... And I don't know about you, but I get a ton of spam calls. So a lot of people end up missing those calls, or they get lost in the spam calls that they're also getting... So we want to provide the ability to just put a phone number on the postcard for you, that still actually forwards to your phone, but it's gonna give you a push notification at the same time to be like "This is a call from your postcard. You should answer this prepared for that." So I'm very excited that we're going to be doing that later this year, and you won't have to use your cell phone for sending out that direct mail.

Ash Patel: The people that are killing it with direct mail - what are they doing right?

David Lecko: Most beginners don't send enough. They think that they've found 20 properties that look rundown, and they reached out one time, and they didn't get any deals, so they say "It doesn't work in my market." But you've got to know what a successful investor is doing, how many mail pieces per deal they're sending... And then you're a beginner, so double it, because you need to leave room for - you're not as good as somebody who's done it for years. So that would be my number one piece of advice, is go to a meetup, talk to someone who's successful - not somebody who's trying to do it, but somebody who's actually successful, knowing their KPIs, and then doubling the effort that they're doing, and committing to doing that, before you say "Oh, it doesn't work in my market."

Ash Patel: Postcards or letters? What gets a better response?

David Lecko: You get better response with the ballpoint letters that we have. They're more expensive, so a lot of beginners use the postcards instead. The way we boost the response rates on the postcard is - with DealMachine you take a picture of the house, it puts that on the postcard. So that's going to stand out, because it's not a Google image. You could tell, somebody was right there at that property. And most frequently, they're like, "I had a bunch of mail, I actually called yours because it looked the most personal. I could tell you were actually here." I still hear that today, even though DealMachine has been around for seven years, and that's exactly a core feature, that I wanted to boost the response rate. So I'm still hearing that it is.

But the ballpoint letters - they're going to be a buck 25, rather than 55 cents, but they're written with a pen, and so if you've got the budget and can stick with it long enough at that higher price point, those will get a better response rate, too.

Ash Patel: David, how many follow-ups is correct? What's the right number?

David Lecko: General marketing advice for follow ups is at least 10 before somebody responds to your marketing. I always tell people they need to send at least six, and then I try to have them find more properties as well, because they typically have more time than money... So that's how I cut the mail they need to send, and then have them just find more property. So if you're in Ohio, or if you're in Indianapolis, you probably need to find 500 rundown properties, and send them six times each. If you're in a higher price market like Seattle, you might need to find 1,500 properties that look rundown and send them six times each. So it takes a little more work in those higher-priced markets, but the payoff's bigger; the average wholesale fee up there as 30k-40k dollars, whereas Ohio, Indianapolis it's maybe 10k-15k. So that's the difference, and that's why you could do this absolutely anywhere, you just have to know your KPIs and commit to doing enough.

Ash Patel: Do you help extract the data to target those homes that they're looking for?

David Lecko: The data just pops right up in the app: who owns it, what's their phone number, where should you send mail to.

Ash Patel: In terms of criteria, if I'm looking for absentee tax addresses, outside the state, that kind of stuff.

David Lecko: Oh, the criteria. If you're driving for dollars - this is a huge misconception; you just need to find rundown properties. It doesn't matter if it's absentee owner or owner-occupied. In fact, most of my driving for dollars deals have been owner-occupied. We do have a portion of the app where you could just pull tax liens, like you said - people who actually haven't paid their taxes. And that property might get sold at the tax auction; you could pull that list from DealMachine and just send mail to those properties, even if you haven't driven by. There's a whole bunch of other data like that, that you could pull; probate, pre-foreclosure... And that's all available in the app, that you could just pull and send mail to as well.

Ash Patel: David, in terms of sending out letters and postcards, how important is it to include something personal about you?

David Lecko: I think putting your face as the photo, rather than a logo of your company is going to give you a better response rate as well. I think people want to do business with locals, rather than a big corporation whenever they're trying to get their problem solved and it's something as big of a deal as their house.

Ash Patel: Yeah... And the reason I asked that is I had a student who sent out - I think it was 100 letters, and it was only in a very small radius near where he lived. He had a picture of him and his wife, and said, "This is where I live. I want to buy your property." And he got a 10% response rate. Now, this is for commercial buildings.

David Lecko: That's huge.

Ash Patel: Yeah. Again, commercial, medical, office, industrial buildings... And the response was not only people that wanted to sell, but other people that are like, "Tell me more about what you're doing. I'd love to invest with you." And his two attributes that he attributed that success to was having a picture of him and his wife, and emphasizing the fact that he's local.

David Lecko: Good. We have two separate experiences that point to the same thing, so I think we're onto something there.

Ash Patel: Yes. 100%. That's awesome. David, what is your best real estate investing advice ever?

David Lecko: My best real estate investing advice ever is to realize if you haven't gotten your first deal, it's not because the market condition's not right, it's not because your markets too saturated to actually do a deal... It's actually because you're scared. And that's okay, but I think you'll actually just gain a lot of experience by doing that first deal. It doesn't have to be the very best deal, the biggest profits; you'll never know if it was the biggest profits or not if you haven't done other deals to compare it to. So just make sure that you're taking action and not getting stuck. That's my Best Ever real estate investing advice.

Ash Patel: David, are you ready for the Best Ever Lightning Round?

David Lecko: I've got some Best Ever answers, you know it!

Ash Patel: [laughs] What's the Best Ever book you've recently read?

David Lecko: The Best Ever book I've recently read... I read all these last year, by the way. The best one that I read - it's actually called Humor Seriously, and it's why you should use humor in your work, and with your family, as long as you are not being inappropriate. Making a joke, even if it's not funny, is 100% going to make the other person like you more, and perceive you as more confident and competent. And I just love the fact that because we have a remote work environment, so it changed how I ran my meetings. Instead of me trying to get people to pay attention, I'm just having a blast cracking jokes that aren't even funny, but it's very engaging. Some people do laugh, probably just because I'm in charge, but I'm having a blast. I can tell, I've heard from my team, they're very more engaged, and they think it's actually the best meetings they've ever had. So that's actually my favorite book... Even though I've read a bunch since then.

Ash Patel: I wrote that down. That's good. You set the tone for your group. David, what's the Best Ever way you like to give back?

David Lecko: The Best Ever way that I like to give back is I just gave my friend Loopy G, who's an aspiring real estate investor, he's been at it for a few years, but he wants to level up his business, the Profit First book, which was gifted to me when I started my business. It's just an amazing way to run your business so that you're guaranteeing your profit. And if you know how much money to take out every month, and you don't feel guilty about it, it just made being an entrepreneur so much less stressful. So I just always tell people and give that book away, I've got multiple copies. That's my number one Best Ever way to give back.

Ash Patel: David, how can the Best Ever listeners reach out to you?

David Lecko: Check out my podcast, DealMachine Real Estate Investing podcast. on Instagram I'm @DLecko, and I would love to connect with you there.

Ash Patel: Hey, David, I've got to thank you for your time today, sharing some incredible tips on Open AI and sharing what you're dealing with DealMachine, so thank you for your time.

David Lecko: You too, Ash, and it's been a pleasure to see how you host your podcast, and I would love after this if you and I could play some chess matches on the chess.com app, which I know you love to do, because I know you said you beat Joe Fairless a couple of times.

Ash Patel: A couple. Maybe like 2% of the time. So yes, let's do it. And your podcast is called...

David Lecko: DealMachine Real Estate Investing podcast.

Ash Patel: Awesome. David, thank you again for your time.

David Lecko: Thank you, Ash.

Ash Patel: Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five star review. Share this podcast with somebody you think can benefit from it. Also, follow, subscribe and have a Best Ever day.

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