Epic Real Estate Investing - Driving for Dollars with Epic - David Lecko | 561

Episode Date: January 7, 2019

Today, our guest, David Lecko is driving for dollars with Epic! He shows us how to implement this strategy in a time-honored way via his DealMachine App. So, stay tuned and learn how the app works, what properties you should avoid, and where to look for your deal finders.  Learn more about your ad choices. Visit megaphone.fm/adchoices

From coast to coast, epic investors are doing the most. It's time for another epic field report. Okay, I am on the phone with Mr. Enrique Santana, an RIAA's client, and he had just posted in Follow Through Friday, his first deal that was not a turnkey deal, so I wanted to bring him on and talk to him about it. So Enrique, hello, how are you? Good, good. How are you doing? Very good, thanks.

So let me just read it really quickly. Closed escrow on my first non-turnkey house on Monday. bought it using all cash with 30% equity. Minor rehab began on Tuesday already working with the lender to do a cash out refi. It will cash flow about $150 after the refi, but that will be an infinite ROI. After refi, I'll be ready to repeat. So congratulations. Thank you.

Ben. And how did you find this particular deal? This one, I was pretty much surfing on the MLS one night. I found this one. The house looked nice. It didn't look like it needed much work. I checked it out. It was an REO.

So right away, I went in contact with the agent. I noticed that the price was much lower than most of the other houses in the area. Like I said, it didn't look like it needed much work. So I just gave it a shot. I made an all-cash offer to the agent directly. So see if I could get a better deal. Sweet. So you just found it browsing the Internet, browsing the MLS.

Yes. Very good. So this particular property, your planned exit strategy, you're going to hold on to it? This is a buy and hold. Yes. Okay. Very good. So this one is located near most of my properties that I bought turnkey through you guys.

Okay. So I was like, okay, I'm already kind of familiar with that market. So let me see if I could just expand a little and make it go a little faster than waiting to build, you know, 20% down for another property or something. Sure. Well, great. Okay. So I thought this was going to be local to you, but you bought this where you bought the other property. Is that in Birmingham or Indianapolis?

Yes, so it's in Birmingham. Birmingham. Okay. Perfect. So you got some rehab to do. You're in Los Angeles. This property is in Birmingham. How are you, have you arranged that?

I had the property inspected with the same inspector I used to inspect all the properties I bought with you guys. And he pretty much shared the same thing I kind of felt about it that didn't need much work. So then I just contacted the property manager that I'm using already in that area. And they said, because I asked them if they could recommend any contractors to help you out. And they said they could actually take care of it. So I just went with them and they. gave me a bid and as soon as it closed the very next day, they had contractors out there.

Fantastic. That's awesome. I couldn't believe it. Right? Yeah. It doesn't always happen that way, but it does happen. And it's all about the team on the ground. So good. So after the cash out refi, you're going to be cashed long 150 bucks and your ROI will be infinite. Yeah. So that is changing a little bit from what I first posted. We got the appraisal done and it didn't appraise quite as high as I was hoping. bought the property for 108 and it came back at 144 in the appraisal.

I only needed about $8,000 of a rehab cost. So that put me at $116. So once I do the cash shop refi, I'll actually be cash flowing more. I'll be cash flowing around $3.90 a month. And it won't be infinite returns anymore, but it'll be around 78% ROI. Well, that's better than a sharp stick in the eye. I'll take it. Right?

Don't need too many of those to make an infinite. impact on your cash flow, right? Yeah, so I was actually really excited about this one. Great, that's great. So what's the biggest lesson that you learned in this transaction? I want to say the biggest lesson is trust the people that I have on the ground already. So far, it's work. Sweet.

Yeah, I think your team on the ground is kind of like your dentist. It's kind of like your car mechanic when you find a good one you want to hold on to them because they can really make everything a lot easier. Yeah. So how are you going to celebrate? Right. I'm just going to reinvest the money. I'm actually working on doing some deals here in Los Angeles now. So I don't really want to celebrate until I actually do something over here. Well, got it. Well, I'll be here. I'm ready. All right. So, all right, Enrique, keep doing what you're doing. And we'll do this again. Sounds good. Okay. Take care. All right.

This is Terio Media. Yo. Yeah, yeah, we got the cash phone. You didn't know home. Got Des Moe. Okay, well, welcome to the epic real estate investing show. I've got a really special show to you today or for you today. Today I'm joined by creator of the Deal Machine app, of which he's really brought old school, traditional time-honored strategy of real estate investing into the new world and combined

it with technology and really made something that used to be kind of challenging and cumbersome, really simple. He helps aspiring investors flip homes with a point and click app. Simply take a picture of the house and app searches the owner, gives you their phone number, and sends the owner a piece of direct mail offering to buy their property right from your phone. And I was like, this is amazing because it's such a good way to find leads, but it can be rather cumbersome and tedious and time consuming. And a lot of lead management can go into that practice.

And like any sort of prospecting that it can become tiring. And the more that you can streamline it and make it easy, the better it's going to be. All right? So without further ado, please help me welcome Mr. David Lekko, to the epic real estate investing show. David, welcome to the show. Hello, Matt. Thanks.

Thanks so much. So we ran into cross paths. I don't know, eight six months ago or so. And I just, you'd explain to me what your app does. I said, that is so cool. I think that's going to be really big. And for one reason or another, we just didn't venture any further from that conversation. But we have a mutual friend who said, hey, you should look into that again.

I said, yes, because we've had a couple people. We've run something here at the beginning of our show is called, Epic Field Reports where people come in, they share how they found their last deal and they kind of walk people through step by step. And we've had a couple of those this year that they said they found it on the deal machine app. And I was like, there's that deal machine app guy again. So let's get him on the show. So welcome, David. Glad you're here. Thank you so much. Really glad to be here. Yes. Awesome. So let me ask you this. What were you doing just prior to building this app and what inspired it? Yeah. So I was working as a software developer.

and the inspiration came from reading Rich Dad, Poor Dad. I wanted to not get into real estate, but instead of funneling money to stocks where I didn't have a lot of control, that book really turned me on to buying a rental property or two as a way to save for retirement. So that's how I got started doing it. Okay. Good. So what kind of software were you developing before then? It's actually called Chapter Builder for fraternities and sororities. It's a CRM that they can use for recruiting new members.

Got it. Okay. And then the book, Rich Dad, Poor Dad, like it's, you know, inspired so many others into different directions of life. You were able to kind of take your technology or technological skills and combine it with that book and you came up with this, right? Yeah, it wasn't even meant to be a business. I was looking for properties myself. I was driving around. I wanted to buy a property with equity. A weekend project, I made this like really basic version of doing the manual steps. So being a software developer was really just trying to solve my own problem. Got it. Yeah, it's how some of the greatest inventions ever came up from someone trying to solve their own problem, right?

Yeah. Perfect. Okay, so just if people aren't up to speed, what we're talking about is the time-honored strategy of driving for dollars, where you drive through neighborhoods, you look for houses that look like they might be in some sort of distress. You look for certain signs. And typically, you'd have to write down the address, maybe take a picture of the house. you drive back to your office, then you go do a title search, then you might have to do a skip trace to find the phone number,

and then you might go ahead and write them a letter and put it at the envelope and send it off and then wait, right? And then you have to keep track of everyone that you sent a letter to and then time your follow-ups and stuff like that. So I kind of started the show, very tedious process. But if you've read the book, one of the books that really helped me out a lot. Like, you know, Rich Dad Poorhead gave me the idea and the concept, But it really fell short in the how-to, right?

And the next book that really kind of connected those dots for me was the millionaire real estate investor by Gary Keller. And inside, he interviewed a bunch of millionaire real estate investors. And inside of there, they talked about what's their primary or their major sources of off-market deals. And the first one was relationships. Okay, that was number one. Second one was guess, driving for dollars, walking neighborhoods.

Yes. Yes. And the third one was referrals. So, I mean, this book was released a little while ago. And I don't know if, you know, the internet was what it was then or what the, were direct mail, where people were finding deals with way they're finding with direct mail. But those are the time on our ways, the way it's been done for hundreds of years. And so, you know, we just kind of bring the old school in with the new school with the deal machine app.

And so that's what we're talking about. So I guess I'll stop talking because you know more a lot more about it than I do. But I just kind of would have put some context around why I think this is so effective and why it's working so well for the people already inside of the epic community. So why don't you explain to me, I guess, how it works. Exactly. And I've had somebody ask me, too, who's new to real estate, why does deal machine work? And I thought it was a funny question because it's not like it does anything that wasn't being done before,

but it just allows you to do it so much faster and scale that method of finding deals. You know, so you basically just take a picture of the house and it tells you who owns the property. and you can press a button right there on the spot to launch a direct mail campaign to the owner. And the mail is pretty special. It features a picture of the house. So that's going to help you get a higher response rate. It's going to be something that they've never seen before come through their mailbox, you know, the actual picture. And then also there's another button you can press to go ahead and look up their phone number, email address, and other properties that they own.

And it's really that simple. Plus, you can have other people drive for you with their own unique logins. and we can get into the details of that, but that can actually help you leverage your time even more than just automating the lookup and sending out mail. Got it. So it's really that simple.

I mean, we just walk through the whole app. That's it. Yeah. Very cool. So I guess let's kind of walk through and what would be the typical type of property or what are some of the things that you'd look for in a property that would suggest this is one that I should take a picture of

and send them a postcard. Yeah, exactly. So I love to walk through some of those things. Yeah, please. Six or seven. And the first one that I notice is that the property is vacant. So a good sign for that would be that the mailbox is overflowing, or maybe there's newspapers piled up in the driveway. Another couple of things might be, you know, there's like a notice on the front of the house or, you know, the grass is like overgrown. And so those are signs of vacancy. Another one might be if the window blinds are white, open and you can just look through the house until there's nothing in there.

See that it's actually vacant. Yeah, that's the first one. Right? Very good. You know, I was just thinking, like, the other part that's so cool about what you do is that probably in the last year or so, the street view postcards have become so popular. And it's just kind of taking whatever Google has on file, putting it on a postcard. And those response rates have been really good.

But this even kind of beats that, doesn't it? Yeah. It's definitely, you're able to tell that it's as a unique angle, you know, and it's like not coming from the street imagery that they might have seen before. Yeah. So I want to go off of my separate from my list here for a second and say a lot of people only do, you know, out-of-state owners. But I want to say, don't be afraid of a house that's actually owned by the person. Because the second thing I had on my list is general disrepair. So just in general, does it have a tarp on the roof? Does it have a sagging gutter?

Does it have just maintenance that obviously needs to be done to the house? So that's how I actually got my very first deal. And it's the second item on my list. But I know a lot of people think, oh, it has to be an absentee owner, which means the owner lives out of state. But more of my deals have been actually owner occupied that had maintenance needed done to it. So I wanted to add that tip as well. Got it.

Sweet. Okay. what's the next sign of the distress property or a potential deal? Yeah, so this one is a little bit, it's one that you wouldn't expect, but I think window air conditioning units are a really good tip. And the reason why is because a lot of newer homes will have central air built in. And, you know, putting in a central air system may cost $4,000 to $6,000 can add a lot of value to the house. Yet if the home doesn't have that, I think that's a good indicator that maybe there's something

else that is, you know, may need to be done in the house. Some of the reason why, you know, that owner may need to end up selling it at some point. So I think unless you live in like a moderate climate, like Wisconsin, northern Wisconsin, where, you know, central air is just like not needed because it's not hot. That can be a really good example to look for as well. Sweet. All right. So we got vacancy, general disrepair. And then looking at the AC units could suggest there's updates needed in the property, right? Yeah. Okay. Very good. What's next? What else?

Yeah. So the next one is, again, something I didn't anticipate when I was first looking for these types of homes, but that's accessibility ramps. And a few of my deals have actually been done from, unfortunately, you know, somebody who passed away or somebody who ended up going into a retirement home. And so those homes had accessibility ramps. And I didn't know what at the time, but, you know, a couple of those ended up calling and doing deals. with now that's on my radar that if it has an accessibility ramp that it just may mean the owner is aging and so they may need to sell their house at some point in the near future got it that's like i would have never thought of that one actually but that's a good one yeah um what else got more yeah i do so i had mentioned tall grass earlier and i wanted to kind of revisit that because i think that's a really good one but some others would be you know and maybe even like a and b neighborhoods where a lot of

the houses have great landscaping. If you find a house that has like unkempt bushes, that might be another good indicator if they're not trimmed, for example, something that a normal homeowner might do. But if somebody is like really stressed out for whatever situation may be going on in their lives, isn't going to tend to their bushes until like the very last thing.

So that might be a really good example. And then somebody from California added to my list and they're like, hey, we don't have grass out here. You know, like it's pretty common. So they'll have like turf lawns or something like that. But I guess think about in hot climates like California. If there's a house on the block that has like a grass lawn that looked like it just totally got neglected or something like that, you know, definitely keep that in mind too based on your location. And in the wintertime, if there's snow on the ground, but there's no footprints or tire tracks, that can also be a good landscaping thing to look out for as well.

That's one I would have never thought of because it doesn't snow here in California either. Yeah. Everybody's got a slightly different version of this based on where they live. Very good. Yeah. No, totally. I guess that would be a little bit geographic specific in some of those. Any red flags or anything that you have seen in the past that you might want to stay away from?

Yeah. So in my market, I stay away from houses that are too distressed. I used to get very excited about those houses, but it ended up being. like, oh, I can get this for $5,000 under contract. I actually got one. It turned out pretty well, but I think it was kind of more rare. If it's too distressed and you're looking at wholesale, I think it's really hard to tackle those types of deals

because there's just not a whole lot of room to sell it to somebody else for a bigger profit. So I know that sounds crazy for somebody in California to think a house could be sold for $5,000. Yeah. But we're talking about Indianapolis where the prices are really affordable. and if the house is just in a bad neighborhood where the max ARV is $50,000 for a house in perfect condition, sometimes you just can't bring the house back. And so it's not worth spending a lot of time on those deals. I saw a lot of those when I first getting started.

I was like, well, you can buy a house in Detroit, Michigan for a dollar. Yeah, but then you got to bulldoves the house, pay the fines to knock it down. Yep. And then buy your 50 grand in and your ARV is 40. Exactly. Yeah. Yeah, tough to do. Very good. So I know you've been working with a lot of your clients, obviously, are all real estate investors. You're a real estate investor. So I know you've got kind of your

pulse, your finger on the pulse of what's going on. What are you seeing or any sort of feedback you're getting as like best practices? What's working now? Good question. I think that a lot of people start off using direct mail. And I would say fewer people will do cold calling. And I think, driving for dollars is one of those really high ROI list because it's your own unique, et cetera. And so the direct mail with the picture can be really effective. But I would also suggest to go ahead and give that owner a call or text message as well. A lot of investors aren't willing to do that because it's just easier to push a button sometimes. But I would say if you could build that into your process, I think it would pay off. Got it. So driving for dollars is pretty much

what it sounds like. You get in the car, you drive around up and down the neighborhoods. And what's nice is you're building a list that's local and it's convenient to where you live, right? And start taking pictures. And then where does that data go? Like, is it to stay in your phone? Well, it's your data. So it doesn't go anywhere unless you tell it to go somewhere. But you can access it on your phone. You can access it on your computer as well. And you can export it. You can send it automatically to your CRM. And that's pretty much the extent of where the data is. Right.

It's good. It's an app with not a whole lot of moving parts, at least for the user, right? We want it to be very simple because we know that's what allows you to repeat it and you need to repeat that process to be successful. Got it. So let's see. You were saying something before and I actually read this on your website. We have something kind of that we do as a practice.

That's not ours exclusively. People have called it the, you know, you go out and start recruiting bird dogs, right? We have a feature of our system called property finders where we can go out and we can recruit people. And the whole system trains them on how to go and find properties for us. And I think you had something kind of similar like that. I actually just saw on your website before we hopped on the call, that those could be a really good companions with each other, right? Absolutely.

So how does, how does, if you were to, have a bird dog and do you buy them their own app? How does that work? You don't have to buy them any additional apps and they can't spend your money. So you don't have to worry about that. But what you can do is just send them an invitation. And it's going to give them instructions on how to just get the app. So they won't mess up the sign up process.

And so they won't mess up any of your deals. In fact, they can't even see any of your deals. They can only submit deals to you. And the app makes it really easy for them to do that. And then also it's easy for both of you to do. track the number of deals that each person sent you so you can pay them however you'd like to got it so it identifies who sent that to you right absolutely and um i don't know if you guys have a recommended way that you you would pay a bird dog but we've got kind of three three different options

essentially that we sure that's a common question how do you guys do it yeah so i've there's three ways um you can do hourly you can do per deal added or you can do per deal that you can do per deal that you close on. And so if you're going to find somebody the most consistent way is to do hourly, I would say, you know, think about an Uber driver. They always think they're going to make 20 an hour driving. And I think it's actually less. And you could offer them more consistency for 15 an hour and you just have to kind of direct them where you want them to go and what types of houses that you want them to look for. And the second option, maybe if you don't have the budget to commit to somebody would be, you know, dollar per house that they add.

So that way it takes a little bit of the risk off if they, you know, aren't performing as well. You're only going to pay them for what they submit. And then the third one, especially if you have a lower budget and you have family members that want to help you out, give them access and you can just pay them like $100, $500 fee. We've even seen as much as a thousand, you know, dollar fee if you close on one of those properties. A lot of people love that because you don't pay until you make money. but the downside is it's hard to find a consistent person

that's going to hang around for one to two to three months in order for you to get a deal which is how long it takes sometimes on those so we would recommend that payment structure for like a family member that you have a relationship with already right

got it well good so you don't have to do all yourself Uber driver that's a good idea right they're driving around anyway waiting for their app to their own apps will go off right and a lot of times you know they they kind of sit around waiting for a ride but if they're working for you they can just go and and look for houses anytime got it do there any other people out there that kind of kind of fit that mold or that that avatar

yeah so i had this guy i talked to a few different mailmen and i think they're really good Yeah, especially the mailman that is different. So if you see a mailman that's different that day, he's probably a substitute mailman, which means he has a different route every day. So it's great to talk to them. And I think the structure that works best for them is like dollar per house that they submit. And I would go, I would go higher dollar amount for the mailman. I would say, hey, I'll pay you like five bucks for a house that you see that meets his qualifications. Because, you know, he, otherwise, he's probably not going to be interested because he's, he's delivering mail, et cetera, got his hands full, literally. So that's what I'd recommend for a mailman. Yeah, they could have some amazing insight on who's getting their foreclosure notice or their tax lien. Absolutely. You want that

person on your team. Yeah. Yeah. What an insight. What are some of the ways that your clients are finding these people? So I think we've experimented ourselves with Craigslist and also Indeed. I personally prefer Indeed than I actually have a sample job posting that I use. I'd be happy to share a link to if you're curious to Google Doc. Craigslist is another one. The downside of Craigslist I figured out, though, is a lot of times they will not be as consistent.

So somebody that's like on Indeed is looking for more of a permanent type situation. So it just depends on what you're looking for. Got it. And also, whenever your deal finders get a deal, some of our power users will post that on social media and then even run ads about that success story. And they'll use that to attract more deal finders. And so we haven't mentioned this yet, but deal machine has like an enterprise level plan that we actually have like a funnel page built into that so that you can direct people from like an ad or from a Craigslist ad. and it goes straight to your funnel page for signing up deal finders specifically. Oh, nice.

Yeah. Really. What else does it do that I haven't asked? I thought we were done. It does all kinds of cool stuff. What else? Yeah, absolutely. So the basic plan, it's going to have the ability to add three deal finders,

and the enterprise plan gives you unlimited deal finders. So you can just follow as many people that way. It's got the sign up funnel to make it really easy for them to come from an ad straight to learn about your business and the whole process. We've got all the explainers done for you, a special training video for the deal finders for you. And let's see. It actually reduces the cost of the mail that you're sending out, if you're going to send that out with the deal machine app from currently 99 cents down to 80 cents.

And let's see. What else? What is that sending? It's sending just a postcard, right? It's a full-color postcard with the picture on the front and the back. Yep. Okay. So yeah, that would catch their attention.

And yeah, I would say most people choose that because they want to have all the unlimited team members. But if you have, you know, somebody that you want to have like full access or maybe specialized access beyond just a deal finder adding deals, you can have like more of like a partner in your program as well. So you can say this person can see other people's deals, but they can't delete deals and they can't export my deals. and so the enterprise gives you a lot of that flexibility. Got it. Got it. You know, before we started recording, you were sharing on the screen, you got to, we're able to share your phone.

You want to give a quick demo of what that looks like? Yeah, I would love to. People on the podcast, though, they'll have to go to YouTube to see this demo. But those that are watching on YouTube, they'll be able to see it. All right, I'm bringing it up right now. Sure. This will be at epic r-rei.tv for those of you that want to see.

All right. So this is this brand new map feature that we've got coming out. And it basically allows you to scan a subdivision very quickly and get the property data. So even if you're not right in front of the house, you can see down below there. I'm pinning over the property. It's giving me the address. And I can very quickly just add it, see who owns it, and then start that mail campaign. So I can sell this property's owner occupied.

Let's see about next store. Probably also owner occupied. Oh, it's an absentee owner. So what you can do from there is actually add a picture of a house. So I'm sitting at my desk now. So I'm just going to pick one from my phone. And we'll do this house. All right.

And so once I've got that deal added, now you can see I can start the mailers or do the enhanced search. So real quick, let's just see if I can get a phone number for this property owner. All right. I've got three phone numbers and three additional addresses that this person owns. And so here's what the mail looks. like. You can tell that real quick, and I'm going to switch it to one of my favorite postcards. We've got a few different designs. And the one called blocks is my favorite, because I just like the way that the feature, the picture and the face is on there. Oh, nice. Yeah, so you can actually customize what the

postcard says. And again, we've got different designs you can choose from too. You can set up campaigns to be sequential if you want to get that sophisticated with it, which a lot of people do like. And in fact, you know, I can also just call them up right here. I've got two different mobile numbers. So I can call or text and then a work phone right in the app. Yeah. So let me start this. Oh, this isn't this guy's house.

So maybe I won't send the mail now. But that's as easy as it is. It's just pressing the start mailers button. He'd be like, what? My house looks like that now. Yeah, exactly. That's good. So now we're talking about this.

So you've looked up some phone numbers. I imagine you can just click the phone number right from your phone. or it'll start dialing. Exactly. Or we're sending a text. Or sending a text. Very good. What does the investment and investor would have to make in using the app?

What is the price structure? How does that work? Yep. So the cost is, first of all, you get a 30-day free trial. And you want to do that by going to this URL in this podcast. But there's also a $49 a month fee. and 99 cent postcard with mail, with the distress properties that you're finding driving, it takes about adding 200 properties and then mailing at least three times.

So on the app, we've got the campaigns and the repeat mail feature. And so I do every 21 days. So I would send that three times. And I would do that for 200 houses. And that's what I would do in order to expect to get one deal. Okay. So have 200 houses, mail them each three times. That should equal a deal.

Okay, good numbers. So that's about $600, $700 just on the safe side, invested in dollars in order to get a deal. Right. That's a lot cheaper than most people's acquisition costs for direct mail. Sweet. I feel like this whole interview came out sounding like a commercial, and maybe it is. But I've just, I liked it so much, and it's been proven before. I even got, got wind of it by people that I know and trust.

And so I just wanted to, you know, share the spotlight with you and put that on your, on your opportunity here. So if you wanted to get in touch with David, you can go directly to deal machine.com, but he's put together a really special epic offer that he hasn't made anywhere else. So he gave it to us exclusively. We've dubbed it the epic 30-30 offer where the community can get 30 days free trial and as well as $30 of direct mail credits. So essentially you could send out for 30 days, you could send out 50 pieces of mail. take it for a nice test spin and potentially even have your first deal under contract before a payment is even due. So really appreciate that, David, and thank you for sharing that.

You can go to Driving for Dollars with Epic. I guess we should give away the domain name so they could actually take advantage of the 30-30 deal. We almost forgot that. So driving for dollars with Epic.com, driving for dollars with Epic.com for you on YouTube, I'll put it on the screen. And then for you on the podcast, I guess you can push pause and write it. down later. But we may have tried to make it really simple. Driving for dollars with Epic.com, that will take you right to the 30-30 deal. And you are on your way. Always new and exciting

to get newly generation ideas and strategies. And, you know, you brought something that we know is proven to work historically. And you just made it all that much easier. So thank you for everything that you do, David. Thank you so much, Matt. You bet. I will, I'll see you next time. We'll see you so. Okay. All right. Take care. Bye. All right. So to your success, God bless. I'm Matt Terrio. Living the Dream. See you next week on our episode of Epic, Real Estate. Investing. Take care. Yeah, yeah, we got the cash flow.

Huh. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know, home board, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.