The Science of Flipping - Episode 161: Data is the Most Important Thing with Dustin Defrates

Episode Date: February 20, 2020

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. All right. What up, everybody? What up? The Science of Flipping World and family. This is another podcast episode that you can find right here in the Science Flipping Academy Facebook group. If this is somehow your first time hearing this and you're not a part of this group and you're in real estate, you're a real estate investor, you're a real tour, go to the group. Find the group Science Flipping, because I give you guys all the good stuff first. And as you guys see, I have a very special guest here on this podcast, a good close friend of mine, a fellow investor, a realtor. In fact, we even did a deal together as recently

as this week here in Phoenix. Mr. Dustin DeFratis, what's up, dude? Hey, brother. How are you, man? I'm awesome, man. I am awesome. In fact, hey, congratulations. As I just mentioned, even as of this week, we closed the deal and made some money together. So this is a good time for this episode. That's the name of the game, right? If we weren't making money, we wouldn't be on here. That's right. That's right. Well, I wanted you on for a very specific reason. We've known each other for quite some time and had a friendship for quite some time. And we have a lot of similar friends and network, but you do something really, really special in this space because you actually are a licensed realtor. You have your own brokerage, but you also are an active investor. And I think this is somewhat of a missing link for a lot of people

that might be listening to myself or anyone out there as they feel like they need to be one or the other. And quite frankly, you're proof that that simply isn't true. And so I'm very happy that we're able to have you on here because you've been able to bridge the gap and do something pretty special. Well, I appreciate that. I agree with what you're suggesting that the real estate agency side and the real estate investor side, a lot of people pretend, a lot of books have said that it's not in your best interest to necessarily be only a realist. A lot of books are saying only to be a real estate investor, don't get your real estate license because of the legal implications and, and, and things along those lines. And to be frank, it's just not something I believe in. I'm,

I'm not going to break the law. I'm not going to do anything wrong. I'm going to be the good person that does the right thing to homeowners, whether that gets me a deal done or not. So me having my real estate license isn't a preventative thing. In fact, it's been an empowering thing because it's allowed me to make multiple versions or allow for multiple services to be conveyed to the home seller as opposed to just my one investor offer.

Yeah. No, and I think today, you know, I get a lot of questions all the time, and we're live right now on Facebook, So I'm sure I'll have even more. But one of the things I have lived by for quite some time in my, one of my idols, Bill Walsh, ex 49er coach, he wrote, he wrote a book and part of that book, he talks about how the first six minutes of every football game are planned and they're scripted. And every minute thereafter, you have to make an adjustment. And I really believe this to be one of those adjustments that I think in today's economy, the real estate world, whether you're in Phoenix, and you're dealing with Opendoor and Offerpad and Zillow, or you're in Missouri, or you're in Iowa, or you may not have some of that similarity in the extremeness of Phoenix, the economy's adjusting.

The economy's moving. Things are different than they were two years ago, three years ago, four years ago. Even as of like six months ago, things are different. And that's why I want you on here. And I wanted my audience to understand who you are and the value you provide. Because the reality is if you're not constantly making adjustments, I think everyone's going to be left in the dust, because things are constantly changing. I agree 100%, Justin. I think that maybe I could give your audience the science of flipping a quick example of how I've made my adjustments in the transition between,

we bought 100 houses in 2010 and 2011. And in 2010 and 11, marketing to those homeowners is way, way different than marketing to those homeowners today, right? Today, everyone and their mother is attempting to have a conversation with the homeowner, making them their offer, but to be it, what was an example, knock, you know, they're willing to buy your house and they're able to make you an offer, but that offer is going to be lower than you might get elsewhere because they're going to make money over here. So there's just all these, like a lot of information out there. But my primary pivot has been from 2010, everybody, you could

buy a house anywhere. So our job was to talk to the everyman and say, hey, we're looking for the best inventory. We'll help a soft landing through a short sale or a foreclosure. Let me help you. Let me help you. Let me help you into this more hyper-competitive market where the home seller is the one who says, no, I'm going to be helping you. You get to buy my house because I have 15 people that want to. And here's how much money you owe me. That's right.

Yeah. I mean, it's definitely a seller's market. And I think that goes to the point of being able to find the right sellers. And this is where you and I really have connected over the last year and have made major waves in your business as well in my business. And I mean waves in a good way. Just because now it really comes down to how are individuals like yourself or myself finding sellers. And this goes to all realtors and all investors because the reality is we're all playing the same game. And if we can offer more value to more people, there will be more business to be had.

But who are the right people? And that's what it really comes down to and where you and I have really connected over the last year or so. Just about making sure we're finding the right homeowners and who are the right homeowners. And how are you going to provide more value to them? And how are you going to find them? And how are you going to get in front of them? And there's so many different things here and a lot of my followers have listened to me talking about cold calling and most recently text messaging and the combination

of both of them and door knocking and direct mail and these are all things I actively do as a moment in time in our business and this is the topic you're actually quite an expert at. Yeah. So I started my data career, I guess you could say, in what was that three, four years ago, maybe 2016. So the market's competitive. 2013 is when people are starting to catch on and we should start buying houses. 2016, everyone's buying houses, right? So we did some pretty deep data work where we're going into the recorder's offices and we're looking for liens. We're looking for real, real problems. Vacancy is kind of an easy one, and code violations from the city might be an easy one.

These really hard, complicated data processes that people can find at their local markets. We wanted to focus on that at the beginning. It worked really well. But the problem is, is that as the real estate community starts to discover some of these things like code violations, it turns into everyone and their mother going after the exact same data, making basically the same offering. And, and, and it's, well,

and it's a lot more complicated than it used to be in 2016. So, so what we actually did was we tried to say, okay, well, if every man is going after these specific flags is very, the one occurrence of a violation or the one occurrence of maybe a foreclosure or whatever it is,

we need to be able to go after those people with a good offering. But we also need to be able to expand our target base to more so of a holistic approach to the market saying, hey, let's get our offer out on a little bit more scale. Let's make sure more ears can actually hear what our offer is, which has the good deals, the high margin deals. I'm able to pick those things up through some of that deep data, right? But generally, we're able to operate on a consistent basis with the scaled, stacked data that we like at GeoPoint Data. Yeah. And I think one of the things that I came to the realization is for years, quite literally, if you were listening to me now and you were listening to me five years

ago, I've been talking about going to the masses of asses. And up until recently, because of how Phoenix as a market has changed, I realized one thing about six months ago, a year ago, closer to six months ago, is if I'm going after the same property criteria as open door offer, Pat Zillow, I'm in harm's way. I just don't want to compete in that space, right? So if I'm going after a home that was built in 2000, they're going to crush my offer, like not even comparable, like 20, 30, 40 grand at times that I can't compete. I don't care what I'm offering. It's hard to argue against putting an extra 40 grand in the seller's pocket, right?

So I very quickly realized like there has to be some refinement to this. Specific to me, specific to Phoenix. Like I said, if they're not in your market, you still want a set of refined data, which would be the most motivation you possibly could find, right? And to be able to filter that.

And so this is where Dustin and I, you and I have really gotten really close over the last better part of the year, really refining this. You came out with GeoPoint data, and you and I have been talking about it for over two years. But the key to it and why it's always been so impressive to me is how refined you can actually get the filters. It's not just big filters like high equity, low equity, right? Owner, absentee, they exist. But you can also refine this like we've refined it down to something like nine or 10 different filters that are within the data that we're pulling from you guys that has just really changed the game. And I say that to guys like, I am using his data. It is incredible to the point where I called him before this. And I said, if anyone uses your data, hook them up because this is well deserved. So if you do go to geopointdata.com, just put in TSOF,

that is your promo code. He gave you because you're listening here on the science flipping. TSOF is the promo code. What I'll tell you about the data that I've used that has given me such great success is we've refined it down to nine filters, but it's very specific to how many leads come back per call. I think we can all agree, including yourself, like gone are the days. Gone are the days of the 1% callback ratio.

I mean, not even close. And if you're out there listening to this or watching this, good for you if you're getting that. I don't know. Yeah, you're always going to get that one comment. Totally. So that is great. But literally, we are at roughly like one-third of 1% is the total callback ratio we're getting here in Phoenix.

Total, including the FUs. And before I started using your data, Dustin, I was getting roughly 25% of that 30% of 1%, if you guys follow me, right? So.003 total callback ratio, quarter of that was my lead ratio, real people that really wanted to sell regardless of price. Once I was able to refine my data and really hone it into what I believe to be some of the most motivated people out there with also including, you know, kind of staying out of harm's way with the age of the home built, right? Like I want to stay away from the iBuyer model. So I'm going to go older, including high equity, including like empty nesters,

some of these other things. I've been able to get that up to 66% of every call that comes in is a lead, a real viable lead. So that has changed my game immensely because of the strategy I'm using with the data to go and find people who actually have motivation to give me a call and talk business. I, as you know, I'm a numbers and statistics guy. And I like to pretend I'm a scientist trying to figure out cool things, you know. But unfortunately, so many people don't know the numbers that you were able to rattle off there. And being in the data business, that's 100% of this, you know, we run algorithms against our data to say which data points are most likely to predict a sale, how likely is that to predict a sale inside of one period of time or a different period of time, and what the likelihood of them being to transact with an investor as opposed to a real estate agent.

So all of these things go into it. And we like to use the word stacked data. So when you talk about nine different points that you're bringing into one lead type, we're saying that you're stacking 1980 on top of owned for at least 10 years, on top of maybe 60 years or older, on top of vacancy as reported from the U.S. Postal Service, on top of a two-story home because seniors should not be going up and downstairs if they're over 65, 70, whatever that number might be in years old. So there's a lot of common sense in data. You know, if you have zero children, which is one of the data points that we maintain, and now you have one child in between the age of zero and five, we know that you just had a baby. And a lot of times people can handle being in their residence when they first have that baby, but then they say, oi, these kids and this toys and that stuff started to pack up and that's going to trigger a sale. We also maintain things like credit score and net income and in a low net

income with a low credit score, they may not have access to some of the financial resources that many of us have access to. So maybe they're more interested in selling their house to tap into that equity that they've had since 2013. That's right. Yeah, no, I think this is why you've been so successful for so long is you've always focused on the data. As long as I've known you, honestly, for however many years that is, you've always talked about the data and this is why you have very successful brokerage and continue to do flips and wholesales, et cetera. But this is something people need to hear. This is why I wanted you on is because they hear it from me all the time, but like know your numbers, know your KPIs, know all of the data, but coming

from the man who's built the company to refine this, it's really important, not just to sell data. And yes, I would love people to buy your data and that would be great. But the reality is they would be more effective. They'd be more efficient. And you've really taken the time over, literally you've been talking to me about Gita point data, which has changed names. I even believe the last two and a half years to what it is today and i remember

the first version of it two and a half years ago we sat at that starbucks uh and you showed it to me way different than you just say the ease of use but the reality is the consumer data the property avatar the the person avatar like someone who's just had a kid, one to five years old. Those are all flags, filters, stacks that you can now refine in any city now and really understand how to move that needle. And I'll tell you, when you go, like for me, when I went from a of a quarter of 1% to three quarters of 1% lead ratio, it's a game changer. I mean, literally our conversion rate went down to one at every seven leads we started contracting. And it's because of the effectiveness of your data. Our scripts didn't change. Our acquisition guys didn't change. We literally had no other variable. Our mailer didn't change.

It was simply your data that was so refined and so pointed that it got us to get in front of the right people. And so, A, thank you, which is awesome. Yeah. But I also would say this. For those out there asking, like, you get what you pay for. I would say, quite frankly, GeoPoint data is not the cheapest data in the industry. You can go to your title company if you want free and cheap data. But what is your accuracy? Because if you're sending and spending money on mail, skip tracing,

cold calling, text messaging, and everything else from that data and it's incorrect, you are literally torching money. And so accuracy of data is quite frankly, you get what you pay for. For sure. No, I appreciate you going into some of those details. Unfortunately for real estate investors and realtors, real estate professionals across the U.S., there's so much misinformation about data. There's so many people with so many pitches and so many gurus pretending like their product is the best thing in the entire world. And, you know, it turns out that maybe that guru isn't actually using their own data or whatever those stories that we hear are. There's three primary things. You have the data stacks, right, the availability of consumer demographics,

how much of the money they're making, what their syndicated credit score is, how old their kids are, how many kids are in there, whether they're a veteran, single parent, all of these demographic data stacks. And then the actual property details, right? So we have four different cell phone databases, one different landline database, and there's over six different consumer databases that are all layered on top of each other. And there's 134 million residential addresses across the United States of America. So imagine how many properties are being bought and sold every single day that we have to track on our system. And when that property is sold, we have to reset.

We maintain all of the homeowner's phone numbers on top of our data. So we know. We don't skip trace. We already know that the phone number associated with that homeowner is the phone number for that home, right? There's still people change phone numbers. There's still data seepage and data loss and inaccuracies because people change their phone numbers. But we know because it's been publicly reported that these are the right people for the right reasons, right? So the best data sources or the deepest, largest girth of data is kind of priority number one. Phone numbers becomes priority number two.

You know, I know that a lot of people are out doing mail campaigns or Facebook custom audience uploads or making outbound calls or text messages, right? People change their phone numbers, especially the people that we're trying to get a hold of that are, that are distressed, that are, that are having issues in life. So having the best phone numbers is essential. And then, and then the one thing that I've seen as a pushback from the, the people buying data is, is unfortunately, many of these subscription based companies that aren't actually data companies are not updating their buy sell records on a monthly basis on a weekly basis or even a quarterly basis. And so what happens is that the, the, our, our target audience,

our customers, you're the science of flipping audience wants to talk to the people that are most likely to sell their house, right? So let's just walk through a couple of stupid numbers, right? Let's say you have a data set of 10,000 houses across the United States of America, 5% of houses sell on average, right? So every year, 500 houses are going to sell in your market of 10,000 houses, right? Now, now divide that by 12 and you're going to sell 41 houses a month, right? So we're, we're only going to sell 41 houses total. So if someone doesn't update their data once every, every month, then you're letting 120 of the most likely houses to sell matriculate out of your lead list and, and you're just losing money. So,

so regularly updating lists, good phone numbers and, and the most data available on the homeowner for stacks is, is kind of our, our claim to fame. Well, and you brought up something I haven't even brought up yet, but I,

you know, maybe even the last episode, but I talk about like the trifecta or the Holy Trinity of marketing, right? It is door knocking, cold calling, uh, and direct mail. Right. And what I would also put in there is now text messaging. It's very new in the sense of probably the newest strategy that has been created, but has been very, very effective. And so what I would also say is anyone who is sending direct mail needs to be cold calling and text messaging on top of door knocking, which you can create, like I would create a pre foreclosure filter. That's the homes I'd be going

after first and then door knock the surrounding areas for maintenance deferred properties. That's how I would do that. With all that said, for those of you cold calling, for those of you maybe already text messaging, you might as well get the data that has the right phone number with it. And so GeoPoint data actually, when I buy the data, I buy all of the data. So I buy the address, but I also buy the phone numbers with it. Because otherwise I got to go out and skip trace from a different company, which is fine. And batch skip tracing has done great for me. And you can also use TSOF with them. But the reality is like, if I'm going to already be mailing them, I know my cold caller that I'm using is going to be calling them. And I also am

text messaging them. I'm surrounding them from a call, text message, and direct mail. And so, you know, your accuracy, quite honestly, your phone number accuracy when putting it up in launch control was the most accurate data we've ever put up into launch control with the least amount of disqualifying numbers ever. And we've now been doing this for quite some time. So, you know, that speaks to volume of, you know, the accuracy. And again, you get what you pay for. And Dustin, I know you said you'd give my tribe a discount and I really appreciate that. That's what the promo code for TSOF, but still like get good data.

Everything revolves around your data. And I'm a testimony to the data, not only just the accuracy of the address, but also the accuracy of the phone numbers. Yeah. No, I appreciate you saying that. We're really excited about our most recent product. We have four different versions of platforms coming out as iterations of our product gets better and better, you know.

And so most recently we were able, we have our entire database pinged into the front end of the website. So now with instantaneous results, you're able to say, I want to have only results with phone numbers. So you're never going to buy a property that does not have a phone number. You don't need a skip trace. You're not going to have an 85% match ratio or a 90% match ratio. When you buy data with us, you have the choice to buy it with or without phone numbers, right?

It's awesome. I'm excited about that piece. But as you click through high equity or high income or low income or the different filters that we have on here, when you calculate at the bottom of the page, when you say how many are available instantly, you know what filters you have clicked because you can see them it's not complicated and then you know how much data is available so you can decide well I'm only able to afford to market

one to one thousand people or I am my target market is gonna be ten thousand people let yourself play with those counts to figure out how many houses you're going to look for within the scope of your marketing funnel. Yeah. And the more filters you put on there, the smaller that list should inevitably get. Right. And so again, for those of you that may not have a big marketing budget, what's really nice about that is you can go for 500 people, filter out the best filters for 500 people. But then if you get it with the phone numbers, you can mail them, call them and text message them. So you're literally quite literally

surrounding them with every type of marketing strategy you possibly want to at least get them on the phone, get them over text or have them call you back. And so what is the actual URL? Where should they go? If they're interested in taking a look at what it looks like, trying to figure out if this is good data for them? Do they just go to geopointdata.com? Geopointdata.com. Make sure they use the code TSOF, and that's a 20% off coupon for your target audience. So I'm super excited for you guys to try it out and check it out.

And we have a customer support line that Adam is the guy who's going to pick up the phone, and he will help you through anything that you need. And if you don't see it on the site, our data stacks, we're slowly rolling out more and more data stacks. So if you don't see it on the site, please feel free to call us to submit a support ticket and we'll see whether or not we have what you're looking for available in our systems. Yeah. Hey guys, I even had a call in because I wanted some very specific filters and, you know, some have been great. Some weren't, you know, I thought they were going to be great

and they weren't and whatever. But that's where you got to A, B test everything, right? We just had another list that was sent over 7,500 and we're going to test that list and so you got to test the filters but i'll be honest their customer service has been great right so if it's not on the the front page of the site or you can't figure out how to find that filter call they've been great with me and dustin has you, been so gracious to give you guys 20% off by using TSOF. So GeoPoint data, use the code TSOF. Any last words from the data man himself? No, get out there. I mean, I loved your line, text messaging as a newbie, but as a new product, but the basics, door knocking, if you're filtering down to the narrow funnel,

then you should be knocking on every single one of those doors, outbound calls and mailers for a larger top of funnel strategy to get people to that bottom of that funnel. I love that. So I'm going to, I wrote that down and I'm going to take that away with from here. Yeah, right on dude. Well, thank you again. I really appreciate you spending some time. I know you're slammed, but also thank you for giving everyone here listening a discount. I know that means the world to everybody, including myself. So thank you for joining, dude. And I'm sure we'll be talking soon. Let's get some more deals done.

Geopointdata.com, baby. Right on. Peace. Thanks, brother. right on peace thanks brother