This episode is for anybody who's approaching Real Estate Investing and is curious about a behind the scenes look into the technology that powers your acquisition strategy so that you can find really amazing deals. This is the podcast for 10Xing your income and replacing your W2 through the business model of wholesaling real estate where you find a rundown home and you make a finder's fee for selling it to an investor that will close on it with cash. My name is David Leko, I'm the CEO and co-host of this podcast CEO of Deal Machine, which is a tool I created eight years ago and has helped people close their very first real estate deal over 10,000 times in all 50 states. Today we're going to do things a little bit differently. I'm actually getting interviewed by a deal machine member where we were in Tampa, Florida this past week for a group of the home, the world's largest group of house flippers that do over 100 deals per year and our member asked me why we've innovated the way we have at Deal Machine, why we came out with unlimited contact info, why we were able to improve on the skip tracing data accuracy with the private investigator tool becoming 50% more accurate than any other source of phone number information. So all the behind the scenes footage is right here and will even give you a sneak peek as to what's coming next. All right, we were at Collective Genius and I happened to run into David Leko, one of the founders of Deal Machine who's an amazing guy and actually somebody I follow and somebody I really respect their business practices, somebody who we use, Deal Machine all the time. It's one of the first things that we've reached to people who are starting out in real estate saying like, hey, what should I do? I say, start driving for dollars and you reinvented this whole business. Well, I'll give you a credit single item, I know you have a partner, I know you've got other things. Could you tell us a little bit about your sport? Yeah, so this was eight years ago and I was working for somebody and putting about 60 hours in per week. What were you doing? I was actually, I had made a software and he bought it from me for $10,000 and I went to work for him. So I created the software but I didn't know how to get people to use it and it was for attorney recruitment, it was right after college, you know, right after I had that experience. Where did you go to college? Missouri S&T in Raleigh, Missouri. So I went, I did engineering there. Okay, awesome. I didn't even know before we talked that you're from St. Louis, Missouri, I'm from St. Louis. That's right. And now I'm living in Kansas City, you're living in Austin and you're investing in Indianapolis. Correct. So the reason why I moved to Indianapolis was because all the fraternity sorority headquarters are in Indianapolis. Okay. So I moved out there for the whole country. Yeah, like 50% of them, you know, they're all concentrated there. It's a big nonprofit headquarters city. Okay. And that's due to the American Red Cross. They like lobbied to get some preferential like nonprofit, you know, tax treatment and whatnot. Okay. That attracted a lot of nonprofits. A lot of those headquarters are in Indianapolis. Awesome. So you moved to Indianapolis with the goal of obviously what you did was successfully build an app and sell it for $10,000. What was the whole? I mean, yeah, I was after a year and a half of work, right? I knew I was a great deal, but for the guy who bought it, of course, yes, but I was making 70. I took a pay cut of $50,000 a year to work for him, right? But I knew that when I'm young, watch the poll there, when I'm young, that putting in the time was was the most valuable thing, the things that I would learn from watching how this guy was able to grow a business and help solve a need. I knew that was going to be valuable for me. So I wasn't too worried about making the most money early on and in real estate, we always give that advice too. It's like, hey, when you're starting out, you know, find a way to help somebody that you meet at a RIA. Yeah. Totally. Yeah. So it was a similar type of mindset that I had and I was, even though it was not a lot, 50,000 a year, I was saving 50% of it because I knew that time was on my side for investments, right? It's a rusty car and I put 60 hours a week working for the sky. It was great. Oh, I like your DNA already. Yeah. So you're so people who see you online, they see the sports cards. They don't see the fact that you were saving your money. Are you still what I would call a budget friendly because I'm still cheap? Yeah. So it depends on, it depends on certain things, you know, so I think time is the most valuable thing for me. Yeah. And so I pay somebody that comes and cooks meals so that I follow a certain diet and the cost ends up being like five, sometimes 600 a week, including the food, but also for her to just come and cook, right? So that's not cheap. It's like 2000. Yeah. It's food a month, but the alternative is that I cook it. I don't want to spend time doing that or I Uber eats it and it's just not going to be as healthy. Right. So how much does average Uber eats meal? It's like 30 bucks. Now, honestly, I just go on the side and when you, yeah, when you figure that out and the extra fees and stuff, it's because it gets quite expensive. So, so I'm not, I'm not budget on everything. You know, I've, I've allowed myself to spend on some stuff, but yeah, I don't want to be stupid with money and in a lot of, so anyway, yeah, that's kind of how I've viewed things. Some things I'll definitely spend money on. So when you went to Indianapolis, you started this other fraternity business, which gave you the real estate bug? Yeah. So the guy who owned that company, well, I noticed I was working 60 hours a week, but he was not, you know, he was working like four. And you know, he had another company that existed already. There was complimentary. It was a coaching business, fraternity headquarters would hire his business to help them grow. And so it was very complimentary to the software, but I noticed I'm just killing myself and he's not. So eventually I was like, what was he doing differently? Obviously he owns the business and I don't. So that was a key thing I learned was like, well, if you own it, eventually others can be doing the ground level work. Right. He also had five rental properties, which seemed like a lot at the time. Right. And I asked him about that because I had been putting in money into my Roth IRA maxing that out and then had additional retail stock market account where I was buying index funds. So this is like all of your kind of like, hey, these are the right things to do is what I've been told to do. Yeah. Max out your 401k, max out your Roth, save your money. Yeah. Good investments. And now you see this guy who's got a little bit of property, a lot of free time and you're noticing that you're busting your ass for this guy. So where does the, where does the switch take place? I guess a little bit of resentment built over time. Oh, I love that. And so it led me to ask him after two years, you know, I kind of realized I've, I've learned as much as I can in this job. I also feel a bit burned out. I need to put my focus into something that will be beneficial to me in that regard, you know? But anyway, the whole curiosity about his rental properties, he's like, well, the stocks can go up and down like you probably noticed that if you've invested over the last few years. Oh, yeah. And in the real estate, as long as you buy it right, the rent always goes up. The value of the property always goes up and you can cashflow every month, let the property pay for itself and that cashflow that you get can grow over time. And so that's really why I chose real estate. So I went looking for answers. I got rich dad, poor dad. I went to a meetup. I was a little bit discouraged because the guy's like, well, I got these deals in 2008. There's not really that many good deals now. But looking back, I started buying my rentals eight years ago and it was not a crash or anything like that. But oh, yeah, if you look at my portfolio, you'd have the same discouragement. You'd be like, oh, shit. And David had such good deals eight years ago. He's a lucky guy. It's what I realized is, um, as long as you do buy it, right? So it cashflow is dude, the best thing is just letting time do its thing, right? Amazing. Yeah. I always say this. In real estate, time, time, time is on your side. Yeah. Because all your big fuck ups, like if you just wait long enough, they'll end up looking like an amazing investment. Yeah. I bought properties in 2005 at the height of the market in Las Vegas. It took me 17 years to get out of them, but they did come back. Okay. Well, yeah. About what I held on for probably 20 years. Yeah. I actually would have done pretty good, but I wanted to get out of those deals badly. So let's just sit in the shed so we don't, it's hot. Yeah. So for me, so you were saying, okay, so real estate over time has been a better investment than stocks that go up and down and don't provide cash flow. That was my like hypothesis, right? And I looked up to this guy, he had stuff figured out that I didn't yet, but it set me on a path to go do what he did. So that way I could stop putting in 60 hours a week for peanuts. You know, and eventually, you know, he was like, hey, we need to increase your salary, but I was already on a path to do my own things, you know? So we ended up splitting ways, but the key thing that I, and real estate was told was to go look for rundown houses because I was looking at what was listed for sale and none of that would cash flow. And I noticed that. So I went looking for rundown houses and ultimately I wrote down 40 addresses over two months. I saw that one of them was being constructed on. Yeah. And I thought I had this on my list, man, that was my house and I saw somebody had just bought it. And I haven't even reached out yet. So I knew I needed to change because I'd be second to sell me anything if I haven't reached out. So that was where what turned into deal machine was just like a widget on my phone. I created that following weekends. I had some software skills. It was a basic app where I could pin the house, it would tell me who owned it from the county record and then I could. You could have in a week, I could have mail sent. I mean, yeah, it was a very basic app. I don't care if it's racing or not. And you're not giving it to somebody that says, shit, it was an app on the weekend that could pin the app from the partial number and send it a piece of mail. Yeah. I mean, it was up and like it is now, but it was just really, really bad. They're just seizing you in solitary confinement. I can't do that anymore. I mean, I've been out of the coding game because ultimately I had a best friend who was such a great software developer asked him to be ultimately I realized about a year into me using this little widget. But somebody who worked for Alpine Property Group in Indianapolis named Brittany Wicks, she hosted a meetup every month. She came to buy properties at the auction and help new wholesalers understand how to get a deal so she could buy them from them too. And so I showed her this meetup was like, yeah, I've been using this thing. And she's like, well, spend $1,000 to try it in new marketing method. Let me get a hand. You know, let me get ahold of that. I was like, this free, it's not on the app store, but I'll figure out how to get it on your phone. So I had to come up with a name and put it on the app store. It was a free app. And I was like, I'll charge you a $1.75 of mail, you can full-fi some mail, you know, to $1,000. Yeah. So that was the deal we did. And that's when I realized like, man, I'm, I didn't even try to sell it, but it's people who are serious about this business. They're always looking for an edge. It seems like a good idea because driving for dollars was a very common advice. But there just wasn't an app to help streamline that process. You changed the game, bro. Thanks, man. No, no, I like, I've been investing in real estate since 2002, driving for dollars actively since 2013. And I thought it was advanced when we could take digital notes versus writing it down. Like the fact deal machine has changed the game. And in fact, it has come so far. I think I bought it when it was first going in Vegas. Like you'd have to go look at my account originally to see what it was. I told you when I got back to, when I kind of shut down my business in Vegas and moved to Kansas City, I met with a wholesaler, one of your, you know, one of your co-hosts on your podcast. Yeah. Ryan Haywood. Ryan Haywood. And I'm like, where are you getting all these deals from? He's like, I just use this app. And I was like instantly, I'm like, okay, well, I'm back on that app because apparently that's working really well out here in Missouri. And at that point in time, the technology had changed so much. So in just the two years since I hadn't used it. And now, tell me where you're at right now with it currently. Ryan Haywood. Right. So eight years in, started with driving for dollars, have expanded to being a data provider. And the biggest reason why people are coming to us now, I think I said, we've grown 44% year to year to year. And that's in year eight of being in business. So it's typically harder to grow when you're bigger, you know, and you're more established. So it's been great. A huge reason why that's happening is because we came out with unlimited contact info. So if anybody is cold calling or texting, they're using skip tracing services because you get the phone number. It typically would spend like six or 10 cents or even 15 cents going back up a little bit for people who are brand new to yeah, sailing and stuff. They don't know what skip tracing is. They don't know kind of what your software does because a lot of times just to let people who are listening or watching right now know is typically, you know, you would have to go in. You'd have to create a list. You'd have to import that list. And then you have to skip trace that list, which means you have to find out their name, phone numbers, email address or what are likely to be their name, phone numbers, email address. And then you'd have to go and upload that and mail it. Now what does to allow you to do? Yeah, if you look up a property, it's pre-matched to what the person is who owns the property, what their age is, what their household income is, what other properties they own, and then most importantly, their phone number and their email address and their relatives, right? So it's pre-matched, you don't have to spend, you don't have to spend extra money to get that information. It's actually included in the monthly fee of deal machine, which starts at $99. So if you're skip tracing $10,000 a month, that costs you over $1,000 traditionally. And so you could save $900 a month by just having your deal machine account, let's you export $10,000 per month, right? So the same is get bigger if you're a bigger player and you skip trace even more. But that's what's great about it. And here's what, there's the kicker is like, it's also 50% more accurate than other providers because in testing we've done like 33% of properties, they don't have a skip tracing match. And so when that happens, we will provide you a list of every person with that owner's name in the United States. So they're in that list and we prioritize it based on, well, where do they live? What's their area code? Does it seem like that's more likely the property owner? So it's called the private investigator tool. You could get that list. There's nowhere else you can get that in deal machine. So it helps you close that gap of the properties you'd normally not have info for skip tracing. So it's really powerful. That's why people are just coming over right now. Yeah, I mean, for me, like we do use all types of software, but the one that I tell everybody is the first thing, one that you want to download. And if you're watching this, listening to this or whatever, it's like if you're a brand new investor, exactly what you just said is look for the stress house, send them a freaking pulse card. And then you want to be aggressive, which you should be is now you can call them before that would be a little bit frustrated. I'm sure for people to have to go and use this software and then go to that software and do whatever else. Now they just go to your software, they've got everything that they need in one spot. Right. Well, yeah, say if you just getting started, there's somebody local to the awesome market that I've become friends with their daughters graduating college. And daughter like was interested in doing fashion, but she wasn't getting any calls back on job. I mean, that's a tough industry to go into, right? So that was just like a conversation, which she was asking advice. I was like, I mean, my passion is race car driving, but like even in the pro level like NASCAR, a lot of those drivers pay to be there. So it's like, if your passion is fashion, being a really successful like fashion person is like very difficult, you know, unless you're some type of prodigy. So find a profession that can earn you money and then you can spend money on whatever that hobby is or that passion is. So she was like, well, how do I do wholesaling real estate? Seems like you can make a lot of money that way. And so and wanted to share this for anybody who's graduating feels pressure from their parents like, I'm not sure what I'm going to do. Yeah. This isn't working out. Five hundred houses that hadn't paid taxes on the outskirts of Austin, like 20 minute around the perimeter. Okay. It's not like really pressure from flipping houses, but a lot of like non updated homes, right? You can find that. So she took, she mailed, she's about $500. So that would mean she, what is it, 50 cents a postcard? So she, you know, she's probably sent mail to like a thousand properties that hadn't paid their taxes. So, and that's how she's getting started to choose her is after college, right? She's graduating this month. So with deal machine and the software changing, how did you guys decide to go with like offering that? Was that like going from user feedback for the phone numbers or how are you continuing to make all these improvements? Yeah. I mean, I, I think we want to continue innovating and we realize that that is the true power of providing value as a software, really a lot of softwares in the industry have been built by real estate investors exclusively and they, they build the software like you would build a house, right? Where you just like, you pay to build it and then you just sit back and collect your rent for 50 years. I, I don't think that's how software, well, that's a very good, I think that's why we've been able to grow, you know, beyond some others in the marketplace because we've continued to always innovate and, and improve it, you know, every three weeks, if you look on the iTunes app store, you could see our history of updates, you know, it's every three weeks since the beginning of when we started, so it's, it's about doing that in a way that's not disruptive. Yes. To using the software. I hate when they do this, when you make a huge change, yeah. And Facebook used to do this in the beginning days too, right? Huge overhaul. Everyone's pissed. I mean, they still kept using the software, but nowadays, Facebook doesn't really roll out updates that are that disruptive. Right. I mean, I haven't heard that in years. No. Making sure that the update is very thoughtful, very easy to use, still, and thoroughly tested before rolling that out. And that includes getting actual people to figure out if that's good or better off than it was before. So that, through that thought process, yeah, I mean, the business model of skip tracing, it just seemed like how wouldn't you make that better if you could offer it for free in the included price. And when you have all the data like we do, like we're not reselling, like we're not reselling somebody else's API, which is like a transactional look up for each property, then we can do more interesting things with it because we have all the data in our own database. So we could pre-match it to the homes. We could provide you a list of all the people with the same owner's name. So if you don't get a match, you can look up everybody in the US and their phone number that has that same owner's name. So that's why we're able to do that. All right. So API, well, it stands for application programming interface. It's just how softwares can communicate with each other, right? So a lot of the traditional skip tracing where you pay 10 cents per look up, that's because the software company is paying someone else eight cents for that look up, right? And they're making marketing up a little bit. That's traditionally how everybody is done skip tracing. So API is just a general software term that means two applications are talking to each other. So usually you'll see like an API and it's like, oh, that's for developers, they can go in there and do their thing or whatever like that. Join us for our groundbreaking three night live event, July 1st through 3rd at 8 p.m. Eastern time where you can be among the first to see the latest innovations in real estate technology coming to deal machine. We'll have your questions answered live and you'll also get discounts that are solely available for live attendees. Go to dealmachine.com/unveiled to reserve your spot. Another question. The thing that I get really excited about about talking to you, David, is that like most people who do software, the software thing that they build is not for themselves. They just build it and make money. And you build it for yourself. And so as the as an owner user, you're constantly looking at it as an investor, not just as the guy who runs deal machine or as 50% of the person who runs the machine, you're looking at as, hey, how do I make this better for myself because you're still actively investing for sure. Yes. So talk to me about like what is your active investing looks like and how do you see that growing and how do you continue to keep the edge against the competition because I'm sure there's competition coming your way. Well, one of the competition got bought by a title company and then they haven't updated their software since then. So we're pretty good there. And then I don't know what happened with a couple of the other companies that I haven't seen much from them either that were traditionally like big names, right? So for at the moment, I think that the best defense is a strong offense for sure. And we've learned a lot about how to do that over eight years, right? Things you don't want to do is you don't want to make big changes that confuse and upset people or that miss and they're not as good to use as you thought they were. Using it myself is always driven historically like what we should do next. We've got office hours four days a week. And so that product team like attends those calls, right? It's just like real people that are asking questions. So we're just we're always very much speaking to the investing on my side of that eight deals this year. And when I started out, I didn't have a lot of money. I was making 50 grand a year by a rental property on the retail market and you run out of money, right? So it's like $150,000 property requires about $30,000 down. So I needed to go off market, find good enough deals. Right. Okay. I could force appreciation by fixing it up, maybe adding the square footage or just improving what the inside looked like, right? So that I have so much equity. I can refinance, get all that money back out that I put into it by purchasing it and fixing it up called the burst strategy by renovate refinance repeat. So I would I have 19 deals nice and I've worked hard to make sure like 75% of those deals were like burst strategy deals where I got the money back out. And at first, you know, I bought a property for 4,000 renovated it for 65 that it was worth 120 through that forced appreciation. And I could refinance it, get $75,000 back or 80,000, you know, yeah, $80,000 back. And then I could go do the next deal. Right. Yeah. So that's what my investing looks like about 19 properties, 4 million in value, sweet spots, like $160,000 that rents for 1600 a month. So it meets the 1% rule. Nice. And yeah, it's like just what I've been doing. And I took a break for a little bit when deal machine was really growing in the early years. And I've been excited to get back to it in the last like nine months. Where does your drive come from? Yeah. My parents were concerned that I was going to lose it all by going in on a business real estate. And that was really cool to show them when it was successful. Then I treated them to some trips, took them to Las Vegas for the first time. And that was really fun. Right. So that's how it started. I think one of the things I've learned from my race car driving coach is we're only here to win first place. It is like if you've won enough, nothing else really matters. We're not here to roll around in second place. And he's just one of the most committed people ever. And if I have like the rare race where I didn't hold anything back because I was scared of like hitting somebody, obviously, if you go too hard, you might lose control and hit somebody. But there's no better feeling than knowing you gave it actually a hundred percent. Like it's just a great feeling. Yeah. Like it's way better than winning first, but not having to try that hard. It's way better to know, oh, I got second. But dude, I gave it a hundred percent my all. And so that's like the present moment now is just how great that feels to have truly given a hundred percent of what you're capable of. And it's just like a irreplaceable feeling that I've just realized from the way my coaches. What's next for you, personal goals, business goals, like where do you see all those things coming? Dude, I mean, things on the personal side and business side are fantastic. I mean, we're at forty four percent year growth now. I'd love to help a lot more people can, you know, actually one of the challenges I took was to learn social media. Okay. So much of our business was through people like yourself who have been able to communicate in a way that helps people build the financial freedom that they want, put their job, ten extra income. So I took on the challenge of learning social media myself. So I'm. You grew up pretty fast, dude, I've had a few hits this year. But before that, I posted four videos a day all last year, four videos a day, it was like nine hundred posts, right? And that all those at bat, so to say is like what taught me things that work and things that don't. So that's something I'm really proud of and excited to, you know, just help more people that way. That's awesome. I love to see you do that. I was like, oh, man, this guy's going all in on this next. Dude, at some point, I just know you're, I just know I need a challenge. Okay. So yeah, that was like an amazing challenge for me. The best part was things that I could learn that are valuable in my life in any other way. What's more valuable than how to communicate right with the seller or or it's on social media? What's more? What's more valuable than how to communicate? Life is just communication. So I was very excited about that. Yeah. I need to learn like human psychology is really taught for social media because you learn like you say one thing just a way that you would normally say and you're like, oh, that really triggered people. Like I remember the first time I was wearing a backpack walking through Home Depot and I say we buy the cheap stuff and they're like, slum Lord, boom, boom, boom. I'm sure you've got a video that has gone viral like that. So so it's continued to try to grow your, your business brand, your personal brand, continue to try to help people and you've gone, you've grown 44% year after year after year and you've got a great staff. You guys do great training. I could tell you as somebody, I just, I just randomly approached David, he's a totally just an easy going guy. I mean, we just talk about how competitive you are, but you are also easy going. So like as somebody who's just, I say, I say you're humble. I say you're hard working and that's, that's hard to find for people who are young. Like yourself and I find a lot of early success. So I just can't see what's, what's next in your chapter. I'm sure you have some pretty big ambitious goals as well. All right. So David, just to kind of, to kind of summarize things, I really appreciate you taking the time. Number one, we're going to hook you guys up with a free affiliate link so you can check it out. Real estate has changed my life and no, it's changed your life. You've been, that had an app because of it. So we're out here at a mastermind event. You're obviously still highly involved in your business and trying to get better at it every day. So you can tell this to somebody who truly cares. And I know from personal experience, we have a mutual friend, Ryan Haywood, who is, you got, guys, I've done a podcast together. You guys are constantly giving back, what is that podcast? How can they find you on all your socials? Yeah. Deal machine podcasts. We've done 150 episodes, all specifically on wholesaling. Yeah. So if you're looking into wholesaling as a business model, that's the podcast to check out. How much do you cover a wholesaling versus other types like, I know you buy a lot of property. We cover, we cover a fair amount of wholesaling, but we don't cover all wholesaling. Yeah. Yeah. So we just made an decision to stick purely on that. And it's called the deal machine podcast. Yeah. It's a great podcast. You guys crank out episodes all the time, we do three a week with people. You were doing like three a day, weren't you? Well, that was social media posts. But on the podcast, we've done three a week since, oh, a year and a half ago, so 150 episodes. So it's a mixture of interviewing guests that have had success, you know, doing one to 10 wholesale deals, how they got those deals. Ryan will do a solo episode on maybe something that's happened with him, and I've done some as well. Final question. I know I said last final question, but just one final question. If you could interview anybody on your podcast, dead or alive for yourself personally, who would it be? Dude, I've interviewed people who are very advanced. I feel like the best way to learn is with somebody who's two steps to out of you. Right. And we've tried really that the next person I'd want to interview is you, who is actually listening to this and done about three deals. So just hit me up, do you like on Instagram? If that's you, I'd love to talk with you specifically on wholesale deals. Awesome. Peace. Thanks for listening to the Deal Machine Real Estate Investing Podcast. Please leave us a review and follow along wherever you're listening to your podcast. Thanks for listening. Bye.
The DealMachine App CEO Is Interviewed About The Future of Real Estate Technology. Attend our July 1 Free Live Event To Be Among The First To See The Latest Innovations In The Real Estate Industry DealMachine.com/unveiled
Key Talking Points of the Episode
00:00 Introduction
01:53 What is the story behind Deal Machine?
03:20 What sacrifices did I have to make for Deal Machine?
05:30 What was the turning point that brought me to real estate?
09:02 How did I get started in finding real estate deals?
10:02 What led me to getting the Deal Machine app on the market?
12:30 How much has the Deal Machine app grown through the years?
15:14 How does the Deal Machine app make finding deals easier?
17:20 What influences the innovation of the Deal Machine app?
18:20 What does API mean?
21:00 What does the competition look like for Deal Machine?
23:21 Where did my drive to pursue real estate come from?
24:41 What does the future look like for Deal Machine?
27:38 What can you learn from the Deal Machine podcast?
Links
Website: Deal Machine Unveiled
https://www.dealmachine.com/unveiled
David's Social: @dlecko
https://www.dealmachine.com/pod
Ryan's Social: @heritage_home_investments
https://www.heritagehomeinvestments.com/
