Driving For Dollars the Modern Way with David Lecko CEO of DealMachine

David Lecko: [0:00] So I think one of the things I've learned, you know, having grown a company from zero to doing about 13,000,000 a year is, first, I was really nervous to hire somebody and be responsible for them. But I realized that there are certain things that they're just better to pay somebody to do if even if they do 80% as good as you would do yourself. Welcome

Speaker 2: [0:23] to the Collecting Keys podcast. The show where you'll learn how to use real estate to create massive income, not just passive income. Real estate doesn't have to be a get rich slow game. Listen to the country's top real estate operators, and you'll have all the the tools you need to replace your w two income and go beyond in under twelve months. Ready to take things to the next level? Let's jump in with our hosts, Mike DeHaan and Dan Austin for today's episode of the collecting keys podcast.

Mike DeHaan: [1:00] What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. And we have David Lecko today from Deal Machine. So if you have been around the real estate off market space for a while, you've probably heard about Deal Machine. If you haven't, I'm sure you've at least heard about the concept of driving for dollars, which is where you drive around and you look for crappy houses and you tag them and then you mark them. Right? So DealMachine was kinda like the original mobile app that allowed you to do this. It's how I personally got, like, you know, loosely started in looking at properties. It's kind of like a tool that I used that made me aware that there were, like, crappy properties because

Dan Austin: [1:43] because you started paying attention.

Mike DeHaan: [1:44] I started paying attention. Right? And I heard about it, and I downloaded it. And when I was driving for Uber back in the day, I would go and I was like, oh, dang, there's like a lot of crappy properties that I never looked at because I was always just in the zone listening to podcasts while I was driving.

Dan Austin: [1:56] Yep. It's a good skill for a lot of people trying to grow their lead flow, their lead systems, and it's for especially when you have more time than money. This is something you know, honestly recommended to do. But But I think more importantly on this episode, if you're already an existing player, besides using DealMachine or or implementing in your business was just all the entrepreneurial stuff and how to scale your business. He's obviously a fantastic operator running like a, what is it, ten or thirteen million top line revenue business. And so with that has to come some experience.

Mike DeHaan: [2:23] Absolutely. Yeah. I mean, and even if driving for dollars is something that you're completely past, you're not interested in, like Dan just said, the actual entrepreneur talk that comes up in this episode is awesome. He has, like, a whole bit where, you know, I don't know, about two thirds of way through the show where he goes through specifically how he finds drivers to do driving for dollars.

Dan Austin: [2:43] Mhmm.

Mike DeHaan: [2:43] But he goes and he breaks down, like, how he screens them, KPIs, like the whole thing. And the way that he does it would be so easy to rinse and repeat that for any business position you're looking to hire for. And, like, that piece alone, you should take some notes on it because Totally. It is so obvious that he is very experienced as a business owner. He fully knows, like, how to train people and establish boundaries and allow them to be successful. And there's just such great talk around what it takes to actually run a business in this episode. And it

Dan Austin: [3:10] was it was really, really awesome. Absolutely. Take notes on like, listen to the details on this one. And take the context of what he's saying, throw it out the window and just like listen to the details. And you'll be able to take that and apply it right to your business directly. That's what's so fascinating. Absolutely.

Mike DeHaan: [3:25] So awesome, guys. Well, please reach out to David as well. Give his podcast a follow to the deal machine podcast. I was on there in episode 54. He's had a bunch of other guests, and he is aggressively looking to grow that. So if you're a podcast fan, which you probably are, if you listen to this, you'll probably enjoy his show too. Besides that, guys, please go and share this episode with other investors and leave us a five star review on iTunes. So besides everybody, we appreciate you all and enjoy this episode with David Lecko. Enjoy. Alright, we are here today with David Lecko. That's right. Leko. Is it like a yeah. There we go. Got the right cadence on it. Nice. Super excited to have you on the show, man. The founder of Deal Machine. You've been an investor. You've been a business owner for a long period of time. And I'm super excited to have you on because deal machine was one of my first was like endeavors into off market real estate. Back when I was transitioning from being an engineer and trying to figure out the real estate game. I cut all of like kind of my life expenses and was trying to just be smart with my budget. And I used to drive around for Uber Eats, doing food deliveries with the old machine on my phone, just tagging all of the houses I drove by. And it was an interesting case study for me too, because I would always find that the poorest neighborhoods also did the most Uber Eats deliveries, and you can think whatever you want about about finding out the

Dan Austin: [4:45] habits that

Mike DeHaan: [4:46] sort of exist in those areas. But, David Mann, super excited to have you on the show. So for people that maybe don't know about you, about your background, let's do a little bit of a deep dive here on all that.

David Lecko: [4:58] Yeah, absolutely. So it's 2016, I'm working eighty hours a week, and I'm the software developer, I'm the technical support, and I'm also the trainer for this company who's got 20 employees, and they're just starting a software company. And I'm basically the software company person, which meant that I felt a lot of ownership in the quality of the service that people were getting. I was a little bit naive. Like, I I didn't know that, hey, they should, like, hire some more people to do this work because I'm getting overworked. And two years of that kind of burned out. But I learned a lot, and I think that that was amazing. Just starting out, it was important for me to learn as much as I could. So working for an entrepreneur like that, it gave me a lot of insight and confidence that ultimately helped me build a rental portfolio and also my own software company, Deal Machine, which has done about 60,000,000 in revenue since the beginning of time when I started seven years ago, and also taught me a lot of lessons of having as many as 50 employees at one time. And so I'm happy to share those insights with everybody listening to the collecting keys podcast.

Mike DeHaan: [6:06] Yeah. Absolutely. So so that's awesome. So, you know, you start with the software background, obviously. Where did kind of the idea for deal machine come from? You must have been dabbling in real estate a little bit, I would guess.

David Lecko: [6:19] Yeah. So the owner of this company I was working for, he had five rental properties. And I had read

Mike DeHaan: [6:23] the I four hour work

David Lecko: [6:25] knew that time was on my side if I wanted to create a life where my income wasn't attached to my time that I was spending, and had made the decision to spend a lot of time to learn as much as possible, but I was also saving as much as possible during that time. Was saving 50% of my income, which was a $50,000 a year salary. So I had three roommates, an old Honda Accord. I didn't go on dates. I didn't take trips. I was just only working and focusing on saving as much as possible. And that was all in my four zero one k's and stocks, which were pretty traditional ways of saving and investing money. Now the guy I worked for, he actually had five rental properties, and I asked him genuinely, why do you have five rental properties instead of investing in the stock market like I've been taught to do? And he said, well, stocks can go up and down, which I had noticed in my account. But he said if you buy a rental correctly and you manage it well, it should cash flow every single month. So that can give you a clear path to retiring early, which was my goal. He wanted to retire by the time he was 40, and I thought that sounded pretty good too. So I shifted all of my focus into finding a cash flow rental. And I couldn't really find one. The properties were listed for sale.

David Lecko: [7:26] They were actually going to not rent enough to cover the mortgage, so that was a problem. I couldn't buy one of those properties and make money out in the hole, actually. And so I asked him, I went back and said, Well, how did you do this? And he said, Well, I found my properties in 2009 when they were great deals, so I don't know if you can find them now. Which got me discouraged. I was feeling pretty discouraged, Mike. And then I actually found out that there was a real estate beat up in town, so I went to that. And I found people who were doing deals, which got me really excited. They said I should go drive for dollars, which is look for a rundown house similar to what you were doing when you were Uber Eats Inc, is you look for those rundown properties. And the reason why that helps you find a good real estate deal is because if the property's rundown and you find somebody that has something in their life where they just need to get rid of their house, whether it's poor health or a family emergency, they can't sell it on the market because it doesn't look good. So they they give you the discount and then you could fix it up and still have a great cash flow and rental property. It's exactly what I did. But two months in, I'd written down 40 addresses And my heart sank when I saw this property that I knew I had on my list, had somebody out working on it. So I rushed home, looked up who owned it, and sure enough, somebody bought it and for a price that was lower than what I would have offered. So I knew it could have been the perfect first real estate deal for me.

David Lecko: [8:42] And I was really frustrated. But I'm pretty solution oriented. So I used some basic development skills I had to make a widget. Let me pin the house, look up the address, and send mail to it from my phone. And so that's what I used for the next six months to find my first deal that I finally got, you know, about six months later. And it was never meant to be a widget that anyone else could use until somebody at that meetup I showed her what I actually had created for myself. And she's like, I'll pay a thousand dollars to try any new marketing. And my jaw dropped to the floor. I was like, I didn't even try to sell anything. What are you talking about? I put this thing on the app store as soon as I could, figured out how to charge her, and there she goes. Off she went, you know? And a few people started to trickle in because I put driving for dollars as the keyword. That was a term a lot of people used. Yeah. It was not a very friendly app. It wasn't easy to use. It wasn't intuitive. So I would call everybody who signed up and walk them through one by one how to use the app. And once I realized, you know, like, at least eight people a day are downloading this thing, and it was a free app at the time, you only paid for mail.

David Lecko: [9:46] So that lady who spent a thousand dollars, she wasn't buying the app. I didn't have a business model. Right? I was just like, I'm gonna charge you this much for the mail, and then you can send them that much mail out. Well, she was the first one, like I said, and then a few other people started downloading it. And then I realized like, oh, people actually like want this. So I I gave it a name Deal Machine to put it on the App Store and asked my best friend from seventh grade who was a better software developer than me if he could make it more user friendly. And in '20 05/17/2017, we formed an official business and changed the app ownership to Deal Machine, the company, and the rest is history. We kind of did 20,000 the first year just on mail. Right? And then we switched it. So it was a 50 app, and the mail, instead of $2 a piece, was like $1 a piece. Then we did 1,300,000 the next year, which was crazy. And then we just kept lowering the mail costs and and raising the subscription costs a bit. And then we did, like, 3,000,000, 6,000,000, 9,000,000, 12,000,000. That was our trajectory, and which has been fantastic because we didn't have any investors. So we got to keep, you know, profits from that and then reinvested and hired team members up to 50 at one time. And that's been my journey of deal machine. Wow.

Mike DeHaan: [10:59] That's so awesome, man. I love that. That's just such a great entrepreneurial story because you started with solving your own problem.

David Lecko: [11:06] Mhmm.

Mike DeHaan: [11:06] Right? And then you shared it with other people. And turns out if you have a problem statistically, so do other people. And then you had just had such organic growth like that. That's so cool. So when you said you started charging with mail, were you basically just like arbitraging it? Like, they would pay you a thousand bucks and then you would go and order, you know, mail from somebody else and you had a spread, or were you guys, like, actually going and getting it printed and sending it at that point?

David Lecko: [11:30] Well yeah. So the the no. There's companies out there that will do print and mail through API, which is how applications talk to each other. So whatever that cost was, we just upcharged a little bit. And because we have a monthly fee, that was how we would charge for the mail. Nice. That's awesome. Yeah. That's super cool.

Mike DeHaan: [11:47] So as you started to grow that, I'm sure you've seen a lot of ups and downs with the market. Have you found that, like, that with the different market cycles that we've gone to sort of very quickly over the past couple years, how has that influenced, say, you know, deal machine and sort of the driving for dollars model as a whole? Because, know, twenty twenty twenty twenty one were huge up markets. Now we're kind of into a down market. You started in what I would say is more of like a traditional market.

David Lecko: [12:13] Yeah. I would say it's had no effect at all in terms of who's trying to get into real estate investing. For sure. Well, I would say what is real though is people kind of chill between Thanksgiving to New Year's, and that's always Yeah. Yeah. A bit of a retraction for us. And that's pretty normal in the industry, talking with other software companies, service providers.

Dan Austin: [12:34] So with that, do you have a continued trajectory right now for, I guess, continued growth, I should say rather? Like, what are you seeing from a growth standpoint? Because I think that will also kinda speak to what the industry is doing.

David Lecko: [12:46] Yeah. I don't know if our growth trajectory is a good representation of the industry we grew a whole lot and then the growth flattened out for us for a few years, and we're growing again now. It really doesn't, I don't think, has anything to do with the actual industry because this is a year where you would have thought everyone was slowing down with the interest rates rising up. This has been the best year for us Interesting. Out of the last three years, by far. Again, I just don't think it has to do with the industry. I think it has to do with things that we're learning, and that has a whole lot more of an impact than what the external factors are. Yeah. Gotcha. Yeah.

Mike DeHaan: [13:24] I guess that makes sense though, right? Because people's desire for financial freedom or generate wealth isn't necessarily influenced by, you know, the real estate market as a whole. You know? In fact Mhmm. If anything, when you see the ups and downs, when people get a little bit more uncertain like they are now, that desire probably increases exponentially versus, like, when times are really good, like, at 2021. I mean, real estate was actually kind of funny even though lot of people were doing it. A lot more people were getting into stuff like crypto and, like, other things that were sort of, like, of that same mindset.

Dan Austin: [13:53] Yep. Hot topics.

Mike DeHaan: [13:54] Yeah. And now they're sort of coming back around, I think. Now that that's cool. So when it when it comes to driving for dollars, it's something that I think for people that are starting out, it's very valuable. I tend to kinda lead people away from driving for dogs a little bit as their business starts to scale because what I find is people, they have the, you know, thing that they did that got them started. And then as they're trying to scale, they're still trying to do the thing they did in the past, which isn't gonna get them to the next level. Right? Which they spend a ton of time driving around when really what they should be doing is building a team, you know, walking more properties, learning to send, like, more bulk marketing to reach more people. So how do you think something like driving for dollars fits in for, like, a investor that is scaling a business and not someone that's just starting out?

David Lecko: [14:39] Right. So I think one of the things I've learned, you know, having grown a company from zero to doing about 13,000,000 a year is, first, I was really nervous to hire somebody and be responsible for them. I realized that there are certain things that I they're just better to pay somebody to do if even if they do 80% as good as you would do yourself. Because then it frees you up to do higher level things that help you grow your business more. So in terms of how driving for dollars would fit, therefore, I think you should hire somebody for about $20 an hour to go drive for looking for those rundown houses for you. Yeah. And the reason why it's worth even doing that is because, I mean, I'm I'm hearing from companies like Simple Wholesaling in Indianapolis that the deals they get through driving for dollars end up being three times the spread. So that that could be an average of 15,000 to $45,000 on a single deal. So it may not be more than 20% of your deal flow if you're really a high level operator, but the deals that you get from it, they're nice and healthy size. So here's three lessons that I learned from hiring drivers and helping many investors do that over the years. The first time I wanted to hire a driver, there's three payment structures. First of all, you could pay hourly or you could pay per property that they add or per closed deal. And the one that everybody wants to use is per closed deal, but that never ever works unless it's your mom or somebody who knows you extremely well because it can take what, two, three months at least to get a deal from marketing that you do, but the driver who's putting in effort needs to pay their bills every month. So if you're not paying them until you close the deal, they're gonna fizzle out, and that's bad because the time you've spent training them is now lost because they've quit. And so you would have to train someone else, and eventually you're gonna burn out, so you're just gonna give up.

David Lecko: [16:31] Would not pay with that pay structure, even though it's everyone's ideal pay structure, because you don't have to pay anything till you do a deal. The second way is not really ideal because people think in terms of how much am I gonna paid per hour? And the type of person who wants to be an employee appreciates certainty more than uncertainty or more than, exponential ability to make money. If you say, hey, can add I'll pay you 50¢ per rundown house, that's not really gonna compute to certainty in their mind because they have no concept of how many of these types of houses they're gonna find. So I'd really recommend paying hourly. You're gonna actually pay less, and you don't need to give a bonus when you close a deal. Even though people think you do, you don't. And so I would say find out what Amazon is paying in your market. So Google for like, you're applying for a job at Amazon, and then go look for the delivery driver job and see what they pay. It might be $17 in your market, but it varies from city to city. And just add $5 to that because Amazon provides the vehicle and the gas, but the person you're hiring to drive for you, they're actually providing their own vehicle and gas. So $5 more per hour is definitely good for you because $5 an hour is a really cheap way to buy a vehicle and a gas. Totally. And to them, even though it's a worse deal, they're thinking, man, I can get $5 more than I can make at Amazon. Even if they're paying their car, they they don't really see the expense that way.

David Lecko: [18:02] They just see y'all making $5 more an hour. So they're gonna work for you and stick with you. So then post it on Indeed. And when I first posted a job, I had five people interested. I lined up Saturday full of interviews and zero people showed up. I couldn't believe it. I messaged all five of them. Four of them didn't respond and one said, oh, I'm sorry. Moved to Tampa. Decided to move to Tampa with my mom. I was like, are you kidding me? You just you you let me book an interview and you didn't even know you were gonna live here? That's crazy. So I knew I needed to change something real quick. And for all of my positions, we've done something like this where you respond when somebody applies for your job with a very low level, like, hoop that they need to jump through that shows that they actually read something about your job and demonstrates, in my case, that they're tech savvy. Because I don't wanna hire somebody who doesn't know how to use an app to pin a house. I don't wanna have to teach them how to use an app. So my hoop that I would jump them through was, thank you for applying for this job. I'm gonna pay you $10 for this test project. And the test project is go join my team in this app called DealMachine.

David Lecko: [19:15] It's free. And go add a house. And once you do that, message me back here. I'll go look at your house and Venmo you $10 immediately, then we'll schedule an interview. And so if a 100 people applied, maybe like four people would do that. But I knew they had the app on their phone and they knew how to add the app and they didn't have to ask me a bunch of questions, and I did Venmo them $40, right, to get these four people out of a 100. But then I had four people that I could actually have a great interview with. So that's my tips for hiring a driver. Now once you have the driver, because I told you this was like three things that I learned, right? So the first thing is the correct pay structure. The second thing is the correct interview filtering process with a test project. And then the third thing is having a weekly check-in meeting with them that is fifteen minutes long so that they feel part of the team and you can review the properties they are adding so that way you can tell them feedback. Well, why'd you add this one? It doesn't look like a property I'd really wanna market to. And then they're like, oh, didn't you see? It has all this trash in the bushes. That's why I looked like less than the rest of the properties on the street. And I'm like, oh, yeah. My bad. Or if you just quite the opposite.

David Lecko: [20:28] If they're adding too many rundown houses and you're like, well, I don't want them that rundown. You know, you can give them that feedback on a weekly basis so that repetition helps them continue to add the properties that you want. And it's a lot easier to do that weekly than it is like to look back at a whole month's worth of work and been like, I paid what and I lost all this time, so we're adding the right properties. And there's a little thing I had too. I was like, you have to commit to working at least 20 per week. I don't wanna invest my time training you if you're only gonna be able to dedicate five hours a week to this. So unless you're asking to go on vacation, my expectation is you you work at least twenty hours per week, And then the app tracks, you know, how long they drive. And I make sure they add about 12 properties an hour. So that way they're not in too nice neighborhoods, and they're also not adding every property where I could just blast it with mail, you know, instead. Those are my three tips for hiring a and implementing driving for dollars as like a established team. That's awesome, man. That's pretty awesome, man.

Mike DeHaan: [21:26] Here's how I know you're a great experienced business owner. Right? You've figured out how to screen people. You figured out your accountability for them. You know exactly what the KPIs are that person needs to meet and what's gonna make them successful. And you're obviously very clear at dictating that as well. So that's awesome. You guys if you guys just listed out, you should go and take some notes because regardless of whether you're hiring a driver or you're hiring for any other position, there's a ton you can take out of what he just said over that last five minutes.

Dan Austin: [21:52] Yeah. You could translate that to any position you're gonna hire. And the fascinating thing is is like I can relate it to what we've seen in the construction side, and that is like any time you hire for piecemeal or unit work, they're gonna go so fast, you're gonna get shit work, right? That's what happens, and so you've recognized that, put them in an hourly position, but then you, on the back end, add in that coaching, that fifteen minute weekly call, so that you can make sure that they're doing well, and that they're not just screwing off, because that job to them is much more valuable at $20.22 bucks an hour than it is per unit. They don't care about your product, they don't care about anything, and so you're kind of closing the loop and bringing in like a high quality system here. Love it.

David Lecko: [22:28] Thanks so much. That's super cool.

Mike DeHaan: [22:30] So awesome, man. So obviously, DealMachine's crushing it. There's some great tips for how people can utilize DealMachine in their own business regardless of the scale that they're at. Let's talk about you as an investor here a little bit. Are you still buying properties and looking to retire early like you originally started to do when you built Deal Machine?

David Lecko: [22:49] That's right. Yes, I just bought five properties this year so far. Nice. And I'm wanting to get to 20 doors. I'm at 15 now. Single family homes in Indianapolis. Nice. Valued at about $200,000, like a three bedroom, two bath ranch. It's my bread and butter there.

Mike DeHaan: [23:05] There you go.

Dan Austin: [23:06] What are your, like, KPIs for that? Like, what do you look for when you're looking at a single family home?

David Lecko: [23:10] Yeah. So I like I like the three two, 1,500 square foot. I like to have a property that is run down that I can acquire at a discount and then fix up and and almost spur out of it if I can. You know, BUR meaning the BUR, buy, rent, renovate, refinance, repeat strategy. So and I wanted to actually follow 1% rule as well. So, yeah, anything close to that, I'll buy, you know, even if it's not a perfect deal like that. Because I look back at deals I passed on, I held nine properties for, like I kinda stopped at nine rentals, you know, back in, like, the third year of DealMachine when we did a million dollars a year, and I was like, I should focus on this exclusively. I know. Right? So I held those rental properties that I had for three or four years and saw that they appreciated about a million dollars. And I was like, damn it. That would be so cool if I had kept buying more properties. So I've gotten back into it this year. Yeah. Yeah. And so gotten gotten up to 15 now. And I think 20 is a good number because that amount of income could support like a dedicated manager Mhmm. You know, so that I'm not self managing it. That's kind of it. My my rental income from those nine properties was like 200,000 a year, and the net was like 70,000 after I paid the mortgage taxes, insurance, and that weren't really repairs because those were mostly burr deals, so they were virtually no maintenance, You know?

David Lecko: [24:33] So that's kind of the stats, if you will. And so I I don't have all the new properties stabilized yet, but getting to 20 is my next goal. So I I guess I could technically retire, but I also wanted the additional rental income because I live a larger lifestyle now than 70,000 a year, you know. So I wanted to keep increasing that so that way it would be just like a a buffer of safety, of stable income that would just be there and give me that feeling of security, which is so nice. Yeah. For sure.

Mike DeHaan: [25:02] Has your view about what good deals look like or your buying criteria, has it changed from when you first started DealMachine and you didn't have your $13,000,000 a year business yet versus now where I assume you take a decent pay from DealMachine? Because earlier, you know, obviously, you're much more financially strapped versus right now. Has has that influenced your opinion on just like what you want in your different deals or it's still still kind of the

David Lecko: [25:28] Yeah. So I still try to have a good discipline of of deals, but I've noticed as time goes on in my Indianapolis market, the rent and the value of properties just kinda climb steadily. So the longer you hold them, the better the deal is. You know what I'm saying? Yeah. For sure.

Dan Austin: [25:45] Yeah. Makes sense.

David Lecko: [25:46] Yeah. I I noticed that. So I do have that in the back of my mind where maybe I can't totally burr out of the deal, but I'll just buy it anyway because it feels like in a few years, it won't matter because they'll have additional equity there. Mhmm.

Dan Austin: [26:00] That's highly overlooked because there were some pretty good Midwest markets over the last few years where you could do that. Like, burs were common. 2% rule was common. I don't think much of that exists anymore.

David Lecko: [26:11] No. 2% rule is crazy.

Dan Austin: [26:13] Yeah. Right? But like even where Mike and I invest typically, like a full bur is like, man, that is like, you're high fiving. Like, that's really hard to obtain, especially today. And so don't over So many people overlook like, well, I'll have to leave like two or three, five, 10% in this property. It's like at the end of the day, who gives a shit? Because in three, five years, you're gonna be so happy you own this property, because there's a ton of advantages of owning it, including like you mentioned, David, appreciation. Yeah. Absolutely. How do you kind

Mike DeHaan: [26:40] of balance and this is maybe a slightly selfish question here because this is the position that I'm currently in. I guess this desire to keep, you know, buying properties, the time that that takes to do, the capital it takes to buy this just kind of property, all sort of stuff. When you have a business that, like, probably if you wanted to, I'm assuming, you could invest that same money in your business and get a 10 x return rather than having the more, I would say, like conservative return through real estate.

David Lecko: [27:08] Well, hey, let me tell you this story. So when I'm starting my business, thankfully, I read this book called Profit First. It talks about the biggest issue that entrepreneurs have is they continually reinvest in their business so much while letting themselves burn out because they are not getting to enjoy the rewards of their labor. So the profit first gives a structure to say, if you're making a million dollars per year in revenue, then you should actually take 20% as profit. Does that make sense? They have a different, like, table for however big your your business is, but basically how we've always done it is that if if a million dollars comes in, what are our percentages there? We take 20% of profit, and then we also take 15% to put in a special account to pay taxes on that profit. So that means when the 20% comes into our bank account as an owner distribution, then that money is just there to to spend on personally whatever we want, And then the 15% is there to cover the taxes on that when the tax bill comes. Because, of course, as a business owner, it comes at random times in the future, what seems can be random anyway. So that's how we've always run it until I decided, as a software company, why don't we just invest more into our business?

David Lecko: [28:36] And so we went from about 25 employees, and I thought, wow. We got to this point, which was about 9,000,000 a year, maybe it was closer to 13. We got to this point of without like by just creating a great product. And so I decided we should hire more product in engineering so that we could make more great product, and we can grow even faster. So products and engineering people are pretty expensive. The mean average salary in Indianapolis even for that is like $120,000 w two plus benefits. We raised our expenses quite a bit. And right at the same time, something happened in the marketplace where a lot of these copycat apps came out. So the way we did grow was just word-of-mouth and referrals. And so traffic stopped coming our way quite so fast, and there were these other options people could use. Plus I had just raised my expenses. So from a very, very profitable $3,000,000 a year profitable business, it actually shrunk to zero. I mean, we're having months where it was zero profit. And so my business partner was on paternity leave at the time, and he hadn't had his baby yet. But I called him and I was like, yo, we have to take a pay cut because there's no other way unless we let some people go.

David Lecko: [29:51] And unfortunately, that happened to be the day his son was born. He said he had a panic attack, and I had no idea, of course, when I was delivering that news, but I was stressed myself. And so what I realized was I didn't want to I was scared to let people go, and so I cut into our profits. Right? So we we still haven't even gotten back to where we were at that level. Right? 13,000,000 a year taking really 35 percent of that as profit. Pretty good. Yeah. We haven't got back to that, but I didn't let anyone go because I didn't wanna ruin our culture. And we figured out we should learn marketing so that way we're we have a concentration risk with depending on just word-of-mouth essentially at that time. And then thankfully, like, didn't need that many product and engineering people. We had actually complicated the product to make it more advanced, but beginners didn't know how to quickly get started and add distress properties and send mail because there was too many complicated options of designing a custom postcard and all this stuff. So people were having less success with the product since we brought in more product and engineering team to build more features. So we spent a lot of time learning marketing, simplifying our product, and I did not ruin the culture by letting people go.

David Lecko: [31:02] Thankfully, there was this time at the beginning of 2022 where people could go switch jobs and make 40% more in tech. So the people who weren't as bought into our culture did that, and then three months later, of course, lost their job when tech slashed all these jobs. We never let anyone go except for, at the beginning of this year, two people that were hired to lead these big teams, that we no longer had big teams. And just I communicated that in advance to them and the next my whole team, gave them three months of pay essentially and said, you can just go now and take this three months of pay, or you can keep working here if you want for the next three months. And they chose to work here. But anyway, so now we're down to 28 people, which is a great size. Our productivity just really increased. My team appreciated the transparency of the, you know, the moves that we were making. And so those were some things that just made me I wouldn't necessarily say, like, you should invest everything in your business because you might not know what you're doing, you know, like me. And also, you're not gonna burn out if you can have a nice lifestyle that lets you enjoy the stuff that you've already built.

David Lecko: [32:09] So that's kind of my view on that.

Mike DeHaan: [32:11] Yeah. That's a really good answer. And you know, it's it's something that I think a lot of entrepreneurs eventually have to learn to like, I'm sure I know your dad lives out in Austin treatment, Aaron, Aaron and Moose, Moose Steggie. He has that same story about how he made a bunch of money, lost it all, did it again, lost it all. You didn't necessarily lose it, but he took a big step backwards. And then he started accumulating assets from there so that if things do get weird, like, at least he's able to fall back.

Dan Austin: [32:38] Makes sense.

Mike DeHaan: [32:39] And it's you know, I would say that where people get lost is I feel like a lot of real estate investors, because, like, they don't focus on the revenue, so they never really live like a major lifestyle. Like, that's kind of the old joke with real estate investors is, you know, this, you can be wealthy, but not necessarily rich because all your money is in your properties. Right? But but then with entrepreneurs, you always get the burnout sort of stigma, right, where they don't really accumulate any wealth outside of their businesses. And if they stop working, things will go backwards. It sounds like you've done a really good job of kind of finding that happy medium. So so that's great.

David Lecko: [33:12] Yeah. I had spent most of my twenties, like, sacrificing a lot. So when when DealMachines started making money, I actually felt like I needed to overcorrect, and I spent a lot on stuff that Mhmm. That wasn't an investment. And so now I I think I'm kinda like re centering where if money comes in and and I go buy a rental property, that's good because it prevents me from being so frivolous with it potentially.

Dan Austin: [33:37] What's one frivolous thing you bought that you still don't regret though?

David Lecko: [33:40] Oh, okay. Yeah. I mean, I spent $217,000 on a Ferrari that I always wanted. I definitely don't regret that. Nice. I spent, like, a $120,000, like, furnishing this pretty cool house. And that was bad because a lot of that furniture doesn't unless it's like you're buying antique like, you really know what you're buying. If you're buying it new from a store, it does not hold its value. I couldn't sell it for more than 20% of the value when I went to sell my house. So I I just threw it all in storage because I actually like the stuff, but I don't need it here in Austin. I figure one day if I have a bigger house again, I'll bring it back out. But that was that was a mistake. And then I I also I was looking for a piece of art, and I ended up buying nine from this art gallery. And I like all the art, but again, it was just one of those things where I tried to resell it when I sold the house, and there was not a market for this art that I bought. A lot of the types of art that you might find in a in a gallery

Speaker 2: [34:40] Mhmm.

David Lecko: [34:41] On a popular street. You know what I'm saying? Yeah. It's not really what you think it is in terms of of value. So I learned a lot there. And again, I think that art, I spent probably like a 110, similar to the furniture. So it's all in I storage right like it, but I'm not enjoying it at the moment. I'm paying to store it somewhere. Yeah.

Dan Austin: [34:59] I like that. That's a good those are good things and good perspective of how you do that because, I mean, everybody does things, right, frivolously, but you should still be able to enjoy some of it. Sounds like you do. Mhmm. Except for maybe

Mike DeHaan: [35:09] the furniture. Absolutely. Awesome. So what's next for you? For, you know, what you're doing for Deal Machine? You know, you're investing for David as a person. What are the next, you know, five, ten years look like?

David Lecko: [35:23] So the next five to ten years look like one thing I've I've really enjoyed doing is this Miata racing series that I've been able to participate in. So you get like a Mazda Miata. It's like a 30 year old car, and you set it up. Everyone has identical cars. There's about 45 people locally that compete in this race series. We have 18 races per year, all at the same track. And I got a racing coach that helps me drive the car as fast as possible, which is not just about mashing down the gas pedal because it doesn't have a lot of power, but it's about, like, just learning how to drive it the fastest way around the turn. So I've personally, like, loved doing that. I would love to take the next level, especially living in Austin. Not only do I have that that club racetrack, but we have the F 1 Track where F One's been for the last ten years. And so I could pay to bring my car on that track to do like a high performance driving event, which I've done like eight times, I think, since I've been here with the Ferrari, not the Miata. But just like having those two things here, I'd love to like just go further in that because it's something I it brings me so much joy. I love the people that I meet, and I love the personal challenge of getting better at something like that. And I know that, you know, inspiration is, like, temporary. So I feel like I wanna double down on that while I'm really inspired and enjoying it.

David Lecko: [36:40] Yeah. That's cool. Absolutely. I love it. And then with Deal Machine, are

Mike DeHaan: [36:43] you planning to kinda run it indefinitely? Are you looking to pursue an exit? What does that all look like?

David Lecko: [36:49] Yeah. So DealMachine well, I'm gonna die someday Please. And somebody's gonna need to run it. So somebody will own DealMachine. And I don't have any kids. So but, yeah, I think my goal with DealMachine is to really increase the the EBITDA. And my target would I mean, five five years from now would be like 8,000,000, you know, and I would split that with my business partner. And I I think if it got to that level, then that that would also be a good time to see, like, what's what's the right place to send the business next in terms of ownership, but we're not there yet. So I'm really enjoying it personally. Very involved with, like, you know, the deal machine podcast. You know, I host that with one of our top customers. And Mike, we had you on. So I'm all in and I I love the team that we have. I love the partner that I get to work with. I love all of our customers. Like, I it's so cool to get to work with people who see things differently, that wanna build a better life for themselves. It's not like I'm working with customers like the general public, like, you know, just like working at Walmart or something. Like, our customers are kind of like reflections of who I see myself as, and that is very cool and is rewarding to be around people like yourselves.

Mike DeHaan: [38:01] Yeah. So Yeah. Cool. Cool. Something that I really appreciate about you, David, is that you've, you know, you've built out this lifestyle. You've built this cool business. Right? And you've done it all in a way that I can tell you're, like, excited about it. Right? There's so much talk these days about people, you know, always trying to figure out a way to, like, get out of their businesses or, you know, be silent owners or do all these sort of things. And I tend to align with you on this. So I'm like, it doesn't need to be that way. Just like build it in a way that allows you to do the lifestyle that you wanna have. You know, understand that there will be ups and downs, but that's also how life works. It's never gonna be perfect. Uh-huh. And also too, if you are sound parting, what the hell are you gonna do? Like, just sit around? Correct. It doesn't make any sense. Nap. Awesome. So really, really good stuff, David.

David Lecko: [38:45] I love it. Yeah. Thanks for saying that. We're seven years in, which is pretty long for a partnership, you know? That is a long time.

Mike DeHaan: [38:51] Yeah. That is

David Lecko: [38:52] a long time. And I am super thankful that I get to live the life I live and work on the business that I do work on. And like I said, it's great and sustainable because we do that profit first thing, like you were saying, right? If I was not making any money, I'd be freaking tired of doing Yeah. All this.

Dan Austin: [39:13] I get that. Yeah.

Mike DeHaan: [39:14] Exactly. But awesome. Well, so much good stuff in there. I really appreciate everything that you shared so far. So we're getting close on time here. So we are going to dive into our end of show questions. So first off, question number one, what is your craziest real estate investing story? And this can be a big win, a big loss, a crazy tenant, a crazy transaction, whatever you got.

David Lecko: [39:36] Yep. Yeah. So the the one that comes to mind actually happened this year, a couple of months ago. And I just decided I would go to my Marion County website, pull the list of properties that were currently tax delinquent that month. And I uploaded them into deal machine, sent them all a postcard, got a callback. And this guy said he wanted to sell his property. He owed one he owed 200. He had owned it for three years, but nothing had happened because the he was out of state. He was an orthodontist in Utah. This was in Indianapolis, and I'm talking to him from Austin. Right? So I go send my guy to take pictures. I run the comps. I say, there's no way I could buy this for over $1.60. And he says, let's do the deal. I owe $1.80. And so he brought 20,000 to the closing table to get rid of this deal that I bought for $1.60. So that was pretty crazy, and I think is is a great reminder that this guy he bought more than that property too. So we just started out with the one, but we'll see what happens with the rest. But he just bought out of state. He makes a lot of money, and he thought he was gonna make some great investments, but he found out it's harder to operate these things from out of state than he thought. And so he didn't have the time to worry about it. He was making a lot of money as an orthodontist, and it's better if you just focus on what he knows. So getting rid of this thing was like was was helpful. So, you know, I and I that was just the easiest deal ever.

David Lecko: [40:58] I'm not a salesman. Even though I've done, you know, about 20 off market deals, they always feel so easy when it's a great deal. So I'm sure I could do more if I was brushing up on my sales skills, but I mean, I was just on the walking desk treadmill saying like, what's the deal with this property? How did you get into this? You know what I mean? And it was just he's like, man, just make me an offer. I really wanna get rid of it.

Dan Austin: [41:18] That is so cool. That's uncommon that a seller willing is willing to bring money to the table to sell it, but maybe you are a good salesperson, you just don't know it.

David Lecko: [41:26] Yeah. Try I mean, I'm genuinely a curious guy, so I think that that is definitely a helpful skill, but it's it's not really something I like learned and or a technique. You know?

Mike DeHaan: [41:35] Yeah. It's also a great lesson too to not prejudge your leads. Because I guarantee you there's a lot of other people that have looked at that and been like, man, I know he owes $1.80. I'm only gonna be at $1.60. I'm not even gonna make the offer. But Mhmm. Yeah. You took the shot and it worked out for you. That's awesome. Cool. Alright. Second question. What is the number one tip you have for a smaller investor looking to take

David Lecko: [41:57] their business to the next level? My number one tip would be go check out episode 54 of the Deal Machine Podcast, which is the story of Mike DeHaan going from 30,000 in debt to making 50,000 in six weeks. And also, I would say if you've done some deals, there's two pitfalls that I see. One is people read the book Traction, and then they try to hire like 18 members because they're so pumped up. Or they're they're doing, like, 10 deals a year, and they're doing everything themselves. And I would say the better place to start is to go find, like, an in person personal assistant Mhmm. As your first hire. They can help take anything off your plate that is less than, like, a $20 an hour activity. Because it's actually I'm talking, like, running errands, putting lock boxes on properties. I don't assign my assistant anything, but I give her access to my bank accounts, my email, everything. She can, like, book flights, and we share a to do list. So anything that she can take off my plate, she does. And I I think that's, like, the perfect way to scale to the next level rather than getting all these team members or trying to do everything yourself. So that that was, like, a fear that I had when I was first starting out. Was like, what in the heck is this person, like, gonna actually do for me?

David Lecko: [43:25] I don't feel good enough to have an assistant. But that would be my recommendation. A great book is called Buy Back Your Time written by Dan Martell. I actually paid him to be my private coach for three years. And so, he wrote a book called Buy Back Your Time, and it's basically all about hiring an assistant.

Dan Austin: [43:43] So, I would check that out. Dang. I need to look into that. That sounds fascinating. Do you have one tip from that book as far as that helped you hire your assistant, other than obviously getting over the hump of doing it?

David Lecko: [43:54] Yeah. So I'm trying to remember. It helps you calculate your buyback rate. So just knowing that helps. Right? It's got a formula for calculating your buyback rate, how much you should be offloading. Should you be offloading $10 an hour tasks or 20 or 30? You know, what's the right amount? That's a that's a helpful thing that the book gave me.

Mike DeHaan: [44:12] Yeah. It's funny. I think a lot of people have troubles with that because there's kinda this like stigma that if you have an assistant, then it's kind of, I don't know, like uppity. Mhmm. Especially when you're a small entrepreneur. But it doesn't have to be that way. It's all about what the relationship is established like at the at the beginning. You know, it's not like you have like the assistant that sits out and outside your office that you, you know, yell at when she doesn't answer the phone on time like you see in old movies. Right? Right. Yeah. Yeah. So awesome. That's a great tip though. Alright. And then last question, David. Where can people find you, follow you, and reach out to you?

David Lecko: [44:47] I'd highly recommend episode 54 of the Deal Machine Podcast. And I'm also on Instagram, d leko. D leko. Perfect.

Mike DeHaan: [44:55] And you can always should also check out the Deal Machine app if you haven't. It is a really great platform. And all of the stuff that you talked about, hiring drivers and, you know, building a team and, you know, just doing the entire driving for dollars process is super, super easy to do through there. It's a really, really solid platform. So awesome, David. Well, thanks so much for coming on the show, man. We really, really appreciate it. And you guys, you should definitely reach out to David, give him a follow, Go and check out episode 54 of his podcast if you wanna hear more of me. And he has a lot of other great guests on there as well. So don't you check out that episode or check out the other ones too. And please share this episode with anyone who might find it interesting and give us a five star review as well on iTunes. We really appreciate it. Thanks so much, everybody. And we'll talk to you all next week. Yeah. Thanks

Speaker 2: [45:41] for listening to collecting keys. Drop us a five star review on iTunes and send us a screenshot to Mike@collectingkeys.com for your chance to receive a free collecting keys t shirt.