Wake Up to Wealth - Reinventing Success with Leo Pareja

Episode Date: September 30, 2024

In episode 25 of Wake Up to Wealth, Brandon Brittingham interviews Leo Pareja, CEO of eXp Realty, as he discusses his experiences during the financial crisis, the shift in the market, and how he successfully launched a hard money lending business that grew to be a top player in the industry. Tune in for an inspiring conversation about resilience, innovation, and the evolution of wealth in real estate. SOCIAL MEDIA LINKSBrandon BrittinghamInstagram: https://www.instagram.com/mailboxmoneyb/Facebook: https://www.facebook.com/brandon.brittingham.1/ Leo ParejaInstagram: https://www.instagram.com/leopareja/Facebook: https://www.facebook.com/leo.pareja.104/LinkedIn: https://www.linkedin.com/in/leopareja/WEBSITEBrandon Brittingham: https://www.brandonsbrain.org/homeeXp Realty: https://exprealty.com/

This is Wake Up To Wealth, a podcast dedicated to helping you change the way you think about wealth. And now, here's your host, Brandon Brittingham. Hey, what's up, everybody? We are here today on another episode of Wake Up To Wealth. I have my good friend, super excited about this. It's taken us a while to get here, but we're here today on another episode of Wake Up to Wealth. I have my good friend, super excited about this. It's taken us a while to get here, but we're here today. Leo Pereja, who happens to now be the CEO of eXp.

Thank you for coming on the show today and taking your time to be with me. No, my pleasure. Always a good time to spend time with friends. So kind of crazy is you and I kind of got in real estate at the same time in very similar circles. And you've had a pretty wild journey. You know what I mean? Like, for people that may not know you that are listening to this, like, give us the three minute of start to where you are now. The quick and dirty one is I got licensed at 19 years old while I was in college.

I went on to sell real estate for 16 years. In that journey, I learned a lot, failed a lot. But at one point, I was the number one real estate agent in the world for Keller Williams. I sold close to 4,000 homes. The last eight years I was in production, I sold between 400 to 600 homes. Like, loved systems and processes, doing a lot with a little. During the financial crisis, I did a lot of REO, and I saw the market shift with CFPB and Dodd-Frank.

I started a hard money lending business in hindsight at the right time in 2012, grew that to a top 20 business in the United States in the hard money lending space, originating north of $2 billion, learned how to sell debt to Wall Street. And while I was building that business, I needed some data feeds. I went on to build a pretty large technology company that became pretty ubiquitous in the United States, north of 80% of every realtor in America had access to the software while I was running the business. Exited both those businesses, thought I was kind of done with organized real estate. Thought I was going to go into either private equity, finance or tech. Then I got a call from a mutual friend saying, someone's going to call you, pick up the phone

and turned out to be Glenn Sanford. And now I'm the CEO of the single largest brokerage on the planet, which is a pretty wild ride. So you said a lot in a short period of time. And I don't want to glaze over the accomplishments and the achievements that you've had. You know, just like how do you, you know, you've reinvented yourself, so to speak, a few times. You've gotten into a few businesses and exited. One of the challenges that I think a lot of people have is their identity gets so held up in something that they're successful at and can't get around that to get into the next thing. So I'm sure it's a ton of lessons, but what are, say, one of your biggest lessons that you learned of transitioning to a couple things, and then you've been successful at every single one. So successful is a, is a super like finished product word, right? Cause I've had some pretty

cool successes, but I've also failed a lot and at a bigger scale than most people ever fail. But it's getting back up and kind of swinging for the fences. But the other thing is, you know, I've never been ready. And I think that's like the biggest thing that people get stuck on. Like I hear so many people say, well, when I'm ready, when this happens, when that happens, it's like, and the best analogy I have for it is like, when you take your kid home from the hospital, the first, the first kid, you're like, wait, I don't, I don't know how to be a parent. Like, is there an instruction manual for this? Yeah.

And that's how I could, and for most people that had a kid, it's like, oh, I get that feeling where you're like mortified. You're like, this thing's going to stay with me and I'm going to keep it alive. I don't know how to do that, but you figure it out. And so I went from a college kid to a real estate agent and I wasn't qualified at 19 years old to sell anybody real estate. Sure. And then I became an REO agent. I'd never done it before. And then, you know, I was a team leader and then I started raising money and then I started building software and I built, and I sold that to wall street. Like

there's always a day one, there's always a zero to one process. And what I've learned in my journey is like, like you should be paralyzed with fear until you do it. Right. Right. Uh, public speaking is probably the best feeling of that. Like, yeah. You know, statistically, I think it's second to death of fear, but like you've done it. The biggest stages I've done, it's like 6,000 people. And like, it doesn't matter how many times I've done it. I get that feeling in your stomach, but once the 30 seconds and you're in flow, you're good. And I would compare that to everything I've experienced in life. There's always a time you don't know.

And you get to choose to learn it. Because the cool thing that I feel like I experienced early was exposure to really successful people. Because I chose to reach out to them them and get into relationship with them. And once you start spending time with people, you're like, wait, they're just like me. Yeah. They, they put the pants on one leg at a time, all those, you know, kind of cliche things, but you know, everything's learnable. Right. I always say, it's like, you're not an Olympic athlete. I'm not

attempting to break any records physically or do brain surgery. For the most part, most things that other humans can do are very learnable and achievable. So I'm going to go back to the private money, right because i so i think one of the things people get paralyzed you know people get paralyzed with fear they think things are not possible or limiting belief or whatever people get stuck there so you at a time when it was really unheard of started selling uh paper to wall street started selling your your notes to wall street like how do you you know was that just an idea you had and and the reason like how do you you know was that just an idea you had and and the reason why i want you to deconstruct that a little bit is because

from the outside looking in this that's just seems like holy shit this is impossible to figure out and think about it's very common nowadays right but then it wasn't i mean you're kind of a pioneer from that i think that's where people get stuck of like, I can't, I can't achieve this, but you did something very remarkable early on. Like, walk me through that if you don't mind. Yeah, no, that, that, I actually, I think I was the first. Yeah. And, um, you know, the cool part of my journey, like you said, reinvention, but from my point of view, it's been very sequential. Yeah. Right. So I was an agent, then I became an REO agent. And I point that out because that was my first progression from like, I'm a self-employed service provider, which is what a solo agent is, to I became a business owner. Right. Right. When

I went from 30, 40, 50 transactions a year by myself to 600 transactions, it didn't matter. Like the point that I was selling real estate, I think, is less important than the fact that I was processing a service with high touch, high deliverables, with KPIs, list to sell ratio, days in inventory, UPB, all this language that I had to learn that was actually more akin to finance. And literally, REO is real estate owned on a bank ledger. And understanding how that went from

an asset to a liability. And how they discounted it and how they sold it off. Because that actually taught me everything I needed to know for higher money. And then that's when I was talking to, that's where I made all my relationships with REO companies, hedge funds and banks. So I actually, through, you know, happenstance from saying yes and being uncomfortable, I was actually, you know, we're, we're sitting in, in a national Harbor, Maryland, but like, you know, eight miles that way is the White House. Right. And I was actually in the White House while CFPB and Dodd-Frank were being invented with a room

of about 300 people. I was in my 20s. I shouldn't have been in the room, but I went to represent NAREP for Gary Acosta because he couldn't get to the meeting in time. And I heard them say, you know, we're going to change this like ability to repay and all these things. And I'm like, well, you're not going to be able to borrow money ever again to flip a house. Right. Because a vacant home that produces no revenue, there's no ability to repay. Sure. And so when I started lending, doing hard money, the way it worked back then. It was basically mom and pop wealthy folks in a sub

market. But I had learned in that previous experience how debt is bought and sold. There's a coupon, there's a yield. I learned all these pieces of it. And I actually just called the same people I knew from REO who did lines of credit to investors. And I said, hey, I can sell you this paper. And it's got a great yield. And they're like, no one will buy paper with that short of a maturity. And what it took was explaining it, pitching it. And the people I convinced to buy my debt, which most people don't know the story, is were the people who were early into SFR. Yes.

So the- They understood it. The colonies, the people who were deploying had raised literally in the last six to 12 months of that time period, 10, 20, 50 million, $100 million to buy houses and couldn't buy them fast enough. Right. And they were sitting on $20 million. You got to deploy the cap.

But it was earmarked for single family homes. So I said, take that bucket of money. It's in line with your PPM. Like your fund mandate says you're going to get a yield on single family homes. Just park it with me. And I presented it with a tape and it was all relational. You know, I had to sign a bunch of extra paperwork in the beginning, but six, 12 months down the road, they're like, yo, how much of this can you get me? Right. Then, then it was, I started getting calls from strangers who were like, Hey, I heard you sold this tape. Can you get me more of that? And now it's a pretty robust, sophisticated market. Yeah.

Yeah. And then, uh, then eventually you, you sold, you exited from that business as well, right? Mm-hmm. And then, so you guys got to what? What were you lending a year, do you think? I think $400, $500 million a year. Yeah, yeah. And in what time period?

Like how long did it take you to get there? It's like everything else, right? Some people who are not watching the process say it was like an overnight success. Right. There's another concept I talk about, which I say we're all remarkably average. It took about seven years. And if you look statistically how long it takes you to scale a small to mid-sized business, it's about seven years, right?

Like your one, two, and three is an ass-whooping. Right. That's where most people don't make it past. Right. Because of that. You're not making any money. You're probably writing checks. Right.

And then like year four, you're like, okay, I think I got this. Then you get your second ass-whooping as you scale and you break stuff. And then it's normally like between year five and seven where you're like, oh, okay. Yeah, we've actually done something great. Yeah, I'm scaling. It's working. I'm making EBITDA. Yeah.

One of the great points you just made there is you said year one to three, you're getting your ass kicked and you're probably writing checks. I think that's one of the biggest misnomers of becoming an entrepreneur or becoming a business owner that people, oh man, it's going to be easy. I'm going to work for myself. And it's like, that's probably the hardest thing you're ever going to do. What's that famous saying? You trade not having to work 40 hours to work 100 hours for yourself. So from there, you go into tech. Again, just because I think it's remarkable where you went from kind of – I mean, they're all related to real estate, but looking back on it, it kind of makes sense. But while we were building the hard money business, we built our own loan origination system from the

ground up because there is no boomtown for hard money lending. It exists now, but it didn't then. Correct. And so we wanted an API for public record data and we called a bunch of companies and we couldn't afford what they were selling. And funny enough, we participated in a hackathon back in 2015 that Zillow was hosting. And the hackathon gave us access to this national API. And Zillow knows the story. My goal was to hit download when I got there and roll out.

But they set it up so it was read-only. And in 24 hours, we hacked together a beta, an alpha of a product with two engineers, and we won the whole thing. Which shocked us included. And the reason was because we actually sold homes. We actually understood the process. And then we got invited to present what we built in an MLS forum two months later. And all these MLS executives say, hey, have you built that?

We'll buy it. That seems really cool. Like, we'll be customers. And, you know, just like everything else, it got really uncomfortable. I spent a whole bunch of my own money up front to build a product. We got some contracts signed once Once we had product market fit, we ended up raising $48 million of institutional capital, built a pretty big business. And then that was another huge learning curve or maturation period for me because I went from a self-employed person to a business owner to now this is a growth

business right yeah so this was the diff like for me that was the first time going from smb lifestyle business to okay this is a growth equity business where you're hoping to get to massive scale sure um and uh it's a different business. Technology has different metrics. Steve Case wrote a book, several books, the founder of AOL. But he talks about the differences between a small to mid-sized business, which is typically a lifestyle business. And I used to be offended when I was categorized as a lifestyle business. And actually, now I think they're the best businesses in the world now that I've done all of them, including running a large enterprise like this one, because a lifestyle business, which is what most real estate agents or investors, you're optimizing

for your lifestyle. And that's actually a great thing, not a bad thing. And I actually sit down with small business owners all the time and I'm like, look, the goal is not to work 100 hours a week. Right. You may have to do that for a short period of time to stabilize the business and build a system. But the goal is to eventually, again, there's no right or wrong. So I don't think the goal is to work zero hours either. Right. Right.

It's to balance, you know, feeling self-fulfilled, which is like essential human condition. 100%. Right? Like there's all kinds of psychological studies that showed that the industrial revolution was really bad for our mental health. Because people did the same thing over and over again. Didn't like get to start to complete something. And like supposedly like woodworkers and iron workers who take like a raw material and finish it into a finished finished product and deliver you a chair actually get a whole high level of satisfaction. I know you do and I do from buying a piece of dirt,

rezoning it, and building it into something. It's not only the money, but it's actually fun. It's creative. That's your jam. I love that. I flipped, personally, 100 plus doors over here in DC, Maryland, Virginia, in Capitol Heights. And I loved taking an old, busted, molded out property, make it beautiful. I like the process. It was very creative for me. And so I think the business, when you think about lifestyle business, it's obviously income optimization, but it's also like, do you enjoy that? Yeah.

Like, is that fun for you? Yeah. Right. And, you know, when people talk about businesses and they talk about like, what's the best way to build a business? I always tell people like, have an honest conversation with how you're wired. Yeah. What do you want? Because like prospecting, it doesn't matter what business you're in, like cold call prospecting works.

Yeah. That's like playing in traffic for my DNA. Right. Like I don't. You don't want to do it. I don't want to do it. Yeah. But for some people it works.

Like I've interviewed some of our agents who like do it two hours a day religiously and make 400 grand a year. Right. Pick up their kids from school, drop them off at school or super present with their spouse. And they're good with that. That's awesome. That's what they want. But you need to figure out a business that works for you, a business model that works for you, and just optimize this for how you're wired. I'm going to ask you two more questions. One, and it's probably hard to nail this to one, but what do you think? And I always ask everybody this, and I'm always fascinated by the answers. What do you think is like one of the, and it could be an ideology. It could have been something specific you did.

It could have been anything that you learned. What do you think is one of the biggest mistakes you made in your journey? Well, that's a good one. Cause I feel like I've made so many. Oh, of course um so this one is as i've gotten older yeah i actually think about this daily yeah uh it's to worry too much yeah right like this concept is especially i'm a parent now and my parents are getting older it It's like, we only live like in a hundred year spans.

Like think about that in 100 years, everyone you knew is going to be gone. Yeah. Like period. Yeah. Like you will like statistically speaking, none of us know our great grandparents. Right.

Right. Like barely know their names. Sure. So like 99.9% of everything that happens to you is literally irrelevant. And when you, again, that sounds kind of like, you know, depressing. But I think it's legitimate. losing sleep at night, like you're giving yourself like actual heartache and stress and you know, your brain can go to dark places in those moments. Of course. You're like, it's all good.

Right? I don't know if you saw the other day on Facebook, I said, but did you die? And that's actually the biggest lesson learned, right? And I guess i'm you know i think that having talked to you a lot and being around you i think um i think you have a very calm demeanor with the amount of shit you're dealing with all the time do you know what i mean like and you're very calm around all of it you know what i mean i think that you know i mean it's's like the best analogy I can give people that I coach. And I think that's great what you just said is, you know, the fourth quarter, you're down by a touchdown and you put it in the quarterback's hands.

You know, go watch Tom Brady, Joe Montana, all the greats. They were always so calm in those situations. So there's a couple of things that that are really clear in my head. Because again, I love psychology. I love how the brain works. I love how we're wired as human beings. So first of all, we're a product of evolution. And so our brain is wired to keep us alive. Correct. Which means all the stress and all these responses are biological to keep us alive.

And, you know, but did you die is a really good question. And so, one of the things is like, this is the life I chose. Sure. And I actually, I was at dinner with a friend of mine who's very successful developer last night. And he said something, I was like, but this is the life that we chose. Sure. You can always choose to do something else. And the aha that I got once was the human experience is problems. Like I've never met a human being who was completely zenned out and had no problems independent of income and success. Right?

Right. So like a real problem is I don't have enough capital to raise for this amazing deal I locked up. Right. Right. So like a real problem is I don't have enough capital to raise for this amazing deal I locked up. Right. I don't have the right people to handle all the leads I've created. Right. I can't hire fast enough. Right. For customer service because my software is doing this.

Yeah. Like those are awesome. Those are problems. Yeah. You know what else is a problem? That's a great problem. But you know what else is a problem? I can't feed my this. Yeah. Like those are awesome. Those are problems. Yeah. You know, what else is a problem? That's a great problem. But you know what else is a problem? I can't feed my kids. Right. I can't pay my rent. Right. I like, I can't take care of my parents. Sure. Like they are both stressful. Of course. I choose those. Sure. And I've, and and with to your point about me it's like at all times there's always a crisis

no doubt but i've chosen this life sure because the other one is also a very real tangible problem but these are the ones i want yeah no that's i think that's powerful i'm ending with this the way i do with everybody we call the show waking up everybody. We call the show Waking Up to Wealth. I call the show Waking Up to Wealth because I think we've been taught about money wrong. And we've been taught about how to get wealth wrong. So the reason why I bring people on here like you is to enlighten people out there to see and hear what's possible. But to you, what is Waking Up to Wealth? And it's whatever your version is. So the thing that I've come to really appreciate because my journey has been very focused around building wealth and creating wealth is I think there's the ultimate luxury is time.

Yeah. Right? So I think financial independence is something that has always been the goal while going on a wealth building journey. But time, and then I will add location independence, which are newer concepts to me, right? So if you can build a business that doesn't physically require you to be there all the time, and especially in a post COVID world. Sure. Right. I think COVID was super interesting because it was a mass experiment on like, first, have you questioned your mortality? Like, look, we were wiping groceries down. Yeah. And for a second, we're like, oh shit, what happens if this is the end? Yeah.

And then I think a lot of people were like, well, I don't want to live here anymore. I want to live over there, near the ocean, near the mountains, near my family, near my cousins. So you had a lot of that where it's like, at this interesting phase of life, I'm traveling four months of the year with my family. I just came back from Europe for a month. I'm going to spend next week, six weeks in the West coast. And so like for me, it's not like the financial independence was always the goal, but like having enough time to do the things that I want to do with the people I want to do it with, but also like the location independence is a really cool one for me now.

And again, it's also the phase of life. I'm 10 years from now. I may want something like, maybe I want to be closer to my kids and their kids one day me now. And again, it's also the phase of life. I'm 10 years from now. I may want something like maybe I want to be closer to my kids and their kids one day. Right. So. Yeah, absolutely. Well, man, I greatly appreciate you. You dropped all kinds of gems, which I knew you would today. I know how busy you are. So taking the time to get on the show with us is greatly appreciated. I know my audience will appreciate it. And if you don't pay attention or follow this guy, find him on social media, pay attention to him, follow him. He's a wealth of knowledge, super successful and lucky enough to call this guy one of my eyes. Thanks brother.

Thanks for having me, bro. Thanks so much for tuning into this episode of wake up to wealth we sure do appreciate it if you haven't done so already make sure you're subscribed to the show wherever you consume podcast this way we'll get updates as new episodes become available and if you feel so inclined please leave us a review on apple podcast and tell your friends about the show it is how new people find us until next time.