Real Estate Success StoriesTrailerBonusEpisode 15Season 1
Real Estate Success Stories: Your 2025 Game Plan to Thrive - Interview with Ricky Carruth
Real Estate Success Stories: Your 2025 Game Plan to Thrive - Interview with Ricky CarruthReal Estate Success Stories: Your 2025 Game Plan to Thrive - Interview with Ricky Carruth
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Real Estate Success Stories: Your 2025 Game Plan to Thrive - Interview with Ricky Carruth
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Real Estate Success StoriesTrailerBonusEpisode 15Season 1
Real Estate Success Stories: Your 2025 Game Plan to Thrive - Interview with Ricky Carruth
In this episode of Real Estate Success Stories, Leo Pareja sits down with Ricky Carruth, an eXp Realty agent and founder of the Zero to Diamond real estate coaching program. Ricky, also known as the "No-Pressure Agent," has made it his mission to transform the real estate industry by reducing failure rates and shifting the focus from deals to relationships. Born and raised on Alabama’s Gulf Coast, Ricky has been selling real estate since 2002, weathering market ups and downs to become the top agent in Alabama since 2014.
Listen as Ricky and Leo tackle one of the industry’s hottest debates: Will AI replace real estate agents? With Ricky’s "relationship-first" philosophy and Leo’s tech-savvy leadership, they deliver a game plan for agents to thrive in 2025 and beyond. Whether you're an experienced pro or a newcomer looking for direction, this episode is packed with insights that will change how you think about real estate.
Why Watch?
✅ Shocking Predictions: Learn why real estate isn’t doomed by tech (but could be if you’re unprepared).
✅ Market Insights: Discover why 2025 might bring a 10% surge in transactions.
✅ Agent Survival Guide: Find out how to remain indispensable despite changing trends.
✅ Future-Proofing Your Career: Understand how mentorship, strategy, and adaptability can keep you ahead.
About Real Estate Success Stories with Leo Pareja
Join host Leo Pareja, CEO of eXp Realty, as he delves into the exciting world of real estate with top producers from around the globe. Each episode offers exclusive, in-depth interviews with industry leaders who reveal their journeys, strategies, and tactics for achieving unparalleled success in their local real estate markets and beyond.
🔔 Subscribe to stay updated: Don't miss out on the latest insights and stories from the best in the business. Click the subscribe icon to get notified when new episodes drop.
🎧 Listen on the go: Find us on your favorite podcast platforms, including Apple Podcasts, Spotify, and more.
⏱️ Chapters:
[00:00] - The Big Fear: Is AI Coming for Agents?
[05:58] - Why Real Estate Isn’t Just About Numbers
[09:45] - 2024 Market Forecast: A 10% Boom?
[18:25] - Agent Challenges: Commissions, Contracts, and Survival Tips
[29:25] - Learning from Market Crashes: Leo’s 2008 Lessons
[37:04] - From Realtor to CEO: Leo’s Inspiring Leadership Journey
[45:18] - The Future of Real Estate: Tech, Teams, and Trends
💬 Join the conversation: We love hearing from you! Leave your comments below, and let us know what topics you want to hear about or questions you have for our guests. Your feedback makes our show even better!
📢 Share with your network: If you find our episodes valuable, please share them with your colleagues and friends in the real estate industry. Let's grow and learn together!
Thank you for tuning in to Real Estate Success Stories! See you next week!
Chapters
In this episode of Real Estate Success Stories, Leo Pareja sits down with Ricky Carruth, an eXp Realty agent and founder of the Zero to Diamond real estate coaching program. Ricky, also known as the "No-Pressure Agent," has made it his mission to transform the real estate industry by reducing failure rates and shifting the focus from deals to relationships. Born and raised on Alabama’s Gulf Coast, Ricky has been selling real estate since 2002, weathering market ups and downs to become the top agent in Alabama since 2014.
Listen as Ricky and Leo tackle one of the industry’s hottest debates: Will AI replace real estate agents? With Ricky’s "relationship-first" philosophy and Leo’s tech-savvy leadership, they deliver a game plan for agents to thrive in 2025 and beyond. Whether you're an experienced pro or a newcomer looking for direction, this episode is packed with insights that will change how you think about real estate.
Why Watch?
✅ Shocking Predictions: Learn why real estate isn’t doomed by tech (but could be if you’re unprepared).
✅ Market Insights: Discover why 2025 might bring a 10% surge in transactions.
✅ Agent Survival Guide: Find out how to remain indispensable despite changing trends.
✅ Future-Proofing Your Career: Understand how mentorship, strategy, and adaptability can keep you ahead.
About Real Estate Success Stories with Leo Pareja
Join host Leo Pareja, CEO of eXp Realty, as he delves into the exciting world of real estate with top producers from around the globe. Each episode offers exclusive, in-depth interviews with industry leaders who reveal their journeys, strategies, and tactics for achieving unparalleled success in their local real estate markets and beyond.
🔔 Subscribe to stay updated: Don't miss out on the latest insights and stories from the best in the business. Click the subscribe icon to get notified when new episodes drop.
🎧 Listen on the go: Find us on your favorite podcast platforms, including Apple Podcasts, Spotify, and more.
[18:25] - Agent Challenges: Commissions, Contracts, and Survival Tips
[29:25] - Learning from Market Crashes: Leo’s 2008 Lessons
[37:04] - From Realtor to CEO: Leo’s Inspiring Leadership Journey
[45:18] - The Future of Real Estate: Tech, Teams, and Trends
💬 Join the conversation: We love hearing from you! Leave your comments below, and let us know what topics you want to hear about or questions you have for our guests. Your feedback makes our show even better!
📢 Share with your network: If you find our episodes valuable, please share them with your colleagues and friends in the real estate industry. Let's grow and learn together!
Thank you for tuning in to Real Estate Success Stories! See you next week!
What is Real Estate Success Stories?
Join host Leo Pareja, CEO of eXp Realty, as hes dives into the world of real estate with top producers from around the globe. Each episode features in-depth interviews with industry leaders who share their journeys, strategies, and tactics for achieving success in their local real estate market and beyond.
🔔 Subscribe to stay updated: Don't miss out on the latest insights and stories from the best in the business. Click the subscribe icon to get notified when new episodes drop.
🎧 Listen on the go: Find us on your favorite podcast platforms, including Apple Podcasts, Spotify, and More.
📢 Share with your network: If you find our episodes valuable, please share them with your colleagues and friends in the real estate industry. Let's grow and learn together!
Speaker 1:
Zillow is gonna take your job. Zillow is gonna take over. They're gonna they're gonna replace real estate agents. AI is gonna replace real estate agents.
Speaker 2:
And so that that's probably the more common one I'm hearing now. Right? Mhmm. When I do q and a, it's like, is AI gonna put us out of business? And this this is what I fundamentally believe.
Speaker 2:
I believe that in Ricky and Leo's, functional career lifetime, there's gonna be a need for a real estate agent.
Speaker 1:
Mhmm. Leo, what's up, buddy? Good to see you, my friend.
Speaker 2:
Thank you for
Speaker 1:
coming to Miami. Yeah, man. It's gonna be here in person.
Speaker 2:
Absolutely. It's it's different. And we've done a couple of these online and just in person. It's it's so much better.
Speaker 1:
Yeah. It's always good to good to kick it with you. So we've we've went through the NAR settlement. We've went through now the election. We got New Year's coming up.
Speaker 1:
The feds just lowered the rates again, yesterday, I believe it was. What do you think the key issue is now on on the minds of the industry at this point?
Speaker 2:
Well, the the key issue on the minds of the industry might be different than kinda the general economics. Right? So
Speaker 1:
Right.
Speaker 2:
I always find it interesting, like, the fed lowered the rate quarter basis, 25 basis points yesterday. That does not actually translate to a drop in mortgage rates.
Speaker 1:
Sure.
Speaker 2:
Right? Historically, mortgage rates are actually way more tied to the 10 year treasury Mhmm. By about a 150 to 200 basis point difference. What's been crazy is for the last couple of years, we're actually been 250 to 300 basis points. Right?
Speaker 2:
So if if you look at the Fed rate and the 10 year treasury, rates should be at 5%. Mhmm. 5 a half percent, and we're nowhere close to that. Right? So,
Speaker 1:
based on the normal spread historically.
Speaker 2:
Based on historical Yeah. Averages, but there's a lot of uncertainty. One of them was the election. Now, you know, half the country's happy, half the country's mad, and it doesn't really matter. Because I actually say, I don't think that has a bearing on the market.
Speaker 2:
Mhmm. Mhmm. At the end of the day, we're We have a
Speaker 1:
little bit of a bearing on the stock market, I would say, over a past
Speaker 2:
couple of months. Absolutely. The real estate market Right.
Speaker 1:
Right. Right.
Speaker 2:
Is human condition driven. Yeah. Yeah. You're right. We buy stocks because we have excess capital to invest and we feel confident in the economy.
Speaker 2:
Mhmm. We buy cash flowing real estate because the deal makes sense from the interest rate you can buy it at and the cash flow produces. It's not how we buy residential real estate. Yeah. We fall in love.
Speaker 2:
We make little people. We need more space. We need less space. Couple promotions along the way, death and divorce are 80 to 90% of transactions. Right?
Speaker 2:
No nobody says, alright, honey, rates are perfect today. Let's go buy a house. It's it's it's our lease is up in 60, 90 days.
Speaker 1:
Mhmm.
Speaker 2:
And do we wanna continue to rent? Or do we want to get on the property ladder? Or, hey, you know, we've really outgrown this house with these 2 kids.
Speaker 1:
Why do you think that that agents, you know, I see a lot of agents on so on social media talking about, you know, when the best time to buy a house is or they act like the the biggest question they get from from consumers is, you know, should we buy a house now? When when really, you don't really ever do you ever really hear that question in the real world? You know, isn't it driven around what you're saying more?
Speaker 2:
So I think that's a fair question. It's like, I grew up selling in the DC, Maryland, Virginia area, which is a unique part of the country because every 4 years, people move in and out of the area. And so as we just witnessed. So if somebody moves to DC and they're a young professional and they're with an administration, and this is a conversation I had many times in my life where it was like, hey, should I buy it? I'm like, well, how long are you gonna be here?
Speaker 2:
And I said, 2 to 4 years. If you're gonna buy real estate in 2 to 4 years, you better buy it under an investment calculation.
Speaker 1:
Mhmm.
Speaker 2:
Meaning, the number I'm buying it for needs the cash flow in case I have to leave in 2 years. Mhmm. Because what you don't wanna do is buy it, be underwater from an investment standpoint.
Speaker 1:
Mhmm.
Speaker 2:
And then you're upside down and then you end up becoming a distressed seller. Mhmm. But if you're gonna be in any area of the country and the number that I historically have seen and would advise customers when I was an agent would say 10 years. If you are going to be in this general vicinity for 10 years and you're spending x dollars on rent and you can swap it for x dollars in mortgage, hands down 100% of the time Mhmm. That is the right time to buy.
Speaker 2:
Mhmm. Because, first of all, you lock in affordability for 10 years or or 30 years actually. Your your your rent is not susceptible to your landlord increasing. And again, landlords can lower rates, but I still haven't seen of that ever happen to me here. Or or I never lowered the rent on any one of my rental partners.
Speaker 2:
Right? I may have held it steady during a bad market, but I never lowered it. So you you lock in that. And again, when I said 10 years is from experience of look, if you bought a house in 2007, like May of 2007, depending on where you lived in the country, that was like the worst month in history of America to buy a house. And even if that property dropped by 40, 50%.
Speaker 1:
You're still up right now.
Speaker 2:
If you if you go to 2018, you were okay. You could at least get out of it. Mhmm. So there is a wrong time to buy based on your horizon.
Speaker 1:
Mhmm.
Speaker 2:
So if if you bought because you could afford to buy, but you looked at that on a cash flow basis and for what you could charge in rent for versus what you could afford to pay, you're upside down 500, 800, a $1,000 a month. And there is a high probability
Speaker 1:
Mhmm.
Speaker 2:
That you may no longer live there in 2 years, I actually talk people how to buy.
Speaker 1:
Yeah. Yeah. I think it's something that the market overlooks is, the fact that when you when you when you lock in a mortgage, you're not susceptible to rate increases, which is what you just talked about. You know, that's that's the one thing a lot of these guys talk about. You know, go rent.
Speaker 1:
You know, houses, home prices are too high. Interest rates are too high. You know, go rent. And I'm thinking, well, you're gonna pay more every year. You know, you're gonna pay more every year.
Speaker 1:
To me, it just doesn't make sense. Even if you lock in a little higher than what your rent is, when you look at, like you say, a 10 year period, you're gonna be in way better shape, you know. And then you got, equity and everything else. Speaking about real estate agents. Right?
Speaker 1:
We had the election. We had the settlement. Right? We're past all that. And and you were one of the we talked about it, you know, you were in the forefront of, you know, leading the charge with the brokerages on how we should handle the fire broker commission and stuff like that.
Speaker 1:
Speaking about that for a second, like, the way I see it, not a lot has changed since all this came into to effect. We've we've got through the election, you know, all this stuff. We talked about the industry buyers and sellers. What are agents worried about now? What's the next thing?
Speaker 1:
Because it seems like they gotta have something to worry about at all times.
Speaker 2:
Well, in fairness, I've been in the business for 23 years and there was always some life changing event. Right. Right? I got into the business right after 911. And so that was very scary.
Speaker 2:
And then we had the greatest run up in history where, like, I feel like the multiple offers in 05, 06 were worse than
Speaker 1:
They were. They were. They were absolutely worse.
Speaker 2:
Because there was no income, no everyone qualified.
Speaker 1:
Right.
Speaker 2:
So everyone was a qualified buyer. So that was historically very difficult to operate in.
Speaker 1:
I mean there were 7,000,000 transactions o five, I believe, versus 6,000,000 in in, 2021.
Speaker 2:
So very close, but the part that people don't add is that there was less humans. Right? So
Speaker 1:
No. No. No. I get that. I mean, that's that's part of my point.
Speaker 1:
It's like there were more transactions Exactly. With with less people and less and less homes. Right? And less homes. And and less homes.
Speaker 1:
Right? There's been a lot of homes built since then.
Speaker 2:
So then we had the worst crash in the history of the world. And then it recovered, then we had COVID. So there's always some, you know, major catastrophes.
Speaker 1:
By owner dot com. Right? Real estate agents are done. Yeah. You know?
Speaker 1:
Zillow is gonna take your job. Zillow is gonna take over. They're gonna they're gonna replace real estate agents. AI is gonna replace real estate agents.
Speaker 2:
And so that that's probably the more common one I'm hearing now. Right? Mhmm. When I do q and a, it's like, is AI gonna put us out of business? And this this is what I fundamentally believe.
Speaker 2:
I believe that in Ricky and Leo's, functional career lifetime, there's gonna be a need for a real estate agent.
Speaker 1:
Mhmm.
Speaker 2:
Right? First off, there is it's highly infrequent. The average number of times people bought and sold real estate when you and I got in the business, because I remember from another conversation, you and I started pretty much the same time Mhmm. Was 7 years. That number has slowly creeped up to 9 to 10 years.
Speaker 1:
Oh, over what period? Like, when was it 7 years and when when
Speaker 2:
Yeah. So in in in the early 2000, it was about every 7 years people moved.
Speaker 1:
Mhmm.
Speaker 2:
Now it's getting closer to every 9 years people.
Speaker 1:
What do you think is the cause of that?
Speaker 2:
Yeah. No. That's it what the data says, it's partial rate lock.
Speaker 1:
Mhmm.
Speaker 2:
Right? Like the average, interest rate in America for 8 84% of all Americans have a sub 5% interest rate. Right? So even if you found a house that was equal to or greater than, to swap a 3% rate for a 6 and a half percent rate, that takes out
Speaker 1:
Mhmm.
Speaker 2:
A huge portion of the potential sellers. So people are just holding on to homes longer. We're living longer. My father's 83 and he can probably outrun both of us. Right?
Speaker 2:
He's just in really good shape. That didn't used to happen 20, 30 years ago. Mhmm. Right? So Mhmm.
Speaker 2:
People are aging in place a lot more gracefully. Mhmm. So they're like, I don't need to move to a condo Right. Or a retirement community because I can still mow my lawn, I'm still healthy, I'm still, you know. So so the length of ownership is extending, which takes housing inventory away.
Speaker 2:
Right? Because there's we're not building enough homes. Mhmm. People aren't choosing to sell them at the same pace. So but that adds to the reason why I think we need agents for a long time.
Speaker 2:
Right? If if I do this only but every a decade, well, whatever you did when you bought the house is completely there. First of all, you probably signed paper 10 years ago. It's funny to say it out loud. Right?
Speaker 2:
Like paper, blue ink, maybe a fax machine. Mhmm. Now everything's digital, DocuSign, electronic. And so the need for help so one, the average American moves 6 times in their entire life. 3 is a tenant.
Speaker 2:
3 is a homeowner. And it's typically your starter home, your move up home, your move down home. Mhmm. If you think about that, that's that's that's very infrequent and very and it turns into very emotional.
Speaker 1:
Mhmm.
Speaker 2:
Right? Like, it's not like buying a cash flow property or picking an office Mhmm. Where it's like, okay, does this have enough square feet?
Speaker 1:
It's a big, big deal.
Speaker 2:
And this is like and and and I think you can relate to this. Like, I as an agent transacted like close to 4,000 properties. Mhmm. I haven't lived in that many homes with Ariana and the kids. Mhmm.
Speaker 2:
And even when we bought, we turned into emotional wrecks
Speaker 1:
Mhmm.
Speaker 2:
Where all of the logic goes out the window. And I always like to have an intermediary party to keep the 2 the the two sides, from killing each other.
Speaker 1:
Yeah. Speaking of people hanging on to their homes longer. Right? And that that, like, messing with the inventory and stuff. What are your thoughts on this whole, you know, people having less babies, population slowly gonna dwindle over the next 100 years.
Speaker 1:
We're gonna have empty buildings and stuff in the next, you know
Speaker 2:
So it's century. Yeah. No. No. It's it's a very real like, again, you know, I'm a data nerd, well known phenomenon that when you go from a 3rd world to a first world to an industrialized country, the higher the standard of living goes, the more expensive it is to to live.
Speaker 2:
Mhmm. Having kids is more expensive in a first world highly industrialized country than a emerging third world country.
Speaker 1:
Mhmm.
Speaker 2:
And there's actually a very good example of what not to do, and it's called Japan. So
Speaker 1:
Yeah. They have empty.
Speaker 2:
In in the US, we have roughly 94, 95, 96,000,000 residential places we can put people, including rentals, apartments, single family. We're short like 4 or 5,000,000. That's why Mhmm. Prices haven't come down, even though rates shot up to 8%, everyone thought the market was gonna collapse. And that's
Speaker 1:
due to the creation of new families Yes. That need homes
Speaker 2:
So that that ingredient is called household formation, which by the way, ours is still going up, which is a really good thing. Mhmm. And it could either be one of 2 ways. 1 is birth rates, also immigration.
Speaker 1:
Right?
Speaker 2:
So as long as there is more I
Speaker 1:
don't have any problem with that. I don't think right this time.
Speaker 2:
No. No. But again, like, but if you look at Japan, they had a very closed philosophy. And now they have 60 Or
Speaker 1:
they just don't let anybody in the country, basically?
Speaker 2:
And
Speaker 1:
then did they also have a
Speaker 2:
Replacement of baby problem. Right.
Speaker 1:
Right.
Speaker 2:
So so their problem is so exacerbated now that they have 68,000,000
Speaker 1:
And why do they do that? Do you know?
Speaker 2:
I'm I'm I'm not part of I didn't know if you that that economy, but but but this is the interesting one. 68,000,000 places to put families in Mhmm. Like apartments, rentals, single families. There's only 60,000,000 households. So it started more in the rural areas, and now it's actually even going into inner cities.
Speaker 1:
So you're saying there's 68,000,000 homes available with 60,000,000 people?
Speaker 2:
With 60,000,000 households, families.
Speaker 1:
Households. So there's 8,000,000 vacant homes.
Speaker 2:
So we're we're short 4,000,000. Mhmm. They have an excess we're short 4 to 5,000,000 depending on the economist you ask.
Speaker 1:
We we have empty homes in our country. Right?
Speaker 2:
But there's still an excess of owner.
Speaker 1:
Excess of home. Excess like primary. Like, we have we have empty homes but we have an excess of the amount of households needed.
Speaker 2:
Correct.
Speaker 1:
Versus they have an excess of homes less the households needed. Got it.
Speaker 2:
Big distinction.
Speaker 1:
Yeah. Yeah. So the election's over. You know, the stock market went crazy. What do you I mean, you can't predict anything.
Speaker 1:
How What's your feeling for next year when it comes to
Speaker 2:
So this So I've I've made predictions so I'm gonna stick to them.
Speaker 1:
Okay.
Speaker 2:
So so
Speaker 1:
I don't know if you're a prediction guy. Some people don't like to do predictions
Speaker 2:
Yeah. No. It's so
Speaker 1:
be wrong and then In
Speaker 2:
in the last well, that that's I think that's a choice you make both in leadership and then being public by being on social like you are. Look sometimes I
Speaker 1:
like predicting and I don't care if I'm wrong.
Speaker 2:
Sometimes you're right and sometimes you're wrong. That's the fun thing about predictions. So like at last year, so October of 23, I got up on stage in front of 6,000 people. I said this is my prediction. Mhmm.
Speaker 2:
I said 23 will be a copy paste of 24.
Speaker 1:
23
Speaker 2:
Or 24 will be a copy paste of 23.
Speaker 1:
Of 23. Yep. Which it was basically.
Speaker 2:
Basically. Right? So we sold 4,000,000 resales with 600,000 new construction. We're on pace to do 3,900,000 resales with 700,000 new constructions.
Speaker 1:
We're right in line.
Speaker 2:
So A
Speaker 1:
little more inventory, but right in line as far as sales, pending deals, etcetera.
Speaker 2:
So 23, 24. Mhmm. So the prediction that I'll go on record with because I've already gone on record. So, is if nothing crazy changes, so I'm assuming the rates, like, I I even made this prediction before yesterday's cut, but let's just assume it stays relatively flat.
Speaker 1:
Mhmm.
Speaker 2:
Because the difference if you look at January
Speaker 1:
rates stay flat? Do you say
Speaker 2:
they actually bumped up a little bit after after the election. But again What
Speaker 1:
are you saying it stays flat? 10 year treasury, mortgage rates, Fed rates, where
Speaker 2:
Let's just assume they all hold.
Speaker 1:
Okay. They all hold.
Speaker 2:
Which by the way, there's room to naturally float down without any cuts.
Speaker 1:
Spread of the 10 year treasury, of course.
Speaker 2:
But let's just assume it holds flat. If you look at where rates started Jan 1 to November 1 Mhmm. They've already come down quite a bit. Mhmm. Right?
Speaker 2:
So, at today's affordability, with as you pointed out, the newer inventory. So we're up like 34% year over year on inventory.
Speaker 1:
Which is is that even back to pre pandemic levels? It's not. It's not. It's still lower. We're still lower than
Speaker 2:
we're looking at. Like 20% lower. Yeah. But again, it's better than we've had. Mhmm.
Speaker 2:
Right? So if all holds as it is today, that's the prediction I'm making, we should get about a 10% bump in transactions for 2024. Mhmm. So 4,000,000 plus 600,000 or 3.9 plus 700,000, you add 10% to that. We should end up breaking 5.
Speaker 2:
Breaking the 5,000,000 if you add the
Speaker 1:
Oh, 5 oh, no. No. With new construction.
Speaker 2:
Yeah. Yeah. Yeah. Yeah. Low 5,000,000.
Speaker 1:
I look at I normally look just at existing home and gauge it there.
Speaker 2:
And the reason why I I bring it up is because in 2024, 20% of all sales will be new construction Right. Which is substantially higher than average. Average is between 10 15%. Mhmm.
Speaker 1:
And that's because mortgage buy downs and all the incentives the buy the builders are getting. You're getting a new home. You basically can get it cheaper than existing home, etcetera.
Speaker 2:
So builders did a couple of smart things over the last 24 months. One is they actually shrunk the footprints.
Speaker 1:
And then made them
Speaker 2:
house smaller. They they they did shrinkification like we've seen other parts of the economy do Mhmm. Where it's like, hey, we don't need to build as much house, but it's still new and I can get you into this for 4.50, 500, whatever price point your market bears.
Speaker 1:
Mhmm.
Speaker 2:
In some parts of the country, it's equal to resale. So it's like why buy Right. Resale when I can buy brand new?
Speaker 1:
Lower rate.
Speaker 2:
And the third one is exactly what you said. It's that buy down rate. Like
Speaker 1:
Yeah.
Speaker 2:
And again, I I think for any agent listening, they should be educating their sellers Mhmm. That that is a tactic to to to get the house moved quicker. Be like, hey
Speaker 1:
Mhmm.
Speaker 2:
Like, I, I recently saw a product that was interesting. It's newer, but, a third of outstanding mortgages technically are assumable because they're govvy of some sort. Mhmm. And so there's a start up trying to identify those properties. Mhmm.
Speaker 2:
Where, again, it's tricky because let's say, say you have a first need of trust with the VA at 400,000, but the house is worth 700,000. Technically, based on the underwriting, you could assume that mortgage, but you have to come up with $300,000. Right? It's you're not doing 10, 20 percent down. Right.
Speaker 2:
Because most of the people who captured a really good rate did it 3 years ago. Mhmm. So the equity's gone up quite a bit. And so but there are
Speaker 1:
Assume loans are tougher right now with the equity. Yeah.
Speaker 2:
With the equity. But they're phenomenal. Phenomenal. If
Speaker 1:
you can get a 2.85
Speaker 2:
Yeah. 30 year fixed with 26 years left on it. Yeah. That's gold.
Speaker 1:
And these are FHA, VA, SDA. And when you do that, the seller that you're assuming it from, they can't you can they go get another government loan or you're basically As I
Speaker 2:
as I understand it, if it's approved and accepted by the underwriter,
Speaker 1:
they could because
Speaker 2:
they're gonna have a VA
Speaker 1:
loan or whatever.
Speaker 2:
Yeah. Because they get their certificate back.
Speaker 1:
Oh. That's interesting.
Speaker 2:
But again, I think that's still just like a niche. Right?
Speaker 1:
Right. Right. Have you heard how builders are handling this commission thing? Like are they still offering? Are they offering a lot?
Speaker 1:
Are they offering a lot?
Speaker 2:
Yeah. So the interesting thing about all of it in general, it's hyperlocal. Right? So, like, imagine in the position I sit, I have agents in certain parts of the country. Now I'll I'll I won't name states to to to leave the innocent alone, but there are some states that literally have one take on it, and then there's other states that have a completely different take on it.
Speaker 2:
So it's super interesting because, you know, I'm in certain masterminds with top our top performers, and that we'll have 2 folks who are losing their mind going, this is this is so complicated, we're having so much conflict. And then we have other top producers in another part of the country, like, what are you talking about? This is super simple. You just use this forum and it's straightforward.
Speaker 1:
Mhmm.
Speaker 2:
And I have to remind them on my guys, you guys have different forums at the state level. Not just like the forms that we create, but like the purchase and sale contracts. Like Yeah. 1 one association and I will name them by name because I think they did such a great job. The Northern Virginia Association of Realtors.
Speaker 2:
Their page 1 of the sales contract almost reads like a net sheet.
Speaker 1:
Uh-huh.
Speaker 2:
There's a purchase price, there's percentage financed, there is it it literally says seller to credit buyer. So closing costs, buy down points. Then right below it, it says seller to pay buyer brokerage compensation.
Speaker 1:
Mhmm. Very clear.
Speaker 2:
And then one sentence underneath it says, this is a binding legal agreement between the seller and the brokerage to be amended only in writing.
Speaker 1:
Mhmm. Like, if everyone use that
Speaker 2:
as the purchase and sale contract, there is no questions. It doesn't
Speaker 1:
It's like the old napkin contract.
Speaker 2:
There's it doesn't matter what I'm offering you. It doesn't matter what we're advertising. It's like
Speaker 1:
look It matters what the offer is right in front of us and what we're gonna net.
Speaker 2:
This is what the buyer and I agreed to pay. The buyer requested that to be paid by the seller. Mhmm. Mister and mister seller, will you
Speaker 1:
What do you wanna do? What do you wanna do?
Speaker 2:
So I mean, I I actually good question. There was a a thread inside of our internal communication thing where this agent asked the question. I actually logged in and responded myself because she's like, look, I'm so confused. Like, what if I have a first time home buyer who needs down payment assistance and needs all this stuff? What am I to do now?
Speaker 2:
I said, you you are to show them all the properties available, and it's up to the seller if they wanna sell it under these terms. Mhmm. This is no different pre August 17th if I was doing down payment assistance and needed 6% contributions for buy down points because that's the only way my buyer qualifies.
Speaker 1:
Mhmm.
Speaker 2:
No one's forced to take any offer they want. Right. And what I say to agents all the time is like, have you ever not gotten anything for below list? Have you ever not gotten a pool table?
Speaker 1:
Mhmm.
Speaker 2:
A hot tub? The refrigerator in the garage?
Speaker 1:
The boat.
Speaker 2:
The boat.
Speaker 1:
The car. I've seen all that happen.
Speaker 2:
I remember going to a Brian Buffini event and he told me he got a dog once. I think
Speaker 1:
I remember that speech.
Speaker 2:
I don't
Speaker 1:
know if
Speaker 2:
it was a script, script, but I remember it 23 years later. Okay. Right? It's considered personal property. It's legally conveyable.
Speaker 2:
Uh-huh. Like, I mean, people buy cattle and farmland. Right. Right. They get farm equipment.
Speaker 2:
Mhmm. Like, my brother-in-law and sister-in-law moved to Florida a couple of years ago and they had a beautiful house in Northern Virginia. And my brother-in-law is really handy and he the basement's like the most beautiful thing of the house, but he had a detached sauna with a plug and he had a sign on it says does not convey. Mhmm. They ended up with like 14 offers.
Speaker 2:
It escalated a $100 over a list. Mhmm. They got the sauna.
Speaker 1:
Right. Right. Right.
Speaker 2:
Right. It it literally said, not included.
Speaker 1:
It it it's like it's like when you put it in the contract. Okay? You've put in the contract, the seller, we we negotiate the deal. And in the contract, the seller says, as is. Right?
Speaker 1:
We'll not do repairs. Okay? Real capital letters. Right? And and every single time and, I mean, I'll tell the seller, like, we're gonna put it in there.
Speaker 1:
That way, they know. But they're gonna come back after the inspection, and they're gonna have a list of stuff for us to repair. They're gonna they're gonna submit it to us just like you didn't even say that, and you're gonna probably end up doing some of them because you want the deal to work.
Speaker 2:
And if there's a contingency for inspection only, they still have the right to walk.
Speaker 1:
Right.
Speaker 2:
Right? So it's like you can say and I because I had the same conversation with sellers. It's like it's as is whereas. Okay. But if if if I agree to a 5 day inspection with a release clause, right, you can it's you're open for negotiation.
Speaker 2:
So that that's how I feel about this compensation conversation. I think people overcomplicate it. Mhmm. Right? It's like, if the seller doesn't want to accept the offer as presented from the buyer.
Speaker 2:
That's the distinction. It's not about Leo, the agent, Ricky, the agent. It's about the buyer and the seller, the net proceeds the seller's gonna walk with, and the net proceeds the buyer can afford to bring to the table while affording the monthly payment.
Speaker 1:
I'm starting to lean towards a place where I think this is the new norm, where the buyer's agents offer what they want in the contract, and the seller pays it based on their net. Do you ever think we'll get to a place where the buyer is paying it and the sellers do not contribute at all in the offer or whatever?
Speaker 2:
So I I would say that that's always been the case. The seller doesn't have any contribution. They have equity. Right? The buyer, whether it's fully financed, paid in cash, that is where a 100% of all the funds are coming from.
Speaker 1:
Mhmm. Mhmm.
Speaker 2:
So I would make the argument that whether it's from the cash contribution or the finance contribution or the credit from the seller, at the end of the day, the buyer can afford what the buyer can afford on a monthly payment with x amount of dollars to be contributed in cash Mhmm. With y amount of dollars to be contributed from the loan. Mhmm. And so, I think sometimes we overcomplicate or split in hairs. And it's like, look, if my seller's qualified for 400,000 and they have $50,000 in cash, and they're qualified for this LTV, this is what they can bring to the table.
Speaker 2:
This is what they can bring to the table. Mhmm. And if the seller is willing to accept, the net that brings them after compensation credits and whatever else prepays on the like, because remember, that buyer can ask for, as long as it's approved by the lender, for an 8% credit
Speaker 1:
Mhmm.
Speaker 2:
To buy down the rate to a rate they can afford. The seller doesn't have to accept that. But are they willing to accept it for a price they're willing to walk away walk away with with a net they're willing to walk away from? And so that's how I see the world. I don't I don't think much changes Yeah.
Speaker 2:
In the sense of, at the end of the day, this is your net for the seller and Mhmm. At the end of the day Mhmm. This is the net that you need to bring to the table as the buyer. And that's all that matters at
Speaker 1:
the end of the day. Yeah. I think that, I think that when the settlement happened and the new rules, it's been 2 or 3 months. It's been in the worst market we've seen in 15 years. And so it's it's maybe a little misleading of, and it's brand new against a 40 year model we've had.
Speaker 1:
It's gonna take time to unwind. I guess I guess the only fear I have is if we get back into a 2021 or 2003, market, where we're getting tons of multiple offers, people out offering more than asking price. You know, the seller picking the offer that doesn't ask them to pay for a buyer agent fee.
Speaker 2:
So this this is and again, this is just an opinion right now because we're not in that market.
Speaker 1:
Sure.
Speaker 2:
But I think that an agent is even more valuable then.
Speaker 1:
Oh, absolutely.
Speaker 2:
A 100%. So so
Speaker 1:
But if the seller's looking at their net and they're saying, well, this one doesn't have a agent and or or or they're not if the buyer may be paying their own agent on those deals. Right? That it's not saying there's not an agent. It's just saying that the seller
Speaker 2:
is So so back to those days. Right?
Speaker 1:
Still cash that the buyer.
Speaker 2:
The seller is the buyer is probably having to contribute above the appraised value. Mhmm. And they're they're like, it it goes back to what I just said. Total cash contribution from the buyer. Mhmm.
Speaker 2:
Totals net cash to the seller. Mhmm. Those are the only 2 And
Speaker 1:
in those markets, like some buyers can't compete, we're not gonna be able to compete even in the old market at that point. If there's 10 offers, it's gonna kinda be the same scenario.
Speaker 2:
And and in a market where there's 10 offers, I think that's where good realtors show their value proposition. Right? Like I remember winning in those markets as an agent because I
Speaker 1:
Fun, wasn't it?
Speaker 2:
Well, it was just I asked a lot more questions to the listing agents. It's like, hey, what's the seller doing after this? And they're like, oh, well, we're waiting for this to be built. I'm like, hey, what if I gave you a 30 day free rent back? Like, on a on a well sized priced home, that's meaningful.
Speaker 2:
Mhmm. I'm saving you 7, 8, $9,000 in monthly payments. And and, you know, depending on what day we close, I could almost contribute 2 months of a free rent back without my seller, my buyer having to put anything out of pocket because it would be we closed on the 5th of the month, and it was prepaid escrow, and so you basically got 60 days. If I could say to the seller, hey, I'll let you live in the house for 2 months while your home is being built, and you put the cash in your pocket, so you can close on your next home with a lot of confidence. All of a sudden, that 10 or 20 k above list is a lot less interesting.
Speaker 2:
Mhmm. Because it's like, wait wait, how about I close in 10 days?
Speaker 1:
Mhmm.
Speaker 2:
Give you all your proceeds and let you live in the house for 60 days so you can close on your next home. You have small kids. I don't wanna rush you. All of a sudden it's like, I want that offer. Mhmm.
Speaker 2:
And that we didn't we didn't have to go above list. I just asked questions that were important to you. Right. Because when you're doing the sell to buy and you're worried about basically being in a truck with your 2 kids and your your partner, that gets very scary.
Speaker 1:
Yeah.
Speaker 2:
And you know, as an agent you probably experienced it where Uh-huh. The loan got delayed and then you had to put them up in a hotel and
Speaker 1:
Yeah. Moving trucks in there.
Speaker 2:
So that's what a good agent brings to the table. Yeah. Where they can ask these questions and say, okay. How can I make us really be set apart from the other 10 offers and get you something that's still a fair deal to you that you can afford with concessions you can bring to the table?
Speaker 1:
This was in 03 or so?
Speaker 2:
Yeah. Like 2006, 7, all that. Well, you
Speaker 1:
know, back in in, you know, I lost everything in 5. I went back to roofing houses serving tables and stuff, working on oil rig. And in o a, 2008, I got back in the business. And it was all foreclosures. And I thought, let me do let me let me represent the bank, you know.
Speaker 1:
It was like, after a minute, I was like, no, that's not that's not my route. I'm gonna represent buyers to buy these foreclosures at half off, and then they'll resell in 3 years when it goes up. You know, refer me, upgrade, and all that stuff. But do you remember I don't know if you were selling reselling in o a.
Speaker 2:
I was selling REO. I was one of the big REO.
Speaker 1:
Oh, you were you were the listing agent.
Speaker 2:
I was the listing agent.
Speaker 1:
This is funny because in 03 and 02, when you were talking about that, I was on the listing side of all those.
Speaker 2:
Mhmm.
Speaker 1:
Right? All the multiple offers was coming in. I was on the listing side. I was
Speaker 2:
the buyer's agent back then. Right.
Speaker 1:
So you were the buyer agent, I was the listing agent. But then in in 08, you were the listing agent, I was the buyer agent. Right? Yeah. Which flipped.
Speaker 2:
I carried 250 listings. Right? Yeah. Like my job was to do price reductions.
Speaker 1:
Okay.
Speaker 2:
And property management.
Speaker 1:
And and and do you remember, obviously, the multiple offers during that time?
Speaker 2:
Yep.
Speaker 1:
Now that and people don't talk about that, you know, o eight, you know, the worst year, the big crash and all that stuff. Like, I was winning bids. And and for that, there's no what's this what's more important to the seller is the bank. Right?
Speaker 2:
Well, as soon as possible in cash.
Speaker 1:
Right. Right. So it was literally the whatever the you had to have the highest number. So you
Speaker 2:
had to Mhmm.
Speaker 1:
You had to kinda guess. And you couldn't you didn't have no idea. You had no idea. It was a blind bid. You had no idea what that number was gonna be.
Speaker 2:
But but there was a period there where like I'd carry properties. It was 18 months of inventory in the market. Right? Like Oh yeah. Back then the buyers were the better thing to have because you had to pickle the litter.
Speaker 2:
Sure.
Speaker 1:
Sure. But but I wouldn't mind it having 2 50 listings. No.
Speaker 2:
I didn't mind it.
Speaker 1:
But it was a lot of work. It's not your normal listing. Right? They make you maintain the property. We were
Speaker 2:
it was called cradle to grave. Right? So we took it back from repossession all the way through proper capitalization. So we had to fix everything Mhmm. Get it completely market ready to closing.
Speaker 2:
So it was cradle to grave.
Speaker 1:
Mhmm. Until death do us part. I didn't want nothing to do with it. But I knew that a lot those agents wouldn't exist later because they did not answer their phone. I would call those foreclosure agents, and they would not answer all of them.
Speaker 1:
They were notorious. They just would not answer. And I was like, okay. You wanna play that game? I'm just gonna I'm I'm gonna, you know, I'm gonna represent all these buyers.
Speaker 1:
You know, my business is gonna continue to grow, and you guys are gonna be gone as soon as foreclosures are gone. Do you agree that do you believe in pent up demand?
Speaker 2:
So I I I believe in numbers. Right? Our household formation. So, right now, every day, 12,000 Americans are turning 35 years old.
Speaker 1:
Well, that that's one of my big thesis is around this because it it's record. Right? I mean, the baby boomers were more. Correct? Right?
Speaker 1:
There was more there were more there was more of a and it's weird because, like, I look at the birth rates, and I see the baby boomers. Right? And then it goes down for, like, 20 years. And then I see the spike in 1990. But it's nowhere near the baby boomer years, but yet there's way bigger population
Speaker 2:
than Well, so so the baby boomers made the millennials. Right? Like, I'm I'm the first what year were you born? 81. So you and I are like the first millennials.
Speaker 1:
Yeah.
Speaker 2:
We're called the
Speaker 1:
We're the oldest millennials in the world.
Speaker 2:
We're called geriatric millennials. I heard the other day. I was like, I'm not sure I like that. But so I mean and our parents were boomers. So so technically that's why you When were
Speaker 1:
you born?
Speaker 2:
82.
Speaker 1:
82.
Speaker 2:
That's where we have the big population booms. Uh-huh. But you know, based on what I look at in in both household formation, people turning the right ages to buy real estate. If rates come down and we get enough inventory, we could have 6,000,000 transactions.
Speaker 1:
Oh, no doubt.
Speaker 2:
We just don't have enough inventory that people can afford.
Speaker 1:
Well, my question is this. More 30 something year olds than we've had in a while. I saw NAR came out with their data that the the age of first time home buyers went up Mhmm. To 38. Trade up sellers.
Speaker 1:
There's gotta be pent up demand in there. Oh, cool. People wanting to move up, hating their house every day that goes by.
Speaker 2:
But they love the rate.
Speaker 1:
Now you've got people that have been sitting on silence because of rates and the elections. Like I feel like this is like a tsunami. That that's that's it's like the calm before the storm. You're talking about transactions increasing 10%. We're still below pre pandemic levels in terms of Mhmm.
Speaker 1:
Inventory. Right?
Speaker 2:
Mhmm.
Speaker 1:
Doesn't isn't this gonna cause home prices to increase?
Speaker 2:
It could. And and and what I always say, it's hyperlocal. Right? So we had boom towns like Austin, Texas, Boise, Idaho, parts of the West Coast of Florida, Naples that did like and and South Florida did too, but the demand is still present in South Florida. But there are markets that were like this who are now starting to like, it's not o eight crash.
Speaker 2:
Like, when you and I think of a crash, we think of well, you and I saw 50% market drops. You said 50¢ off. Like, that's what I experienced.
Speaker 1:
It was. We had 50 we were 50% off.
Speaker 2:
There's homes that I sold for 3.50 that I then did as an REO for a 150. It was like Mhmm. I never thought I'd see that. I still can't comprehend that.
Speaker 1:
And you were scared to buy it for 1.50. Right? Like, I saw that and I was still scared to buy it.
Speaker 2:
I'm like, it's gonna go to a 100. Yeah. Right? Like, you know where I started buying? Where I actually did the math and I'm like, I'm at 12% cash on cash.
Speaker 1:
The cash flow made sense.
Speaker 2:
At some point, I was like and I actually remember having this conversation where it was like, I I I bought a house and flipped it for 180. My comps said 180, and I ended up selling at 150. And I went back and looked at my comps. I'm like, my comps were perfect. But I was like, alright.
Speaker 2:
If I just held it at 1.50 Mhmm. It was $1500 a month. So it was like the 1% rule. And I said to myself, if it goes to 0 Mhmm. Which it can't, but that's just in my head I was like and I held it for it was like 18 years or something.
Speaker 2:
I was like, I'll get all my cash back. So it really doesn't matter
Speaker 1:
if it goes
Speaker 2:
like, there was there was a number that if it went below, I actually didn't care Mhmm. Because the cash flow, I could fully capitalize it and get it back and get all my cash flow back.
Speaker 1:
Mhmm.
Speaker 2:
And luckily, I did buy a bunch of real estate.
Speaker 1:
Yeah. Me too. What was interesting in 08 was rents didn't really go down much.
Speaker 2:
No. And and this is actually I remember, I had a mentor who unfortunately passed away last year, but he was really important to me, who's a big owner of
Speaker 1:
My my mentor that was really important to me passed away a couple weeks ago.
Speaker 2:
Yeah. My mine actually passed away the day before eXpcon Canada. But he owned up a lot of real estate. And I remember, like, I'll never forget this. I was driving around in 0 eight, 0 nine with him just looking at all these houses, because that's that's why I convinced to fund my my buying acquisition, because I I didn't have, too much liquidity, obviously, because you and I were on the younger side of that market cycle.
Speaker 2:
But he told me, he's like, the beautiful thing about residential real estate, and that includes multifamily, is that it stores human beings. And he and he gave me an example. He said he had bought data centers in the late nineties, and we forget there was a mass
Speaker 1:
Data centers.
Speaker 2:
Yeah. Like where you put, the the the GPUs and like where Amazon Web Services has all their stuff.
Speaker 1:
Mhmm.
Speaker 2:
And in the late nineties, you we forget there was a huge economic crash after the dotcom boom. Mhmm. And he actually had warehouses that sat empty for years, like 2, 3 years. Because he told me, he's like, I couldn't have lowered the rent to 0. There was no demand for warehouses after the dotcom boom.
Speaker 2:
Like, there was excess capacity for where data centers. Mhmm. He goes, in residential real estate, as long as we don't have the the Japanese problem Right. If your rents are 1800, there is a number at which that'll rent. Right.
Speaker 2:
What and again, even in South Florida, I've seen rents come down in the last 24 months because they went great. They went parabolic.
Speaker 1:
Like you say, it's local. They're I mean, that like But there were yeah. Yeah.
Speaker 2:
But but like there are real estate commercial office markets right now. It doesn't matter what you put it up for rent.
Speaker 1:
It's not gonna rent.
Speaker 2:
Like tertiary or like I wouldn't wanna own office space, commercial office in San Francisco right
Speaker 1:
now.
Speaker 2:
Right? Or like even Austin right now, there was such a pullback. Right? Where it really doesn't matter how much you lower it. Yeah.
Speaker 2:
There's just there's no demand. There's no demand.
Speaker 1:
Yeah.
Speaker 2:
Versus in in our functional lifetime, and I would go back 50 years, 100 years. As long as look, there's not a there's a there's a rental number in residential that you can adjust to, and you and you we know this to be true when you see a brand new apartment building open up. Mhmm. What do they do?
Speaker 1:
Rent quickly.
Speaker 2:
2 months rent for free.
Speaker 1:
Oh, yeah.
Speaker 2:
Right? And they lease up the whole building.
Speaker 1:
Right.
Speaker 2:
They maintain the number they want
Speaker 1:
Mhmm.
Speaker 2:
But they'll give you a 1 or 2 or 3 or 6 months incentive.
Speaker 1:
Yeah. So they they incentivize to keep that rent where it needs to be.
Speaker 2:
But then they then it's fully rented.
Speaker 1:
Then then it's it. That's where
Speaker 2:
it is. Then it that's where it is. We got history now. Then then that's where it is. Yeah.
Speaker 1:
So I'm building an apartment complex, 46 units. So, I'm glad you said that.
Speaker 2:
Right. Because you you'll you'll you'll hire a professional management company because 40 sixers, you'd have to live in the building. Right? You'd have an office, which I know you're not gonna do. But once it's fully stabilized, the rents really maintain themselves Mhmm.
Speaker 2:
Based on that supply demand.
Speaker 1:
Yeah. I'm sorry for your loss And, I'm
Speaker 2:
And you too.
Speaker 1:
And I I'm, you're right. We were on the younger side when that when that cycle happened. And thank God. Because there were 40, 50, 60 year olds that were going through the same thing I went through in my mid twenties during that time.
Speaker 2:
I I was 23. I gave back 14 properties to the bank. I had to do short sales on a loan, because I thought I was very special, and I wasn't. I was just I had a heartbeat, and I qualified a mortgage debt that I shouldn't have qualified for because I was buying way over leveraged real estate in hindsight. Right?
Speaker 2:
I wasn't worried about cash flow. I thought everything was gonna keep going Mhmm. Up until the right, and I am grateful. I feel like it was like the Goldilocks age. Right?
Speaker 2:
We were old enough to be able to participate and when you lose it all at 23, you could still cry and feel bad for yourself, but I didn't have a partner and kids to to to look in the eye and worry of how I'm gonna feed them. Right? Because I always said, you know, when you're Oh my god. When you're 23, I mean, you can sleep here and I could live on my friend's couch, my my mom's basement, like, you could live anywhere and get back on your feet versus losing all at 55 or 60 with
Speaker 1:
Yeah.
Speaker 2:
Children and college tuition and all kinds of things that are in in in your hindsight.
Speaker 1:
Yeah. What time is it?
Speaker 2:
We're good. 2245.
Speaker 1:
Okay. I I we talked about this, you know, you've done so many things. You're an agent and you built the tech company and sold it. That was a huge exit, right? It was like a 9 figure exit.
Speaker 2:
It was it was a big one. It's under NDA but it was a it was a big number.
Speaker 1:
Right. And and you know, I mean, you're you're set, but you've decided, oh, I'm gonna go be the CEO of a, you know, publicly traded company. It seems like a lot of people would think that, like why would you
Speaker 2:
why would you do yourself? The interesting thing is, like, the things that have made me the most wealth creation are not the ones I'm known for. It's it's actually buying real estate. It's it was hard money lending and creating revenue streams. Right?
Speaker 2:
I I think sometimes people don't realize that the most guaranteed ways to build wealth are the non sexy Mhmm. And slow. Mhmm. Right? Like the beautiful thing about buying real estate is it's that self liquidating function that comes with debt.
Speaker 2:
Mhmm. Right? Like, let's pretend the values never go up.
Speaker 1:
Right.
Speaker 2:
But if somebody else pays off your mortgage
Speaker 1:
Right.
Speaker 2:
And you have the discipline to not sell it Mhmm. That's actually one of the best That's
Speaker 1:
a huge win right there.
Speaker 2:
And and you know, when Arianna and I, my wife started the software company and and we were able to fund that from our real estate business. Mhmm. We were able to, you know Would you take out equity loans? No. No.
Speaker 2:
No. Just just the cash flow of of our of our team and the real estate we had bought over time Mhmm. Which is very different. Right? It it it's fascinating to me how many startup founders I meet who are like, they just need to raise all this money.
Speaker 2:
It's like, hey. The first thing is if you create even a a a small business, an SMB, that creates enough cash flow to fund, your ideas, there's a lot of discipline that comes with finding product market fit from cash flow. Mhmm. Right? Because we just lived through an era where there was lots of money raised, for ideas that didn't really pan out.
Speaker 2:
Mhmm. Because there was cheap money available. Right? Like the Vision Fund and
Speaker 1:
Yeah.
Speaker 2:
All the people writing these checks for businesses that we could arguably look at and go, really? I'm not sure I see that pencil out. So,
Speaker 1:
but You think you think there were some that you didn't think would pencil out that crushed it?
Speaker 2:
That's a good one. Not No. No. More of the ones like were surprised that didn't work. That didn't that didn't look like it was gonna work.
Speaker 2:
Mhmm. Look, Uber worked only because they were able to burn through so much cash. Right? So now it it's it's a real cash flowing business.
Speaker 1:
Yeah.
Speaker 2:
But they they needed 1,000,000,000 of dollars to get there. And again, that's that's a strategy that isn't available to most people. But to you to your original point, there was, you know, I think we're never done. Right? And and I think there's a romantic idea of like, hey, when I get to this, someone just get kick up my feet and what what are you gonna do?
Speaker 2:
Right? Like, we moved to South Florida. I was mostly spearfishing. I got really good at spearfishing.
Speaker 1:
With, snorkeling or the tank and everything? Tank and everything. Wow.
Speaker 2:
But after 6 months, it's like I literally started thinking. I'm like, am I am I gonna buy the charter and, like, turn it into a business and scale it all up and down the East Coast because that's how
Speaker 1:
my brain works.
Speaker 2:
Taking. Yeah. Yeah. But I got a call from a mutual friend who introduced me to Glenn and, Glenn actually asked me if I wanted to be the chief technology officer because I have a tech background and I said, I can play 1 on TV but I don't actually like it that much. I like selling and but I said I'll probably just start another company.
Speaker 2:
Mhmm. And he said, well, do you have the idea? And I said, no. I'm actually a little burnt out. It was the hardest thing we've ever done, just because of the traveling and the raising capital and scaling and running a bigger organization.
Speaker 2:
And he said, well, if you don't have the idea, why don't you come hang out with me? I have a little company that became a big company, and I have all these things to fix. And I heard you're good at that. And basically, Glenn's pitch was come hang out for like 6 months. And he goes, when you get the next idea, we can either buy that company and you can, you know, I can be your partner in it or we can, you know, if you get the an idea and you raise a round, I'd love to contribute.
Speaker 2:
And so by the way, he's a better salesperson than most people realize. Mhmm. Because it was like the perfect thing to say to me. Perfect bitch. To me.
Speaker 2:
Yeah. Yeah. It was highly tailored because he was like, how could I say no? I was like, oh, you just want me to hang out?
Speaker 1:
I wonder he's where he's at.
Speaker 2:
Wow. And so he's like, just come hang out here and then, you know, he's like, come up with a title that makes sense. It does it doesn't have to be very public facing because I was at the company longer than most people knew me.
Speaker 1:
Uh-huh.
Speaker 2:
And then 6 months in, he's like, hey, I heard you're touching this, this, that and that, this and this and that. And I was like, yeah. He's like, well, you're kinda running the business so I'm gonna give you a different title. It's called the chief strategy officer. Mhmm.
Speaker 2:
Where you basically his his words were, you can be the shadow CEO, but I'll I'll stay in the front so you don't have to be out front. And I was like, that's because I actually said to him, I was like, I'm actually having fun being the fun uncle versus dad because my entire life I've been founder and CEO. And 6 months later into that, he goes, okay. I'm ready for you to be CEO. And I was like, this is I'm having fun.
Speaker 2:
Like, this works. Like, you keep the title. I'll just do me in the background. Mhmm. And then 6 months later, he tried it again.
Speaker 2:
I was like, it's good. We don't need to mess with anything.
Speaker 1:
It's not broken.
Speaker 2:
Yeah. And that was December and then then March 18th happened or March 15th. And then that was the day of the NAR announcement. Mhmm. Then that Monday, March 18th is when I went live on YouTube and felt like what it was like to be Ricky Carruth for a day.
Speaker 2:
Mhmm. I had 53,000 current people show up. Mhmm. And I got very loud.
Speaker 1:
Mhmm.
Speaker 2:
And then that by that Sunday, he called me. He's like, you are the CEO. I was like Right. Let's have a conversation. Yeah.
Speaker 2:
I was like, can we talk about it? He said, no.
Speaker 1:
This is what it is.
Speaker 2:
He said, the board and I met. Check your email.
Speaker 1:
We've already talked about this.
Speaker 2:
You got some new paperwork to sign. So so that's actually how it happened, which which I think is a really good comparison
Speaker 1:
to like It's almost like instead of just marrying someone, you know, you were friends for a while then you dated. No. But but Marriages that are normally end up a lot better.
Speaker 2:
But it but it's almost like when someone sees you, it's like, hey, you didn't go from realtor to like Internet personality.
Speaker 1:
Yeah. Right.
Speaker 2:
It was a process. Like you tried this, you tried that. It's like for you to say like, hey, you're exited tech founder, CEO of a public company. Mhmm. Those two and a half years in the middle.
Speaker 1:
Really a process.
Speaker 2:
And and and it was not like
Speaker 1:
It wasn't like I wanna go be this.
Speaker 2:
Because if in in the first conversation, it's like, dude, I've never had a job. I don't want a job. He's like, good. I don't want
Speaker 1:
I like I'm looking for employees.
Speaker 2:
He's like, this works because I I I have plenty of employees. Like Yeah. Come help me with this stuff. And he's like, I won't tell you what to do. I just go fix this stuff and, you know, it'll work.
Speaker 2:
And I was like, okay. And then it was like, hey, why don't you do this other thing? And then but it was and I think it was actually a better way to become CEO because I feel like like you as a sample size of 1, you guys got to know me a lot better. Mhmm. It wasn't like, hey, this stranger showed up out of nowhere and he's the boss now.
Speaker 2:
It was Yeah. It was funny that Sunday when Glenn called me and I said, what changed? And other than, like, the obvious. And he laughed and he said, hey, I did a town hall with, like, 400 agents about this thing. And during q and a, the only thing they wanna talk about is when you were gonna become CEO.
Speaker 2:
So it's pretty apparent that the time is right now. And he and and again, kudos to him to like, I think some leaders would be threatened by that versus Glenn's like, I'm ready, you're ready, the agents are ready, let's do it.
Speaker 1:
He was that his first time? He did he give the CEO to somebody and they come back? Jason Jason Jason. Yeah. He was with us
Speaker 2:
for quite a while.
Speaker 1:
That's right. Yeah. Yeah. Yeah. So I think he's he's been trying to figure out how to put somebody in that spot for a minute looking for the right person.
Speaker 1:
He's he's great.
Speaker 2:
Yeah.
Speaker 1:
I love Glenn. Speaking about companies losing money and stuff, we that's not something we do.
Speaker 2:
No. Look, I I think one of the most defensible value propositions we have is we're sustainable. Right? So, you know, Glenn really created an entire category in the cloud based brokerage. Mhmm.
Speaker 2:
I feel like every new company will look more like us than the legacy players. Right? If you see any national company who's come up in the last 5 years
Speaker 1:
Right.
Speaker 2:
Who's scaling looks a lot more like us. Right? So the the margin availability while still providing value to agents is almost virtually impossible with the brick and mortar. And so, we've managed to create a model where it's 100% agent centric, which is what I spend every waking moment of the day on. It's how do I make your guys' toolset better?
Speaker 2:
How do I make the platform better? How do I give you more reach? How do I give you products for less than you can get them on your own? But maintaining profitability or the ability to, you know, obviously we've had rough quarters, we had to pay a little bit of money in the settlement, that kind of stuff where as as long as there are Just a tiny. No no surprises Just
Speaker 1:
a tiny.
Speaker 2:
We can maintain a profitable business. And and profitability becomes really valuable because you can then invest.
Speaker 1:
Mhmm.
Speaker 2:
You can you can buy companies that make sense. You can hire talent. Right? Like one of the things that I say that's amazing about our company is that we have a deep bench of talented real estate experts. It's not it's not a one man band whether it's me or Glenn.
Speaker 2:
Right? We have Wendy and we have Holly and we have Brian and we have all these folks who come from very storied careers, and more importantly, they all started as agents. Right? So we we have a unique leadership team that has big corporate experience, but we all sold homes at some point Yeah. Which I think makes it very different.
Speaker 2:
We didn't we didn't come from Apple or, you know, Google. Well, that's what
Speaker 1:
I was gonna say. I I've heard either you say it or somebody said it that you were the only CEO of a publicly traded brokerage who actually sold real estate.
Speaker 2:
I did say that. Yeah. Yeah. So of of the current
Speaker 1:
landscape Landscape. Yeah.
Speaker 2:
Of publicly traded brokerages and, you know, I'm always happy to correct myself if I get new information, but as I and I've said it several times that of the publicly traded companies today available, to to to view, I'm the only one who actually sold homes.
Speaker 1:
Mhmm. Yeah. I I used to talk about e x p like their their Apple. Apple doesn't isn't worth 2,000,000,000,000 over or what are they worth? 3,000,000,000,000 Apple doesn't isn't worth 2,000,000,000,000 over Or what are they worth, 3,000,000,000,000 now?
Speaker 2:
Probably.
Speaker 1:
Yeah. They're not worth trillions because the iPhone. They're worth trillions because of a couple of products, and then they bought a bunch of different companies. Right? And I and I, yeah, I look at what eXp's doing and with all their cash, and their profit, and their investments, and companies they buy, and I'm like, this is the juggernaut of the real estate world.
Speaker 2:
And that that's Again, like when you create a category
Speaker 1:
When you when you talk about from the business standpoint, p and l's, profitability, you know, from the business world,
Speaker 2:
it's like it's Yeah. Ergonomic. No. And and that's the and I think about it that way in the sense we created a category and that's when I compare us to like Amazon. Right?
Speaker 2:
Amazon disrupted retail. Netflix disrupted not only Blockbusters but almost how content's created and consumed. What both those companies can do because they have free cash flow is then buy whether it's like we've just bought Luxe VT, right, that purveyor of luxury services. We first partner with them, dated, and it worked really well and so we acquired it. Right?
Speaker 2:
So it's like, if we see something, we have the ability or a size of scale to go, oh, that's really cool. First of all, if I feel like copying a feature, I will because you've copied my entire business models.
Speaker 1:
So I
Speaker 2:
have no qualms with it. Like, hey, if that if that makes sense, and and that makes I'm gonna I'm gonna just acquire it Mhmm. Or we'll build it in house. But in order to be able to do that, you have to have a sustainable business model.
Speaker 1:
Mhmm.
Speaker 2:
Right? There are many companies in real estate right now, and I'm only gonna kinda point at the public trader ones because those are the only ones I can see, the financials, who have very little cash on hand. Mhmm. Right? And with little cash on hand or a profitable cash flow model, it is hard to, make investments.
Speaker 1:
Mhmm.
Speaker 2:
Whether it's acquiring adjacent businesses or complimentary businesses, hiring talent, and then also being able to weather a surprise. Mhmm. Right? Like, what I do know is in the next 24 months, a once in a lifetime event will probably take place. Mhmm.
Speaker 2:
Because, you know, ever since you and I graduated high school, we've lived through 1 just about every 2 to 5 years. That's the joke about our generation where it's like, we're kinda burnt out.
Speaker 1:
Yeah. Exactly. We're ready for it.
Speaker 2:
911. It's like, from the day you and I graduate high school
Speaker 1:
Yeah.
Speaker 2:
We've lived through a once in a lifetime event.
Speaker 1:
Mhmm. Here's my question. These other publicly traded brokerages. Okay? The ones that lose money, you know, they're not profitable, etcetera.
Speaker 1:
You know, you talked about Uber. You know, they they lost money for a long time, now they're a profitable sustainable business. What's the argument with some of these companies that, oh, well, we're we're an Uber type, we're an Amazon type, where yeah. I mean that's part of the thing is you lose money for a while, you know. You build the platform, you build the business model, and then you become profitable.
Speaker 2:
So there's a couple of ways to become profitable. One is if you're losing money because your investment you're investing in scale. Right? You're trying to get to more. But one of the things that I look at, which I think is and and and one is in software, gross margin is much bigger.
Speaker 2:
And so if you look at our peer group, we enjoy a very healthy gross margin to net margin. So we we tend to flow between 6 to 8%. That's net of stock compensation and rev share and all the levers that we have to create the incentive for you guys to grow the company. A lot of other other competitors, similar or legacy, their gross margin to cost of goods sold don't create excess capital. Right?
Speaker 2:
So some of them have only stayed in business because they continue to sell stock, which is a dilutive behavior. Right? For every stock we issue, we try to buy back the exact same amount Mhmm. Roughly Right. Depending on the month and quarter to protect the integrity of the company.
Speaker 2:
Mhmm. And so others who cannot create net cash flow don't buy back the same amount that they issue Mhmm. Which creates free cash flow. Right? So there's there's cash flow, free cash flow, adjusted EBITDA EBITDA and then net income.
Speaker 2:
Right? We make money at all of them.
Speaker 1:
Mhmm.
Speaker 2:
Some only make money on adjusted EBITDA, which does not count stock compensation and stock issuance. So, you know, there are more than one company in our space. It's the only reason they don't run out of cash is because they're selling stock. Right? Which again, it's it's a short term solution.
Speaker 1:
Is it only selling stock and and raising money from venture capitalists?
Speaker 2:
Well, there are many ways you could issue stock and sell it to investors or you could sell it into the open market.
Speaker 1:
Yeah.
Speaker 2:
Like
Speaker 1:
Same thing.
Speaker 2:
It's different than a like a debt issuance. Right?
Speaker 1:
Yeah.
Speaker 2:
A company who raises a $100,000,000, $300,000,000 of debt or a stock block. But kinda in the normal course, there's stock issuance and like we issue stock to incentivize certain behaviors from you guys when you attract, when you cap, when you hit icon, but we go back into the market and buy it all back. Mhmm. Right? So if I give you 16 k because you iconed, I then go buy that stock back.
Speaker 1:
Yeah. I guess I guess I'm not as as big of a visionary as some of these agents who are willing to join a company that loses a lot of money. I I I I I just I can't wrap my head around it, going to a company that's publicly traded that loses a lot of money. And the only thing I can think of is that they're either they just don't look at it and they don't care, and they're not even paying attention to it. Or they're like, no.
Speaker 1:
Companies lose money for a while, and then they do really well. You know? I'm just I I can't wrap my head around it.
Speaker 2:
So I I I and I have conversations with agents all the time. I said, first of all, like, I truly believe the agent is the brand. Like, I don't believe that companies make it. A 100%. Well, there's some companies that kinda don't agree with our philosophy.
Speaker 2:
Right? So you're going so some agents are attracted to the brand Mhmm. Because of what it says about them in the marketplace. Yeah. So maybe that's where some of that logic comes from.
Speaker 2:
It's like, hey, I'm not really worried about what their finances are because I I sell a certain price point so I wanna be seen to be wearing this this brand. Yeah. Versus other people are picking to kinda build a potential revenue stream and like, for example, rev share with us or one of our similar models.
Speaker 1:
Mhmm.
Speaker 2:
The question I ask them is, like, look, if you're just picking a brand and at the end of the day, you don't care if they last forever because you're not building anything on top of that, then, you know, it could work for now and that doesn't bother you if in 5 years, 10 years, they don't exist. But if you're actually gonna invest time and energy into building a revenue stream, rev share is very different than any form of entrepreneurship. So Ricky, whether you're selling houses or you're building your your coaching products or your any products you create, those rise and fall with Ricky's ability to operate. Mhmm. Like nothing that Leo or eXp does affects Ricky.
Speaker 2:
Mhmm. Now your one revenue income stream with us, it actually completely it's like 80% my responsibility.
Speaker 1:
Mhmm. Right? Like
Speaker 2:
Mhmm. You can get them to the dance Mhmm. And you can get them excited and you can get them signed the ICA, but when they get here, your ability to earn is almost entirely my responsibility Mhmm. From onboarding them, to paying them, to answering their broker questions. And more importantly, is that like if you invest 3, 5, 10 years and that becomes tens of 1,000 of dollars, 100 of 1,000 dollars in revenue to you.
Speaker 2:
If one day I'm like, uh-oh, we didn't do good math. I could've changed it all.
Speaker 1:
Right.
Speaker 2:
You could've had 5, 7 years of time and energy invested get wiped out.
Speaker 1:
Right. Right. Right. Which I see where you're going with this. Some of these other companies that are like, free everything, and we're gonna do this, we're gonna do that.
Speaker 1:
It's not gonna be like that forever. It can't. It's not sustainable.
Speaker 2:
It's just like, I I I like a sentence where I say sustainability equals legacy.
Speaker 1:
Mhmm. I like that. I think that's a good good place to end. Thank you, bro.