I Was Worth $5 Million at 23. Eight Months Later I Was Negative $1 Million | Ep. 416 with Leo Pareja CEO of eXp Realty

0:00I owned 14 rental properties. My accountant had just told me I was worth$5 million. And within eight months, that number went to negative$1 million. This is Leo. He bounced back to become the number one real estate agent in the world and the first Hispanic CEO of a major publicly traded brokerage. This is how he rebuilt. So I went from what I thought was success. And that was like a half a million dollars a year, 20, 30 million dollars in production to jumping up to becoming number one in the world. There's a formula to everything. Everything's a math problem. The big pivot was I would advise people to actually.

0:46Leo, I have to understand the feeling when you heard this. By 28, you were considered the number one agent at Keller Williams, which was the largest brokerage, you could say that you were the number one agent in the world. So the interesting part about that question is it was actually the most empty and meaningless feeling of my entire life. And if I were to take you back when I got into real estate at 19 and I learned that that was a thing I could achieve, I had two singular obsessions when I was about 20, 21, which is one, I wanted to be on NAR's 30 under 30 list. And then I wanted to be number one at Keller Williams.

1:26And it became an obsession. Like for eight years in a row, it's all I cared about. I tracked, you know, and it was, it was, it was a fun process because I went from, I wanted to be number one in my office. Then I wanted to be number one in my region. Then I wanted to be number one in the East coast and then like slowly climb. And then, you know, I've made it to like number four a couple of times and number three. But the second I got it, I woke up the next day and it was actually very sad and depressing because I didn't feel different. It wasn't my most profitable year. Nothing changed. I didn't get this unlock of wisdom or transformational aha.

2:08And I didn't actually know what I wanted to do after that because it was, it became such a core driving version of who I wanted to be. And once I got it, it actually almost left me confused. And it's been a really interesting kind of anchor for me because it just reminds me that, you know, no matter what role, I talk about seasons of life. I'm super happily married with two amazing little ones right now. and so the season I'm in I just don't want to screw that up for them because in that journey Daniel I actually got to be in front of 100 millionaires and billionaires and I got into the habit of asking each one of them like what would you do different like what's the one thing you'll tell me and um they all and mostly you know in the early 2000s there were baby boomers they all had the exact same reaction which is don't screw up the time with your little kids and so that's become a very core thought process of like no matter what chapter i'm in i've had some really cool titles like number one in the world or founder or ceo of a five billion dollar enterprise business i get to be on the news i get to be on big stages but from that one experience i also remember that this is just a role i'm playing and like when i'm taking my last breath and hopefully I'm an old man.

3:33I'm going to be surrounded by people who care about me because I showed up when it was important. And it wasn't like, oh, I'm sacrificing for them. Like, no, that's bullshit. Like, actually show up and don't forget the important parts. Wow. The people that we've talked to, like you said, the most successful people almost always say their biggest regret is they missed out on all of their family stuff. their kids recitals, whatever it was, they were just not there for their children, or it even ended their marriage. It had a turn on their personal life. At what moment for you though, where you said, I need to balance these things, because I imagine you could not have balance.

4:16You could just focus only on work. Yeah. So for, for, again, the gift I've gotten that I just, I just think I'm the luckiest kid in the world. And it's, I give it to the universe or God, whatever you believe that makes you feel good as a human being, is I just had really good luck as a young person. And the luck I had was getting the shit kicked out of me in the financial crisis. So I was 23. I owned 14 rental properties. My accountant had just told me I was worth$5 million. And within eight months, that number went to negative of a million dollars. And I was, you know, in the fetal position, crying, negotiating with banks to take some of the properties back, called BMW and said, you need to come get your car.

5:00And I realized in that moment, because as I was driving towards my goals, I always had this thought process of when I get there, I will do X. Whether that was like giving back, spending more time with my parents and my family. And I lost it all in literally seven, eight months in dramatic, chaotic fashion, which again, was not unique. If you haven't seen the movie, I recommend The Big Short. And I remember when we watched it with my wife, I think I was like, she looked over at one point and I had my shoes on the couch and I was like in a fetal position. She's like, yo, you got real PTSD just watching this movie.

5:40But that early experience taught me that it's all a moment in time. It can all vanish super quick and from friendships and relationships um to to like literally the roof over your head actually in that moment my wife uh who was my girlfriend back then we both decided we were going to be mentors with big brothers big sisters because i always thought when i have more money i'm gonna start a foundation and i'm gonna give back and then it all disappeared and i realized that Like in the hotel gym, just now traveling, I was on the treadmill watching my favorite episodes while I get a workout. And the only reason I could do that is because of ProtonVPN.

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7:10Right now, ProtonVPN is offering our listeners 70 % off a two-year plan when you go to ProtonVPN.com slash founder. P-R-O-T-O-N-V-P-N dot com slash founder for 70 % off a two-year plan. That's ProtonVPN.com slash founder. it's, it's doing it in the moment. And so like when it comes to giving, I've always told people like, just give to one person. And that could be way more impactful than writing a thousand dollar check or a hundred thousand dollar check. Um, my wife and I did start a foundation once we had money, but whether it's spending time with loved ones or a cause that you care about, like I now reverse engineer everything so when i plan the 2027 calendar for exp for exp globally my kids calendar goes in first my kids spring break all the all the things that um we can plan ahead of time and again like every every school drops some nonsense on you two weeks out but i've also created a culture that my people understand that that's actually my priority where if i'm like hey I'm canceling today and I'm no longer attending a single meeting because it's my kids this.

8:29They understand that that's my priority. And I think it's shown a version of leadership that is different than what you're normally expecting at a public company. Very real story. I had an offsite with my executives and there was an executive who looked really upset and I was like, what's wrong? And she said, I'm missing my kids moving to college. And I was like, why are you here? This is insane. She goes, well, I know that these only happened once a quarter and I didn't want to miss it. I was like, if I catch you doing something like this, I will fire you. Like this, this was a terrible judgment call on your part.

9:05Like you should have just told me because you can't undo that. Right? Like you can't forget that. And again, none of this is wisdom, right? Like I miss some of my best friend's weddings and bachelor parties. And Daniel, for the life of me. I can't remember. It was so important that I didn't show up. And so the gift I feel I got is I got that really early and I screwed up like friendships versus like my kids. I remember the crash of 2008. Unfortunately, I lost my job and I had to live in a tool shed. So although I didn't lose homes, I definitely lost my dignity and my motivation. It was just Just like you, it gives me PTSD when I think about how horrible that experience was.

9:49When you think about agents and executives and people that you come across who have that young, excited, motivated energy, like they're 19, 20s, early 30s, maybe they don't have a family yet. They're just super motivated to get to that number one mark. How do you talk to them without stifling that motivation? Well, no, this is where I sound maybe a little schizophrenic and I talk about seasons. And I said, actually, I think the world actually is too soft on young people. I think you should work 12 hours a day, seven days a week, because youth is wasted on the young, right? Like energy is a superpower.

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11:52But when you don't have any experience and wisdom, all you have is time. So go do shit, right? go put in reps. And I tell young people to compress time as much as possible. So whether that's in real estate, that means join a team in entrepreneurship, go join a founder that you want to be like when you grow up. Because I think the best teacher in the world is osmosis. Just, you know, to quote Hamilton, just get in the room where it happens. And just, you know, I was a sponge and I always seeked out mentors. And when the meeting was over, I'd call them and kind of get the replay or walk with him, be like, hey, let's go to luncheon.

12:29Why did you ask that then? Why did you pause? How did you know they were going to say that? And you realize that there's a framework, a tactic, a structure to a conversation. And that only comes from experience. And you can't read it. You can't buy it. You can't attend a seminar. You have to be in the opportunity, in the transaction, have it blow up in your face. And that's, I encourage young people to create as many experiences as possible. I am the biggest proponent of osmosis. I could have never been successful in business if I didn't work for somebody else, unless I had raised millions and millions of dollars, which I don't think was ever going to happen.

13:12So I am totally with you. Some people are like, I never want to get a job. I just want to go into business and I'm with you. Something was told to you at 29 that changed your perspective. What was that? So I had a mentor who was a transformation of my life. And he took me under his wing or paid attention to me because I was like 23 and doing pretty well. And actually where we developed a real respect and friendship was with my hustle. I remember it was after the crash, he was a very well-heeled investor during the financial crisis. And we went and bought a bunch of real estate after the crash.

13:49And I did the work and he kept most of the upside, which is how it works when you're young. And it was a great deal for him. And we created lots of value during that time period. And he was like, I called him uncle because he walked in to a lot of banks and co-signed me and said, this is my boy. But I remember when I was turning 30, he sat me down at lunch and he goes, just a heads up, you're no longer this child prodigy phenom that you've kind of crafted an identity around you're you're now just an average successful guy in real estate so you better get pretty good at something else and create a different persona and i think it where it was interesting was around identity right and that's where you know when people just make their career their identity you could have some really traumatic falls because that's not who you are at the end of like you were multifaceted.

14:44I'm a father, I'm a son, I'm a husband, I'm an advocate, I'm part of multiple communities. And I just, I see it often where entrepreneurs become like super one dimensional. And even if it goes perfect, this is another really interesting heads up I got from a good friend who was about to sell my first company. And he gave me a hug And he goes, hey, this is going to be the most dramatic experience of your life. I said, how do you, what do you mean? It's like, this is what I've been driving towards. He goes, it's going to suck no matter what. M &A is brutal. Like their job is to hurt you and take from you and the other side and the bankers.

15:25And so no matter if the outcome is what you expected or more than you expected, when you actually sell a business, and I've sold three, you actually give away a big part of your identity. and and on the very first one you'll learn basic shit like have an email address that has nothing to do with the business right like i have a personal email at leopareha.com which i but like when you sell your first company they're like okay hand over your email i'm like hey that's how i log into like everything like what do you mean it's my bank like you actually hand over all of it and especially if you're a big deal in your industry because you've crushed it you lose that because all of a sudden people that you thought were friends, they were professional friends, but you no longer have status in that world because you're no longer the founder and CEO.

16:17You're just like the guy who took over your company or the gal who now runs your company. It's her company now, right? So there's been some very interesting life experiences of who am I? What am I? And outside of being a founder. After the crash, going back to that, and then you said you now had this new connection and relationship with someone who changed your life. What changed within you, though, that you said, going forward, I'm going to do this differently? Yeah, well, I mean, that was one facet of it, right? That was just for investing versus one was being a student of history and just realizing that I was I thought I was really good at real estate.

16:59I thought I was special. what i didn't realize i just had a real estate license during the greatest real estate bubble in the history of the world with slightly more hustle than the average person and then i was like oh i like i'm actually not that good at lead generation conversion funnel follow-up process like i was flying by the seat of my pants and then uh the next chapters became about total addressable market, CAC, LTV, leverage, retention, churn, actual systems and processes, realizing that there's a formula to everything. I often talk about that everything's a math problem. And I think building a business to even being at your ideal weight, it's like caloric deficit you don't want to eat less work out more like you you need to be in a caloric deficit to lose weight if you want to have a business you need to create more revenue than expenses and that's normally a factor of lead funnel to lead conversion to client retention and so the big pivot was i'm good at something and it's kind of natural or i'm like gifted at it versus like no um it's a math problem how big is the total addressable market how do i capture a unfair share of the marketplace at a unit acquisition cost that makes sense?

18:26And how do I scale it for the long-term and make it defensible so someone can't go, oh, Daniel built a cool mousetrap. Let me go take his cheese now. I hope no one takes my cheese. I'm going to do some math because I need to protect my cheese. And you're right. And also there's so much competition nowadays. Well, I spent 10 years of my life in tech and like a service business is easy, right? in my opinion because service businesses normally are completely geographically tied so take your favorite fill in the blank daniel like there's there's math for everything like if it's a deli or a coffee shop people won't drive more than a mile right like maybe a gym for your kids versus you like it's it's proximity based to your life um real estate like you can only serve up to maybe 30, 45 minutes away.

19:14Like you can't be driving two hours one way for an appointment. Tech, you could build the coolest thing in the world. And if it scales super fast and it's great economics, Google goes, thank you. Like I'll just build it. Right. I have a better funnel at the top and Amazon's famous for it where like they have a product and they'll put under Amazon households or basics. You know what I mean? So, um, just understand. And by the way, like that's the goal of capitalism, right? When like arbitrage, in my opinion, is an efficiency in market, period. And as a segment gets more sophisticated or gets larger or more established, the margin naturally gets compressed, right?

19:57That's what happens. And so that's also part of the game of an entrepreneur, like just be okay with that. Sometimes the movie ends through consolidation or through acquisition or through just like that opportunities in there. And we're probably living through a phenomenal moment in the death of most SaaS as we know it, right? I think AI is grossly overhyped and underhyped all at the same time, which is like a weird schizophrenic sentence, right? And I think most things are overhyped in the short term and under hyped in the long term, right? Like, have you been sitting on a business idea? Let me tell you something.

20:38I've been selling on Shopify since 2012. I started with a men's grooming line, built out a full skincare brand, all on the same platform. And the thing that blew me away from day one was that everything I needed to actually start selling was already there. I I didn't need to piece together five different tools or hire a developer. Shopify had it already. The moment that first customer was ready to pay, the checkout just worked. No friction, no drop-off. And when customers come back, their details are already saved. One tap and they're done. That was huge for me early on because every completed sale built my confidence that this thing was real.

21:18And because Shopify handled the setup in the checkout, I wasn't stuck troubleshooting my own website. I could actually focus on building the brand, creating new products, running campaigns. That shift from figuring out the tech to actually growing the business, that's when everything changed for me. With Shopify, nothing stands in between your idea and a real business. So go make it one. Start your free trial at shopify.com slash founders story. Start your free trial at shopify.com slash founders story. We're on version 17. and v1 was an ipod that allowed me to make some phone calls this thing today like i just got into the country using it it's got my credit cards it starts my tesla right like it's so far removed in version 17 than it was in v1 and i think we're seeing already some of that overhypeness in ai and i think it's fascinating because if you look historically at almost every transformation of technology and i would put the steam engine and trains and the internet in 2000 which i vis really lived through that cheese moving that's how i ended up in real estate it created a massive overinvestment which followed by a massive crash but the infrastructure that's left over afterwards whether it was laying railroads across like eight late 1800s i think we had like 118 railroads and And like 30 years later, we had four, right?

22:43But the railroads laid, created the foundation for like Western expansion in like the economy that we have today. You know, pets.com famously crashed and billions of dollars of revenue evaporated in the early 2000s. But it was that fiber optic cable that we laid across the ocean that gave us high-speed internet, which changed everything, literally everything. So I think that's what's happening. And the one really real part of AI that I'm witnessing, experiencing. And again, this is, I was a non-technical founder who founded a tech company, which is a very small club, which is actually really inbred a lot of insecurity in me.

23:22Because prior to that, whether it was real estate or lending or anything happening to do, you couldn't bullshit me. Like I could just go down to the courthouse and see if the permits were pulled, if a contractor told me something. I'd walk around with a tennis ball at construction sites and just put it on the ground. I'm like, well, if this thing rolls, we have a problem and I don't need to be an engineer to figure this out. In tech, I couldn't look at the code myself, but now with Codex and Lovable, I can get into GitHub and I can do things. And I think it's really changed the process flow of, I can get a frontline person who understands the workflow to build the wireframe for me, and then I give it to engineers to make sure it's SOC 2 compliant and it's scalable and it's on the right database schema.

24:01But I do think we're going to witness the death of most enterprise SaaS. I think most enterprise SaaS is over-engineered because you're one of many customers and it doesn't do exactly what I want it to do. And I think most businesses that have some decent scale are going to be able to build their own workflows. And that's going to be a massive disruption to the world. Yeah, I always laugh when you ask them, what are you building? And they're building the exact same thing to solve the exact same problem. I don't even know how most of them get funding. I was listening to a recent C-suite of a publicly traded company that's involving social media.

24:39And then I was listening to a debate around that this person typically never creates something new. They never start something new. It got me thinking about there's power in not being the first. And I imagine when you're publicly traded, there's even more power many times in not being the first and only doing it once it's already been proven by somebody else. Yeah, that's a great question. Actually, when I talk about AI with agents, because they all have the same kind of like anxiety around it, right? I think every human being on the planet has anxiety around it, especially the way it's marketed.

25:13And a couple of thoughts, like the people over hyping it are the ones who are financially incentivized to create massive returns. And so always pay attention to the source of the fear, right? Fear mongering is, that's the reptilian brain in our evolution. Like that thing is designed to keep you alive and nothing makes you pay attention more than fear. Like, so always remember that. Two is that I actually say in AI, I think we're in our MySpace era. There's absolutely nothing that says that open AI. And again, like when I said this six months ago, Daniel, people were like, oh, I said open AI is probably not going to make it.

25:50I think now when I say it, people are like, yeah, that kind of is starting to feel pretty, pretty correct. Like if I had to bet right now, Gemini is the winner. They have the most resources and that's kind of what happens in life, right? They have the most cash, the most top of the funnel, right? For delivery mechanism, they can, they can make it free. And then they choke out the competition, right? And so famously, I would say Apple is that, you know they they normally aren't like uh the i the ipod was like you know there was other ones out there the palm pilot you remember that one like nokia owned the blackberry owned the market right like the iphone was revolutionary but it wasn't like the first cell phone right nokia and blackberry had dominance but then they made a couple experience tweaks and where I think they've won is the ecosystem.

26:45So companies with market power that have ecosystems and then that's where, that was the big lesson I learned when I spent time in tech. It was like, also understand who can put you out of business overnight, right? Like if you're, even if you found a green space and no one's touched it, let's just say you execute, who can kind of tiptoe in and move your cheese overnight? And again, a lot of times that's how you get acquired, right? But there's been many famous case studies where they were negotiating with an acquirer and the counter-acquirer goes, well, you just push past the point of build-buy.

27:20And after this, I'll just build it, right? So there is a, I will pay X dollars to not have to go through the R &D process, but past a certain point, I'll just do it myself. This all reminds me of Who Moved My Cheese, which I haven't read in 25 years. I've heard this as a great acquisition strategy to get connected with the company who you'd want to be acquired by and build some sort of relationship with them early on. But it sounds like to me that could also be at your detriment. I could tell you five stories on both camps that played out beautifully and disastrously, right? There is always the risk.

27:58So it's actually a good segue because I often get asked by like a founder who reaches out cold and says, hey, I want to show you something. And they get on my calendar and they're like, hey, I need you to sign India. I'm like, did you bump your head? like you cold reached out to me you have absolutely no idea what's on my roadmap so i literally have a policy where i won't sign a single one right because again even more as a public company i don't want to put myself in jeopardy where i create liability because i have no idea what you're going to show me and it often happens where someone shows me something i'm like buddy like i've already built it like i'm turning it on in a week and and i think that actually happens because like society creates opportunities and like you're not the only one who sees that opportunity.

28:43And so a lot of times I feel like I've been on both sides where I felt like a bigger company copied me. And now that I've been the big companies like, oh, I didn't comprehend that big companies have like 200 engineers and tens of millions of dollars in R &D budgets. And we're seeing the same bottlenecks and paint at scale. So we're also trying to solve that. So there has to be a level of fearlessness that comes with entrepreneurship. And, you know, the little guy always has the advantage of speed, right? It's like, I can just move faster because I'm willing to work 12 hours a day. And, you know, my senior engineers probably are not versus the two kids in a basement.

29:20Like the thing that's kept me motivated and awake at night for 24 years are the two kids in the basement who can move my cheese because I just didn't see them coming. and I was the two kids in the basement once so I know the feeling but you can't control what you can't control so I would advise people to actually form that relationship early. I was just recently at Cannes Lions and at the event there was a lot of C-suite mixing with a lot of people who entitled themselves as creators. These are social media creators. And what I saw is a lot of the C-suite are seeing themselves as a creator. It's like their goal is to build a social media presence themselves, which uplifts the company, also builds a lot of trust and authority back to the company.

30:13What are you seeing or what are you hearing out of all the C-suite when it comes to publicly traded companies. No, that's, and I think that's more of a, a, a very good take on society, right? Something I say a lot is marketers ruin everything. And again, it's a feature, not a bug. It's, it's like, it's not a diss at marketers. And I'll, I'll walk you through kind of like the emotional feelings of it. No lie. I've said that many times before. So I'll let you continue, but I can totally probably relate to what you're going to say. So, you know, I remember fist fighting my brother to pick up the phone because someone was calling on that one phone in the kitchen with the long wire, right?