Episode #194 – The Tech Start Up Revolutionizing Loan Sales, with Michael Jimenez, Part 1

You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online. Outsmart your competition and live a freer, more awesome life. And now your host, Dan Barrett.

(00:41): All right. Hello and welcome to this week's episode of the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWords nerds.com. And look, if you need leads online, if you need to find more deals for your real estate investing business, you know where to go, it's AdWords nerds.com, jump on a phone call with a member of my team and we will help you put together an online marketing strategy for your market for free this week. You guys, you gals, everybody out there, I have got such a fun interview for you this week. I'm talking to Michael Jimenez. Now Michael is the Chief Experience officer@exchange.loans. That's the Letter X change loans. If you don't know what a Chief Experience officer is, we are going to get into it, but I'm gonna tell you, this is someone you are gonna wanna listen to. This guy is an absolute master when it comes to loan sales.

(01:38): He's got a background as a commercial real estate finance expert, a chartered realty investor. He is all over the place in terms of his experience in this very complicated sort of industry. But at the same time, he's such a driven individual, someone who is unabashedly and unapologetically his own man. He's got his own philosophy about how he's gonna do things, what he wants to have happen, and he is out there getting things done. I gotta say, this is one of my favorite, most fun interviews I've done in a while, and I'm super excited for you to hear it. So without any further ado, let's get into my interview with Michael Jimenez. All right, what's up? This is Daniel Bera and I'm here with Michael Jimenez. He is the Chief Experience officer and founder over@exchange.loans. Michael, welcome to the show, man. I'm so happy to have you here. Hey, thanks for having me. I'm, I'm happy to be joining you, Dan.

(02:35): Yeah, we talked a little bit before this call and there was so many things I wanted to pick at and pride part. Let's start right at the beginning, which is what is a Chief Experience Officer? We were just talking about this, and I want you to give people a little bit of an intro into what you do today and then we'll back up. We'll talk about your origin story and all that stuff. But what is a Chief Experience Officer? Yeah, So am, that's a great question. There's a few answers for that, but I am essentially responsible for all things having to do with the experience of our website and our client and our sales process. So since we are still a small tech startup, everything essentially is my responsibility that has to do with the front end or for the way our clients and customers interact with us and our site. So that also means it's a good acronym to hide the fact that I'm also the head of sales. So I'm usually the one, I am the tip of the sphere, the edge of the sword when it comes to sales and marketing. So I'm usually the first person people have to experience going into our website. So I hope that answers it for

(03:43): It does. And actually, it's a really good segue because obviously this podcast is ultimately about marketing in some way, shape, or form with pretty much everybody that I talk to. And you have such a cool sense of how to talk about that stuff. I'm really excited to dig in. So let's take a step back then. Let's talk about exchange.loans. Now, if you are listening to this, you should go check out this site, the way you spell it, it's the letter X, select the letter X, change.loans, exchange.loans. Tell people a little bit about the company and what you guys do, because it's really, really interesting and it's a big idea. Here's my little app. It's a big idea type website. So walk people through, if you're talking to someone in the real estate space or you're talking to someone that has invested in real estate before, how do you explain to them what the website's all about and what you guys are doing? That's

(04:37): A great question, and that's something we gave a lot of thought to. Hence the name, the name of our companies, the name of our url. And it also describes what we do, what our mission is, is we want to create an online marketplace where lenders and investors can do what they normally do with, they can exchange loans for liquidity. The problem we're trying to solve is really the reverse, I guess you can say the reverse flywheel issue right now, when lenders and investors want to exchange, let's focus on when they wanna exchange commercial real estate loans for liquidity. It's typically in the form that the investor is the borrower walking into the bank or to some sort of other private lender or dust lender, and they're exchanging that promissory note and that mortgage or deed to trust, they're exchanging that loan for the liquidity they need typically to acquire a commercial asset.

(05:32): That flywheel is big. It is extremely efficient, it is extremely lucrative for all involved, which is why we have about giver or take a few trillion. And we've got about 25 trillion commercial mortgage markets in the US. Now, the issue is in that we are trying to solve with our wonderful site and URL exchange.loans, is we want to essentially create a loan sale marketplace so that when the lenders want to exchange that same loan post origination, because it's already been originated and made and we have a borrower where he is already, he may or may not be making payments, we can get more later. But when that lender wants to exchange that same loan for liquidity, there's really no official marketplace for them to do. So that is what we are trying to create. It is a very, very big idea, but we're starting small with our focus in non-performing loans or distressed asset sales strictly for lenders. So there's nobody selling on our site or listing on our site that isn't a lender or directly tied to them. So it's all lender assets. So you know, kind of mentioned this kind of reverse flywheel effect. And I think with a lot of marketplaces, the challenge is always that kind of network thing where it's like, well, I don't wanna join Facebook if my friends are already on it, but then my friends are gonna be on it if I'm not on it. So you kind of gotta get both sides of that transaction at the same time. So what's been something that's gone really well for you guys, and maybe what's some of the challenges that you guys are facing as you really break into this market and try to change the way that people do this sort of transaction?

(07:11): That is an awesome question. That's a great question. So the one thing that has been a lot easier for us is actually selling assets. If we're at a historical low for distressed or non-performing loans, since that's our focus, those are the assets and investors out there, I'm sure you talk to 'em every day, they are starving for opportunistic yields. Yeah, starving debt. And it's part of the reason why we've had a record low of defaults and non-performing loans is because we've had record levels of liquidity, real estate prices or appreciation and just, I would say the credit standards have maintained fairly well since the great financial crisis. But there's just been a lot of money pumped into liquidity, pumped into market, sorry, due to rates being so low. So everybody's been able to refi out unless there's something very wrong with your borrower, with your property, with your building, or the immediately surrounding market. So there's been a lack of distress or opportunistic commercial real estate plays. This has been, it's been very easy to sell these assets and to get great pricing for our clients, which is why we've got about, I wanna say around a 98% sell through rate on the assets and listings that we have taken on for our clients. That's been the easiest part. I don't know if we wanna go to what parts harder or why we built it the way we did or

(08:29): How. Yeah. Well, it's interesting, we talked about this a little before, but you guys recently brought on a cto, right? A chief technical officer. We were talking a little bit about, there's this kind of, I think people who are outside of software or outside of this kind of marketplace development, they kind of think it's gonna be easy. They just think it's not that big a deal, but it's rolling a pretty darn big boulder up a hill, right? It's challenging. So it doesn't have to be specifically about the business model per se, but what's been challenging or interesting to you about this journey of founding this tech company, specifically in this sort of complicated transactional space? Are you dealing with real estate loans and all this stuff that's already hard? What's been the biggest challenge for you as you get into this particular type of business? So that's a great point. So I will have to call out that I'm guilty. One of those people who, oh, it's tech. What's the big deal?

(09:29): So , I've been selling loans, I've been in commercial real estate finance. I went to school for it during the last before cycle, hit the top and imploded. And during the down cycle I fell into this business as a lender. I was at A I N G investment management now, boy financial. And we wanted to get out of a deal in Detroit. That was assignment that I had to work these special assets in Detroit. So someone mentioned, Hey, we should do a loan sale. And I'm like, what the heck's a loan sale? And I was like, wow, this was so much easier than having to go there, talk with the borrowers, look at the market, talk to the brokers, just selling this thing. And we got a very good price for it. Obviously, I can't say we got a very good price for it. And it was before the market fell off the cliff in 2008.

(10:17): So it was between that 2007, 2008 period. And I was like, wow, I don't think there's an easier way for a sophisticated lender to get out of a complicated deal. And the questions, do you really wanna take your property back? Do you wanna be on title? So I think that I thought so. It really seemed like something that was interesting not a lot of people knew about. And it was fun and it was quick and it was actually a lot easier than it. It looked going in exact opposite situation with the tech component. So how did I get there and on earth would I do this? So when the market was recovering, I got into loan originations, learned a bit more outside of the life coast side, learned cmbs learned Fannie, Freddie, and I just decided, and I knew Fannie Freddie was doing very well, I'm just like, I don't really wanna do this.

(11:08): I just wasn't passionate about it. Obviously ask anybody doing Fannie and Freddie loans the last 10 years, game's been good to them. Got in with my co-founder, Andre Prado, who I also worked with at img, who we also worked with, our cto, Chris Perry IMG as well. He got a job working for l and r down in South Beach, and this is, I wanna say about 2012 maybe, or maybe, yeah, I'd say around 2012. Forgive me if I'm fuzzy on the details, , it's like, Hey, you should come check what we're doing. We're selling special assets in an online auction. I'm like, what? eBay, right? He's like, Yeah, EBay. The thing I too, it's eba. It's eba. Anyone

(11:55): Says online auction, you think eBay? Yeah. So I went down there, we chatted, it took a couple months, but I ended up joining him and we ran a division and later became known@auction.com and 10 x. So that's where we got of exposed to the tech side and we had, I guess you say we had a lot of success there. So we figured why not do this ourself? How hard could it be had I known, I would've probably just stayed put. But here, here's where we are now and that's our mission, that's sort our target, our mountain that we're trying to climb here, get to Summit. And it's been tough, like you said, creating that network effect. And like you said, no one wants to be the first to use your product. We've had about four dozen clients use us as a loan sale advisor as well as a platform. But getting that the official approval so all banks know they can use you and all lenders know they can use you, that's going to be the hardest part. So we're thinking of very clever ways to do that as a small, cuz we get a flexibility and ability to be creative as well as bold as a startup firm. So we think we've got some pretty good strategies and tactics that we intend to deploy to get to create that network effect and just that high level of trust with the clients that we look to serve.

(13:17): I mean, I hope that Was long enough of an answer. Sorry. No, that was great. You totally answered the question. And I think you're sort getting to something that I think is really fascinating about you guys and what you want to do, which is that network effect problem. It's a problem up front, but once you solve that problem, that's the moat that protects you from everybody else, right? Because once everybody's in the thing, once you're on MySpace and all your friends are on MySpace, no one will ever move off of MySpace. But obviously that's not true. But it creates that competitive advantage, which I think is so interesting about what you are doing. I wanna ask a little bit about your background. So you've mentioned you were working at I N G, you've worked@auction.com, you met a lot of your co-founders there and the people that you're working with now, but you also made that jump from that corporate environment to the startup environment, which is very different in many ways. Why make that decision, right? I mean, it's one thing to say, yeah, we saw the opportunity, but lots of people see opportunities. Most people don't jump on them, especially if they've got a really solid, I mean, you were killing it at your old job, so why make that jump?

(14:33): Yeah, that's the question. I mean, look, you're have to throw anybody under the bus's talk at a high level. We'll talk at A high level. I asked myself the same question some mornings when I'm waking up for, but I'm like, man, this guy will not take my call, will not take my email, will not take my meeting. What do I need to do to prove myself and get in with these folks? ? Yeah. Well, number one, corporate America, I'm glad I got out when I did. It's gotten the, we'll just call it the morale has gotten much lower in corporate America. I think that's why everybody's so excited for this work from Home Revolution that and yeah, why did I do it? Why didn't, life was pretty sweet, man. I had a corporate card flying all around the country and stuff. No, I figured this was something that was going to happen at some point, and I was still young enough to where I can go and fail completely miserably, fall right on my face and still recover, still have a good 10 year plus resume working with really good companies, i g investment management, Trammel Crow, green Bridge, real Estate Capital, and then auction.com.

(15:45): I was like, cool, what am I building this up to? Surely it's not just to get a promoted and be a middle manager, right? So I wanted that entrepreneurial experience. I wanted to bet on myself and my idea, and I think this is a very, very feasible business plan. And like I said, that founding that solution to that reverse flywheel and creating a network or the marketplace effect off of it, I think someone's going to take advantage of it. Ultimately, our goal is to trade commercial mortgages like stocks. I think they're a better investment class. I think they're safer. And there's a ton of it that's sitting there that's illiquid and that's the biggest issue with commercial mortgages is the fact that they're highly illiquid. So I think it's a big and a great problem to solve. I think I'm the guy for it and if not me, someone else's is.

(16:35): So I think I got a head start, so I'm still ahead a few years. I love the idea of obviously you saw the opportunity to solve, you saw the problem, so there's a real problem there to solve. But I love the idea too, of you saying, this is the time in my life where if I'm gonna fail, it's gonna be okay, right? Yeah. You wanna have that experience now rather than have that experience when you're like 65 or whatever, and then you're like, well, I guess I'm back in the back at Starbucks or whatever. Not that you think you're gonna fail, but you're making it safe for yourself. You're capping your downside, which is one of these fundamental principles we always bang on about making sure that you're not risking too much, you're not gonna get knocked out of the game. So I love that approach. Hey guys, hope you enjoyed part one of this episode. It's just too good to limit one show. Join us next week to hear the rest.

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