Podcast Summary: Chit Chat Stocks – "The Real Brokerage: The Fastest Growing Company We've EVER Covered On The Podcast (Ticker: REAX)"

Release Date: June 18, 2025
Hosts: Ryan Henderson and Brett Schaefer
Description: Hosts analyze businesses and discuss investing insights, releasing episodes every Wednesday and Friday.

Introduction to The Real Brokerage (REAX)

In this episode, Ryan Henderson and Brett Schaefer delve into The Real Brokerage (Ticker: REAX), spotlighting it as possibly the fastest-growing company in the real estate market they've ever covered. Highlighting its meteoric rise from $10 million in revenue in 2018 to an impressive $1.4 billion over the recent 12 months, Brett emphasizes its 127% compound annual growth rate.

Brett Schaefer [02:08]: “We're talking about one of the fastest-growing businesses, potentially growing from $10 million to $1.4 billion in just over five years.”

Traditional Real Estate Commission Model

Before exploring REAX’s disruptive approach, the hosts outline the traditional real estate commission structure. Typically, a licensed agent joins a large brokerage (e.g., Windermere) and earns a 6% commission per transaction, split evenly between buyer and seller agents. For a $1 million home sale, each agent earns $30,000, but must share approximately $15,000 with their brokerage.

Brett Schaefer [04:16]: “Agents are giving upwards of $15,000 of the $30,000 commission they get with a million-dollar home to the brokerage they work with.”

The Real Brokerage's Business Model

REAX positions itself as a cloud brokerage, leveraging the internet and digital tools to reduce overhead costs and increase profitability for agents. Unlike traditional brokerages requiring physical office presence, REAX provides a unified software platform that agents can use on mobile, web, or desktop. Key differentiators include:

• Commission Splits: Agents start at an 85/15 split, significantly higher than the traditional 50/50 or 70/30 splits. Upon reaching $12,000 in commission income, agents retain 100% of their earnings, minus a transaction fee.

  Brett Schaefer [08:30]: “All agents start at an 85/15 split, which is highly disruptive.”

• Brand Independence: Agents can build and even private label their own brands, receiving physical advertising sets for properties.

  Brett Schaefer [08:30]: “Real brokerage gives you the independence to build your own brand.”

• Referral Bonuses: Agents earn additional income by referring new agents, fostering a network-driven growth model.

Revenue and Financial Growth

REAX's revenue has skyrocketed from a modest $8.4 million in 2018 to $1.4 billion in the past year, with a gross profit of $128 million. Despite operating income remaining slightly negative, the company shows promising signs of moving towards profitability.

Ryan Henderson [07:40]: “Revenue is not the most important figure for this business. However, the growth as you trickle down the income statement is similar.”

As of June 12th, the market cap stood at $858 million, with a gross profit multiple suggesting significant undervaluation given the growth trajectory.

Ancillary Services

To enhance its offerings and create a comprehensive ecosystem for real estate agents, REAX has ventured into several ancillary services:

1. One Real Mortgage: Acquired in late 2022, this home loan platform allows agents to facilitate financing for clients. Though currently small, with $4.4 million in revenue, it promises higher gross margins (50%) as it scales.

2. One Real Title: Following a similar acquisition strategy, REAX entered the title insurance and escrow services market. Despite initial service quality complaints, the company aims to pivot strategically to improve.

3. Real Wallet: Launched in late 2024, this digital wallet serves real estate agents, providing features like faster commission payouts, financial management, and a debit card compatible with Apple Pay and Google Pay. With 3,200 agents using it within a year, Real Wallet aims to expand its user base and introduce additional financial services, such as lines of credit.

   Brett Schaefer [24:29]: “Real Wallet serves as a digital wallet for real estate agents’ finances, integrating commissions, payouts, and revenue sharing all in one mobile application.”

4. LEO AI: An artificial intelligence support agent designed to assist agents by handling basic client interactions, generating social media content, and automating busywork. While innovative, Ryan expresses skepticism about its practical adoption among agents.

   Brett Schaefer [28:07]: “LEO AI is a support agent that can handle basic chats and calls with buyers and sellers, aiming to make agents more productive.”

Competitive Landscape

REAX faces competition from both legacy brokerages and other cloud-based firms:

• Legacy Players: Traditional brokerages like Windermere, which have established brand trust and local market dominance.

• Cloud-Based Competitors: Companies such as Compass and eXp World Holdings (EXPI). Compass focuses more on the luxury market with substantial venture capital backing, while eXp World Holdings, though older, shows slower growth compared to REAX.

  Brett Schaefer [39:07]: “EXP World Holdings has about $4.6 billion in annual revenue, but REAX is catching up quickly from $16 million in 2018 to $1.4 billion today.”

Growth Prospects and Market Share

With 2% of the real estate transaction market and 27,000 agents onboard, REAX has ample room to scale up to 100,000 agents, tapping into a potential market of 2 million licensed agents in the U.S. Given the current macroeconomic headwinds—such as reduced home sales due to high interest rates—the hosts believe this presents a prime opportunity for REAX to position itself for exponential growth as the market rebounds.

Brett Schaefer [35:16]: “With an estimated 2 million real estate agents licensed in the United States, and only half being active, there's an immense opportunity for REAX to capture market share.”

Valuation Analysis

Despite its impressive revenue growth, REAX remains unprofitable, primarily due to aggressive stock-based compensation and high marketing expenses. However, the hosts argue that the company's unit economics are solid and expect revenues to reach $10.7 billion in five years with a 50% annual growth rate. Projected earnings at various margins (3% to 7%) suggest the stock could offer significant upside, trading at attractive multiple earnings by 2030.

Brett Schaefer [50:20]: “With 50% revenue growth for the next five years, REAX could reach $10.7 billion in revenue, translating to $321 million in earnings at a 3% margin.”

Management Team

REAX is led by Founder and CEO Tamir Poleg, who owns approximately 3.5% of the company’s outstanding shares. Brett praises Poleg's strategic vision and alignment with shareholders, noting his commitment to building a robust product suite for agents.

Brett Schaefer [46:42]: “He's a founder-led company with a rational head on their shoulders, aligning the success of agents and the brokerage.”

MLM Comparison

Some critics liken REAX’s referral-based growth strategy to a multi-level marketing (MLM) scheme due to its reliance on agent referrals and high referral bonuses. However, the hosts distinguish REAX by emphasizing its focus on providing valuable services and products to agents rather than solely on recruitment.

Ryan Henderson [43:44]: “There are murmurs of this being an MLM, but the distinction lies in focusing on the product first.”

Brett counters by highlighting that the referral program aligns agent incentives with company growth, a common and legal practice in financial services.

Brett Schaefer [46:52]: “The distinction is focusing on the product first and not primarily having people focus on recruiting.”

Conclusion and Hosts' Perspectives

Ryan and Brett express strong confidence in REAX’s potential to become a multi-bagger investment due to its disruptive business model, impressive growth metrics, and strategic expansion into ancillary services. While acknowledging risks such as market headwinds and service quality issues, they believe REAX offers a compelling investment opportunity with significant upside.

Ryan Henderson [55:03]: “This has the makings of a legitimate multi-bagger… momentum, good product, and a great referral network.”

Brett shares his intent to invest in REAX, mentioning plans to allocate around 5% of his portfolio to the stock while acknowledging the need for diversification.

Brett Schaefer [58:59]: “I think the real brokerage has a chance to be a 10-bagger and be a huge winner in the residential real estate space.”

Overall, the episode provides an in-depth analysis of The Real Brokerage’s innovative approach, robust growth, competitive positioning, and promising future prospects, making it a noteworthy consideration for investors interested in the real estate sector.

Notable Quotes with Timestamps:

• Brett Schaefer [02:08]: “We're talking about one of the fastest-growing businesses, potentially growing from $10 million to $1.4 billion in just over five years.”

• Brett Schaefer [04:16]: “Agents are giving upwards of $15,000 of the $30,000 commission they get with a million-dollar home to the brokerage they work with.”

• Brett Schaefer [08:30]: “All agents start at an 85/15 split, which is highly disruptive.”

• Ryan Henderson [07:40]: “Revenue is not the most important figure for this business. However, the growth as you trickle down the income statement is similar.”

• Brett Schaefer [24:29]: “Real Wallet serves as a digital wallet for real estate agents’ finances, integrating commissions, payouts, and revenue sharing all in one mobile application.”

• Brett Schaefer [39:07]: “EXP World Holdings has about $4.6 billion in annual revenue, but REAX is catching up quickly from $16 million in 2018 to $1.4 billion today.”

• Brett Schaefer [35:16]: “With an estimated 2 million real estate agents licensed in the United States, and only half being active, there's an immense opportunity for REAX to capture market share.”

• Brett Schaefer [46:42]: “He's a founder-led company with a rational head on their shoulders, aligning the success of agents and the brokerage.”

• Ryan Henderson [55:03]: “This has the makings of a legitimate multi-bagger… momentum, good product, and a great referral network.”

Note: For full access to detailed charts, financial metrics, and additional insights discussed in this episode, listeners are encouraged to visit the Chit Chat Stocks Substack, where the hosts publish comprehensive research reports for free.