Kathy Fettke, co-founder/co-CEO of Real Wealth Network and author of the #1 bestselling book Retire Rich with Rentals, has starred as a guest expert on CNN, CNBC, Fox News, NPR, and more. Today, she joins Matt and Epic Real Estate for another exciting episode of Thought Leader Thursday! Learn Kathy’s real estate market predictions, her definition of real wealth, and the first three things you should do to start your real estate journey to wealth.
What You Will Learn About Kathy Fettke and Real Wealth:
- How Kathy made the transition from stay-at-home mom to Real Wealth Network co-founder
- The emergency situation that drew Kathy into real estate investing
- The advice Robert Kiyosaki gave her that changed her opinion on investing in California
- How the real estate market has changed since the last crash
- Kathy and Matt’s market predictions for the rest of Trump’s presidency
- The worst piece of advice Kathy hears
- Kathy’s definition of real wealth
- The first three things you should do to start your real estate journey to wealth
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Speaker 1: This is Theriault Media.
Kathy Fetkke: Put the things in place that you need. Find out. Talk to a lender. Find out what you can qualify for. So many people are shocked to see that they can qualify for investment property.
Matt Theriault: Hello, I’m Matt Theriault of the Epic Real Estate Investing Show and this is thought leader Thursday. Today I’m joined by co-founder and co-CEO of Real Wealth Network, which specializes in teaching people how to build multi-million dollar real estate portfolios through greater financing and planning.
She is passionate about researching and then sharing the most important information about real estate, the market cycles, and the economy, and she is the author of the number one bestseller, Retire Rich with Rentals. Kathy is a frequent guest expert on such media as CNN, CNBC, Fox News, NPR, and CBS Market Watch. She’s everywhere. Please help me welcome to the show, Kathy Fetkke. Kathy, welcome to Epic Real Estate Investing.
Kathy: Thanks so much for having me.
Matt: Very good. Glad to have you. We have a lot of mutual friends, but this is the first time we’ve ever met I think.
Kathy: Isn’t that weird? I know. I know. I don’t know why we don’t … Maybe we do run into each other at events but just didn’t know it.
Matt: We didn’t know it. Yeah. Oh, you’re that one girl that one time.
Kathy: Oh, that was me.
Matt: Cool. So before we dig into your business, and I want to, what were you doing just prior to getting involved in real estate?
Kathy: Ooh. Good question. I was mostly a stay at home mom. I had been in the news business for a while, so I was still doing some news writing and I had a radio show in San Francisco. I was dabbling in personal coaching, ’cause my husband was doing that, but mainly just doing things that I could do while raising kids at home.
Matt: Got it. Okay. So what was it about real estate that you originally found so attractive?
Kathy: It was definitely an emergency situation. I mean, the first time we bought our house was through an emergency situation with my dad. My dad and my mom, they had owned an apartment in Marin and it turned out it was a part of [inaudible] that didn’t do very well and the apartment went from an A to a C building and the managers just sold it and my dad got a letter in the mail saying “All right, the property is sold.” And he would have had to pay $300000 or $400000 in taxes because of the depreciation right offs he had taken over the years. So he was in a panic. He was just about to retire and suddenly had this big tax bill.
So he wanted to do an exchange. He had about two weeks to do it. Called all the kids, all five kids, and I said, “Are you telling me all you need is to find a property?” How hard is that? So I found a six bedroom house outside of San Francisco that I told him I could turn it into a three-plex or a four-plex, and Rich and I had just gotten married, so we would live in it and we’d rent out the other units and his problem would no longer be his, it would be ours, with the understanding that someday we would inherit this building. He liked that idea, ’cause he didn’t have to pay the tax at that point. That’s how we got into it initially.
Matt: And how long ago was that?
Kathy: Oh my gosh, 20 years ago, 21, because my husband and I just celebrated our 21st anniversary and this was the first house we moved into.
Kathy: But it was in 97, so it was right when real estate took off. We paid about $546000 for the property. It went up about $100000 every year after that. So we were able to refinance, pay my dad back any money he had ever put in the apartment, it all went back in the family trust, and we got to basically take this property. Of course, we couldn’t own it until after he passed away because then we would have taken on the tax liability, but after he passed away, we inherited it and stepped up to market value and those taxes were wiped out. So that’s when I learned about 1031 exchanges and how to do them right.
Matt: Awesome. Sweet. So that was 20 years ago. Congratulations on your anniversary, by the way.
Kathy: Thank you.
Matt: SO that was 20 years ago. How has your view of real estate changed over the years?
Kathy: Oh my gosh. Where do I start? Back then, I was … You know how you’re an expert about anything when you first learn about it?
Kathy: So I thought I knew everything. I thought “Oh boy, we made so much money on this first property. Let’s go do that again.” I didn’t know what I didn’t know. I think that’s what … Talk about anything, someone goes to a Tony Robbins seminar and suddenly they’re a personal growth expert. So it happens everywhere. But for us, I just didn’t understand market cycles and I only understood equity growth. As a California girl, we don’t know cash flow. We only know appreciation. So I just wanted more of that.
But I was lucky enough to have a podcast. It was a radio show at the time in San Francisco, then my husband said “Hey, there’s this new thing called a podcast,” so we were one of the first to be on iTunes. And from there, I was able to get a much wider audience and have really high-level guests on the show, like Robert [Kiasaki] who basically looked at the things we were doing, which were pretty good for the most part. We were buying properties in Texas, but he said California’s in a bubble. This was 2005, 2006. He started to teach me and our listeners on the show that there were these market cycles and here are the things to look for, affordability and the debt issues, and to look at a place like Texas, where there was job growth and population growth and yet prices were way undervalued.
So we listened to him and we sold most of our California property and helped a lot of people sell their California property and exchange it for properties in Dallas. And people who did that did really well.
Matt: Got it.
Kathy: So that was one of the big lessons learned.
Matt: Mm-hmm (affirmative). Okay. So with all that said, we’re always in a cycle, but we’re in a really long cycle right now. What kind of things are you looking at to “predict” when the shift is gonna happen?
Kathy: Well, it’s such a different market from the last time. I mean, for sure, if you just look at numbers, you could say nationally, housing prices are above what they were during the last bubble. So one would think “Oh my gosh, we must be in another bubble.” And those are the kinds of things I’ve been saying and being concerned about. But when you dig deeper into the numbers, first to fall, there’s been inflation in the past 10 years. So that needs to be accounted for with these higher prices. Another very big difference is the people that do own property today own it honestly. They couldn’t do a liar loan. They couldn’t cheat on their application. You had to expose everything. So the people who have loans own it legitimately and those who lied on their loans, probably have already been foreclosed on.
So a lot of people who got into housing over the past 10 years, locked in extremely low-interest rates and over time, have built equity. So they’re not gonna want to walk away from these low payments, locked in for 30 years in homes that they have equity in. So even though prices are higher today, the people who own those homes are legit. So again, it’s a very different world.
But if you look at GDP growth, for example, and say “Wow, we’re in this 10-year expansion, there must be a recession around the corner.” But like you said, if you dig in deeper to the numbers, it is the longest expansion, but it’s the slowest. So in the last 10 years of expansion, we’ve had 19% GDP overall. In the last expansions in the 80s, it was, I believe 39% and in the 90s, it was 43% GDP growth. So at 19% today, it’s just sluggish. It’s not where it has been in the past. So a lot of people are predicting a recession. I am not seeing that right now. I think we’ve got some issues. We’ve got massive national debt and definite problems with our government and our economy overall. But in housing, I’m not seeing the same kind of issues. I think we’re on solid ground.
Matt: I tend to agree. I heard a really interesting perspective the other night at happy hour actually.
Kathy: Best time.
Matt: He had said something. He’s not a real estate guy, but he was speaking just about the economy in general. He brought up the controversial subject of Donald Trump and he said one thing that the economy can depend on is it’s probably not going to collapse during his term. It might fall off a cliff as soon as he gets out, but he’s going to do everything he can to make sure it doesn’t happen while he’s in office. He might bet the farm and the future on his presidency and preserving that legacy. So his idea was “We’ve got a good three years just to crush it. We’ve got three years, then I don’t know what’s gonna happen after that, but go for it.” I was like “That’s an interesting perspective.”
Kathy: Yeah. I would tend to agree that he’ll do everything he can and that everything may be more of what Obama did, which I’m sure that Trump wouldn’t want to admit to, but if we get ourselves in trouble and find out we can’t pay our debt, they’re just gonna do another quantitative easing and pour a little bit more money in the money supply and buy mortgage-backed securities and bonds to keep the interest rates low. It’ll just be more of the same.
Matt: Yep. Yep. And that was kind of the point is it’s just gonna, it’ll go that direction more.
Kathy: Yeah. I agree.
Matt: Also, I know you’re an educator. You’re a consultant, you’re a strategist, you help people plan their wealth and plan their financial futures. You had this podcast for a really long time. You’ve been on the radio. So you’ve talked to a lot of experts over the years. You probably have played to other experts that you haven’t even talked to. What’s one piece of bad advice out there that you see or hear frequently that just drives you nuts?
Kathy: I don’t know if this is bad advice, but I think it’s just stupid. A lot of people say “Oh my gosh, loans are at risk today because people have these 3% down payments with FHA and with Fannie and Freddie and I think that’s silly talk.” If you are able to buy a house and lock in a payment for 30 years on a fixed rate mortgage, which doesn’t exist in any other country, and you’re able to own a home and have a fixed payment for three decades, why would you care whether you put 3% down or 20% down? You have a deal. You have a deal of a lifetime. And as you pay every month, you’re paying down that mortgage and values have been going up. So for people to feel that housing is at risk because of low down payments, I think they’re just wrong. I think it’s an opportunity of a lifetime, putting as little money as you can and hold that money in reserves. I get frustrated, even with my own family who is like “Oh no, we want to put a huge down payment in because we want a low payment.” I was like “No, no, no, no, no. Put a small down payment and your actual mortgage payment won’t be that affected by it because mortgage rates are so … Put a little down and have the rest in reserves.” That’s one of the things I advocate.
Matt: Got it. No, I agree. You want to leverage as much as you can. That’s what makes real estate so magical is that you can do that.
Matt: When you got 4%, 5% loans, historically, that’s extremely low. The opportunity is amazing right now.
Matt: I’m looking for people to come on my show that disagree with me, but I keep walking and talking to really nice people like you.
Kathy: I’m sure we could find something.
Matt: Yeah, let’s disagree on something here. Let’s get really practical. I visited your website and the theme there is all around helping create wealth. So I’ve got a two-part question for you. What is real wealth in the context of your service and what are the first three things that people should do to start their real estate journey to wealth?
Kathy: Perfect. Real wealth, to me, is having the time to live life the way you want. The time and the money, but mostly the time. Time is limited and money is not. That’s really the message I’m trying to tell people is don’t waste your life away. Figure out what makes you happy, how you want to spend your time, and make that your goal and money secondary. I can’t emphasize that enough, because sometimes people don’t … Most people can tell you everything they are upset about or don’t like or the sickness they’re feeling or whatever. They could talk on and on and on about everything that makes them upset, but they can’t think or talk about what they want.
So spend more time figuring out what you want and make that your goal. So that’s real wealth is living the life of your dreams and that doesn’t mean living in a mansion on the beach. I would be just as happy, I’m being totally honest, living in a car on the beach and surfing all day, then living in a mansion and being under debt and working 80 hours a week and so forth. So we have, a lot of people don’t know how to define what real wealth is to them. So that’s the first step.
I had an artist come to me once and say “I just want to be able to do my art. That’s all.” And I said “That’s great. So what would that take.” He said “About $3000 a month. That would pay my bills and I could just work on my art.” I said “Great. That’s a great starting point. $3000 a month. We can do that.” And we were able to move things around and invest in certain assets and sell certain assets so that he had $3000 a month passive income. And he was in heaven. Most people would say that’s not a wealthy person, but I would say that’s a really wealthy person, ’cause he has 100% control of his time and freedom.
So the first step is knowing what you want and being really clear about that, what is real wealth to you, what would make you truly happy. I’m not talking about buying a Ferrari. I’m talking about long-lasting happiness. Then from there, how much would that lifestyle cost? And how can you create that, either through owning a business or passive income properties?
One more example is my assistant. I hired a girl right out of college and she ended up being fantastic and I can’t live without her. She’s just amazing. Which by the time she was 30, she’s like “You know, I’ve been working since I got out of college, and I don’t want to work my whole life. I want to travel. I want to see the world.” I said “Great. Go do that. But still work for me, ’cause I can’t live without you.” So literally, Maggie, my assistant, we call her Maggie the Millennial, she has been traveling for a year and a half now. She lives in a different country every month. She just called me from … She’s in Columbia or something like that. And they just get an Airbnb. They don’t live anywhere, except I’m getting her an investment property. She just bought her first in Cleveland. But they don’t have a home. They put their stuff in storage and they just travel. She’s living her dream. She makes a decent salary. But again, some people would say “Well, she’s not super wealthy,” and I say “Yeah, she is, ’cause she has traveled and lived in like 15 different countries in the last 16 months.”
Matt: That’s awesome. All right. So we were at defining what wealth is to you first, that’s step one.
Matt: Second, I guess, assign a monthly residual income that’s gonna allow you to live that life. Right?
Kathy: Yes. Yeah.
Matt: And then what’s number three?
Kathy: Oh boy. Then execute. Put the things in place that you need. Find out. Talk to a lender. Find out what you can qualify for. So many people are shocked to see that they can qualify for investment property. Maybe they can’t qualify for a starter home in the San Francisco Bay area where our offices are because the starter home might be $1 million and you might need $400000 down to get into that property because FHA loans only go to $620 or whatever they go to now. So you have to put the difference in a down payment. Most people can’t do that.
But then they don’t realize there’s other options. So talk to a lender. Find out what you can qualify for. Get education. Find out how you can get this plan in place because I guarantee you it’s possible. You just maybe don’t know how to do it. So get the education you need and take action.
Matt: Got it. So Kathy, if someone wanted to get in contact with you and explore the possibility of taking action with you, what would be the best way for them to do that?
Kathy: They can go find me on iTunes on The Real Wealth Show, or they can go to Real Wealth Network and membership is free and from there, you can sign up for our weekly webinars. We just did one on taking advantage of the tax benefits that really favor real estate investors. To be honest, it’s not fair, but it’s great for us. It’s not fair to everyone else who’s not an investor. But you can just sign up at realwealthnetwork.com. It’s free. Get an investment counselor to help you with your strategy and just a ton of information that might feel like it’s coming from a firehouse, but you could just, literally like I said, make a plan, watch and learn 15 minutes a day or 30 minutes a day. And it will change your life.
Matt: Awesome. Awesome. Well, Kathy, it was a pleasure. Now that we’ve met, let’s stay in touch.
Kathy: That sounds great.
Matt: Sound good?
Kathy: All right.
Matt: All right. We’ll do it again for sure.
Kathy: Thank you so much.
Matt: Yeah, you bet.
Kathy: Okay. Buh bye.
Matt: Yeah, bye.
All right, that’s here at the Epic Real Estate Investing Show. I’ll see you next week for another episode of Thought Leader Thursday. Take care.