Today on The Impatient Investor podcast Andrew brings on guest Kathy Fettke and she talks about the most important real estate lesson. Enjoy!

“Learn, learn, learn, read as much as you can”

-Kathy Fettke

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Full Transcription:

Andrew Lanoie: I’m so excited for today’s episode. I’ve got my good friend, Kathy Fettke. Kathy’s been a real estate investor for over 20 years and share some incredible insight on how she approaches real estate investing in also investing during COVID. Enjoy.

Andrew Lanoie: Hey, Kathy, welcome to the show and great to see and great to have you on the show.

Kathy Fettke: It’s so great to be here. I feel like we’re almost in the same room in a weird way.

Andrew Lanoie: We’re close in the new zoom world.
Kathy Fettke: It helps, man, without zoom, it would be, without zoom and facetime, it would be a lot harder.

Andrew Lanoie: It would be a lot harder. So before we get into the conversation, maybe just tell the listeners a little bit about your background. We’ve known each other for a while. You’ve been in the education and real estate space for a long time. Maybe just give everyone a quick background on your background.

Kathy Fettke: Sure. I mean, my dream was always to be in broadcasting, so I have a broadcast degree from San Francisco state and worked in the newsrooms, CNN and Fox and ABC 7 for years. That was my passion. But then when I got pregnant and when met Rich and we started our family, I didn’t want to be chasing fires boys, especially these days or murderers. And I just wanted to be home with the kids and Rich’s career was taking off. So it allowed that, he had just written a book called extreme success, which is based on his extreme sports. He competed in the X games. He was in the first X games. And so we took kind of what it takes to overcome fear and apply that to success in his book extreme success. So that was a success and he was traveling all around the country. Everything was great. We just bought our first house, a 4,000 square foot home had two little kids, everything was perfect until it wasn’t and that’s kind of how life is often, right? We’re experiencing that in 2020, for sure. Just when things are going great, sometimes there’s a big surprise and this was our big surprise for sure. He noticed a freckle on the road during his press tour for the book. And he’s a redheaded freckle-faced person, as you know. So how he noticed this one freckle I have no idea, but he went and got it checked after his book tour. And it turned out to be melanoma. Melanoma is very fast-moving skin cancer. He went for more appointments. The doctor looked at him, [02:38 inaudible] some growth on his liver. They thought it metastasized. And at that time they didn’t have some of the things that we have today to cure cancer. So the doctor just basically gave him a life sentence of six months. So my dream life just came crashing down in one day when he gave me that news. But I refused to believe it. There was just way knowing Rich he’s jumped off the golden gate bridge. He is, I mean, with a bungee cord.

Andrew Lanoie: That’s important to know.

Kathy Fettke: He’s a bungee jumper, a skydiver, a surfer, triple black diamond skier. So it was like, no, I’m not… Extreme, everything. So I was like, no way is a freckle going to be the way this guy goes. It’s going to be way more dramatic than that. So I refuse to believe it. And yet it was reality. So we kind of just switched positions. Whereas I look, you stay home. If the doctor’s right and you have six months to live, you stay home, live your life, be with your friends and family, do what you want. Not all anything you want, but enjoy yourself and let me figure out the money piece. But by then I had been out of broadcasting for years. I didn’t know how to make money anymore. As one of the challenges of being a mom is once you get out of the workforce, the world changes very quickly. It’s hard to get back in. So I really didn’t know how I was going to fulfill this promise to take over the money. And we had just bought this huge house that had a $4,000 a month mortgage. And I had no idea how I was going to do that. So I had my radio show still that I’d made no money from, but I was on a big station in San Francisco. And I thought, well, okay, I’m going to use that to find out how other people do this, because I really wanted to be with him too. And with the children and continued to be a stay at home mom and I looked around and thought, I know there’s people that know how to do this to make money while also living the life they want and being able to have a passive income coming in. I’d heard about that. I just didn’t know anything about it. So I was able to use my show to find out and back then there weren’t podcasts. It was really difficult to get that information. So somehow I was able to find people who were living that dream life. And I just interviewed them one after another. And it just completely opened my eyes to a whole new world. And here I am.

Andrew Lanoie: Yeah, it’s incredible. So you were definitely one of the earlier podcasters out there. When did all of this start like real wealth network? When did that start [05:25 inaudible] the podcast roughly and you guys were in Northern California at that time too?

Kathy Fettke: Yeah, we were in the San Francisco Bay area, house was in Lafayette. And during that difficult time we had, there’s kind of a benefit to being over leveraged, so to speak, like we bought too big and that could be a problem, but the good thing was, it was such a big house that I was able to kind of turn it into a fourplex to get us through that difficult time. And that was my entree into passive income basically. Cause it had six bedrooms. And so one of those was an office. So we literally, made all these different entrances and we didn’t have to share our fridge or our space with anyone. We just literally turned it into separate spaces and ended up pretty much living there with very little expense. So we could get through the difficult times. I think they call it house hacking now. We just called it survival. And we got these tenants from Craigslist, which was insane because that’s all there was, but it worked, it worked and we got through the tough time, but that’s how I learned how to be a landlord. And then right about the same time, I was like, how am I going to make money right now with this radio show, I’m learning a lot, but I’m not making any money. So I thought, okay, sponsorships, that’s how radio shows make money. So I just started calling, going down the phone book, calling people to see if they would sponsor. And I finally found a guy in the mortgage business because this was 2003, I think so mortgage business they were making so much money. They were the ones advertising all the time. Finally got a mortgage guy to agree, to sponsor the show. And just by luck, he was a mortgage broker who understood wealth building.

Andrew Lanoie: Very unique by the way.

Kathy Fettke: He became my co-Host and he taught me and we taught our audience the power of leverage, how to use mortgages, to acquire assets. And so that just kind of took off, my audience grew very quickly because I was interviewing people who were getting loans from him who were doing all these things. They were doing flips. They were doing [07:35 inaudible] the Burr method. They were buy and hold and all these things, no one ever taught me. I didn’t know

anything about it. And I’m learning from these 30 year olds who were already retired, how they did it. And I’m like, why is this not common information? So right about then the whole podcast thing came out. ITunes came out with the first podcast, and Rich said, I just found out you can upload your radio show. So we did.

And within a month I was not, I didn’t just have a San Francisco audience. I had a worldwide audience. We had listeners in 27 countries. It just exploded because I was one of the few podcasters. And that’s when we created, we’re like, Oh my gosh, something’s happening here. Rich and I went to lunch and he wrote on a napkin. It seems like this is what we’re doing in it. He wrote real. Because I was like, it’s like real estate. You can really make money off of passive income, build your wealth and this network of people that we’re meeting. And so Rich writes it down. How about this, real wealth network? And that’s how it started on a napkin in a cafe somewhere.

Andrew Lanoie: It’s so cool. I mean, you guys have been doing this now for, it’s got to be close to 20 years. And you’re coming up on your 20th year in real wealth network?

Kathy Fettke: I would say more like 17. So still a long time. We bought the house that we turned into a fourplex in 97. So we’ve been landlords for quite a while, but this whole concept of, Hey, there’s information out there that the public needs to know, I need to know, we need to get through this difficult time, by the way, Rich is fine today and the doctor was wrong and he wear sunblock. So that’s good. And he gets checked regularly and he’s alive, 17 years later. So never let a doctor give you an end date, don’t believe it. He was only supposed to have six months and 17 years later he’s healthier than ever. But of course at the time we didn’t know. So then it just became very apparent that all these groups, these real estate groups that would meet, they were not doing what I, they weren’t teaching what I wanted to learn. These [09:59 inaudible] back then, real estate investment groups, they were teaching. It was basically the run to the back of the room and buy the DVD at the time and learn something that didn’t even apply to, where I lived or it just cause often outdated information that didn’t work and very expensive programs, $10,00 to $20,000 for this bootcamp. And we’re just like, we don’t want to do that. We don’t want to charge anything. We just want to get this information out there. And in the meantime, my sponsor who was a mortgage broker was getting so much business because of the stories we were telling and showing how people were using loans to build wealth that he’s like, you got to get your license, become a

mortgage broker. I can’t handle all this business. So that’s how our financial problems went away is within a year I was one of the busiest mortgage brokers in the San Francisco Bay area and everything changed.

Andrew Lanoie: So you guys talk a lot about, I know some of the focus is on residential real estate. You promote other asset classes and have invested in other asset classes, but maybe especially on the residential side, since you’ve been through a full cycle of subprime crash and now we’re in the middle of this strange worldwide pandemic, maybe how has the real wealth network changed over the past 17 years, especially through subprime and maybe even we can talk about Covid in a little bit, but how has it changed and kind of, have you shifted your focus at all? Or is it some of that stayed the same.

Kathy Fettke: It’s so weird [11:38 inaudible] not. Wow. Sorry if you heard that. It’s so strange because it hasn’t, it hasn’t. And I think it’s because I’m so lucky that back in 2005, when I was just on a fast track to learn, I would have real estate experts come on and I would interview them and I’d read their books. And, one of those experts was our mutual friend, Robert Kiyosaki, who just was kind of starting out. He wasn’t that well known at the time. I mean, he was becoming more well known, but he came on and told me what he was doing with his real estate and 2005, he was selling. And that made no sense because everybody was buying. It’s like, why was he selling and explained it on my podcast that he knew that these loans were going to come due. And it was very much predicted that they would come due, cause it gets on paper, Hey, it’s going to adjust on this date. Many people knew it was going to be adjusting in a big way in 2007. So if you paid attention, you would know what was coming. And he knew, and he said, boy, when these reset, in 2007 it is going to be, he would use words I won’t use on this podcast. But he’s like, I’m getting out of the bubble markets where prices have gone off way past affordability levels. And I’m going to buy in Texas where there’s job growth and population growth and cash flow, which you couldn’t find in California. And that made sense to me. And I was just so lucky to have him on my show to just grasp that, like, how was I going to find cash flow where I lived? It was impossible, but he explained to me, you don’t have to invest where you live. You can go to where the jobs are going and where the people are going. But more importantly, where the cash flow is, where you can buy a property where the income, the rent from that property more than covers the expenses. So that there’s leftover to put in your pocket. It was a very much less risky than in California where you’re feeding your properties, hoping that the value goes up, but it’s costing

you to have them. So you’re really dependent on prices going up or down. And if you can see, prices will probably go down if the market’s flooded with people who can’t pay their mortgages, that’s not going to end well. So we back in 2005, this was the strategy that I learned from Robert Kiyosaki to chase cash flow in markets that have job growth. And that is what we’ve been doing. That’s what we’ve been teaching people ever since. It’s boring. Not for me. I think it’s exciting, but it’s a boring concept of just buying and hold, you buy the property, you sit on it, but if its cash flowing, then that allows a lifestyle that, frees up your time. So we haven’t changed. Of course, I mean, even in 2009, it was like, Oh, okay the market just crashed, but I still want to invest in areas that have that, that have population growth, that have job growth and cash flow. And then through the whole upside, I mean, I could have bought all over California and I probably would have made more money buying in California in 2010 or something.

Andrew Lanoie: Eventually. Yeah.

Kathy Fettke: You know, if you held it, but in the meantime you’d be, it’d be probably [14:53 inaudible] I probably missed out on some deals in California, but not really because the places where we chose to invest, they also appreciate it. So the difference is we got cash flow and appreciation in the markets we invested in like Atlanta and Florida and Indianapolis, I mean, Cleveland, I mean, I was just, I had no idea property I bought in the middle of nowhere in Pennsylvania. I think we paid $40,000. It just for praise for $120,000. So when people say that there’s no appreciation in these markets, there’s not, unless you buy stuff for really cheap, there might be.

Andrew Lanoie: Yeah. And buy and hold, right. You got to be patient.

Kathy Fettke: Buy and hold. Renting for $900 a month at that. So it makes sense now, $120,000 home, that makes $900 in rent. But when you pay $40,000, that’s pretty sweet. So that’s what we were teaching people through the years. And now we sit and we’re looking at our strategy and honestly, it’s not changing. We’ll probably just buy more.

Andrew Lanoie: Right. And a lot of that really has been focused on residential. I mean, can you imagine being an office building owner right now, or a lot of retail is just getting absolutely decimated. I mean, we’re here, what’s the date today? It’s August 21st 2020 and where, I don’t know where we are in Covid, but we’re five months into this already. We’ve seen, we were talking about this a little earlier. So I saw a headline yesterday that said 32% of US households missed their July housing payment, which is astronomical. That’s staggering number. I mean, that’s not mortgages, that’s rents, that’s everything. That’s almost a third of the U S population. And as of a few days ago, it was 57.3 million jobless claims over 22 weeks through this whole thing. And I actually went back and looked at some of the data from previous to this and the jobless claims, I think that like a trailing 12 from like February, 2019 to February 2020 with somewhere in the ballpark of about 200,000, 250,000 a month. And so that went to 57 million in 22 weeks, which is just unbelievable. So what are some of the things that you’re seeing through Covid and how has that impacted your life or your business or anything you want to share about that?

Kathy Fettke: It’s been unbelievable, honestly, it’s like, I mean, you know me, I’ve been offering forecast real estate forecast every January and then midyear housing updates and forecasts. And ever since my interview with Robert Kiyosaki, it occurred to me that the idea that location, location, location is the most important thing. I changed to market timing. It’s like really understanding what’s going on. And so right now, I’m sorry, what was your question again?

Andrew Lanoie: How has Covid changed your business or anything in your personal life?

Kathy Fettke: Yes, so it really hasn’t changed. And if anything, it’s so weird, Andrew things have gotten better. So in March, I think you and I were talking earlier before the recording, how scared I was when this first, when this first hit. Now in January, in my 2020 predictions that I did in January, I actually predicted a black Swan event if you can believe that. I had a picture of a black Swan and my presentation, you can go look it up on YouTube if you don’t believe me. But I said, generally looking at the charts, when the charts do this, something, something comes and pops the bubble, and we never know what that is, but it generally comes right about this time. And so we were already in the coronavirus stage at that. When I gave that presentation, I just didn’t think it was going to be bad. But once

they were showing videos of people in the hallways of hospitals not getting help. I mean, I freaked out because I do have asthma. I didn’t want to come anywhere near this. And I stayed home before anyone even talked about staying home. I was terrified. And then I was terrified for our, we have 50,000 investors at real wealth, who many of them have bought rental properties nationwide. And I thought, Oh my gosh, how are they going to get affected? And it was a really scary time. So we were very quick to react. Right around mid-March we brought all of our property managers that we work with nationwide together on a zoom call. We’ve been a virtual company for 10 years because Rich and I wanted to live real wealth and live where we want. So we kind of left our company. And then pretty soon every, I mean, our employees live all over the country, which is fun, but we’ve been doing zoom calls and go to meetings for 10 years. So it wasn’t anything new to us, but we brought all the property managers that we work with from Florida and Ohio and Alabama and Georgia, Texas got them all together. And we’re like, okay, what are we going to do? How are we going to get through this? How are we going to get our members at real well through this? Many of them rely on that cash flow,

they’re retired and they need it. I am like what are we going to do? And together all 15 of them just brainstormed ways to get through it. And it really came down to how do we take care of the tenants? How do we make it comfortable for them to stay? And everybody gave lots of ideas, like, show them how to get their stimulus money, show them where there are new jobs, show them where there’s charities that can help. Let’s see, what was the big one? Give incentives if they’ll pay in advance. If we had tenants that would pay three months in advance, they got a 10% discount on their rent. I mean, things like that. And we had higher collection rates than we’ve had. It was bizarre, we were waiting April 1st. Oh my gosh. Oh my gosh, better collections. And then even more shocking, we had more applications for rentals than ever before. And I’m talking 15 different cities in different States. So it’s not just, we’re not talking one area. This was across the country same thing. Even in Detroit, where it was getting hit the hardest and still is we had the same experience, more applications, higher rent collections. So I was just absolutely shocked. I can boil it down to one thing. And that is it, when you look back at coronavirus, what you’re going to remember is safer at home, social distancing, safer at home. Well, if you’re the landlord of that home, that’s just elevated our asset class to great importance. When your home is now the school, and it’s now your recreation area, and it’s where you eat. So many people just going out to eat well, you couldn’t do that. So you had to, everything was happening at home, your office. So this home environment became so, so important. And we’re not,

[22:22 inaudible] so that’s in people’s minds. And I think that will be in people’s minds for a long time in the future. This was a deep, deep wound for so many of us, we’re not going to just forget it. So I do believe that the value of a home, has

again elevated. And that explains, that’s the only thing I can understand is how we’re having more success than before. And we have developments, we’re also syndicating and building subdivisions in lots of different places. Sure, it slowed down in March and April cause nobody knew what in the world was happening. But then when people started to sort of emerge and look outside we have had record sales of our single family, new homes.

Andrew Lanoie: It’s incredible. I think that’s just a wonderful message for people who own real estate. I mean, really, if you protect your residents, then you’re going to protect your assets through all of this. I had our mutual friend, Jason Hartman on who has been talking about this exodus from major markets. He has interesting data on everything, but New York City right now, I think is a record breaking vacancy rates there. And they obviously got hit really, really hard in the beginning of this. I would have argued a few years ago that some of these very small, secondary and tertiary markets around the US would have been slowly declining over years. And now I feel like it might even be heading in the other direction. I mean, imagine where you guys were in Northern California, you’re an engineer and you work at Google and you make, you’re high up on the chain. You make a couple hundred thousand dollars a year and you sent home like why, and if it’s indefinite, why on earth would you live in Northern California when you could live anywhere. And so like here in Phoenix right now, if you’ve got a property, that’s anything that’s under a jumble loan. So let’s say a $350,000 house here, which isn’t a terrible home. It’s a pretty nice house here in Phoenix. You’ve got 5, 10, 15 offers on that home. And I’m hearing the same thing in a lot of different markets around the country. And part of that is definitely pushed down by, Chase came out and said, well we’re upping our restrictions on, our parameters on single family loans. And now you need a 700 FICO minimum and you need a 20% minimum down. And I’m not sure if the other big banks followed it, but that definitely puts downward pressure on the rental market. So that’s been really interesting to see all of this.

Kathy Fettke: And that’s the thing is that when it comes to real estate, especially now that I’m in the development business and we’re building subdivisions that take years to get done. So you can’t look at anything short term, it has to be long-term. So these trends were already in play. It’s why I wasn’t investing in New York City. It’s why you weren’t investing in New York City. It’s why neither of us were investing in San Francisco or LA. It didn’t make sense, but the idea of those areas being overpriced, overcrowded over polluted, there is, excuse me, there was a push by governments to move more people into the cities, but this is really reversing now. And that’s what we were doing in our home building business. We were building homes in outside of Bozeman, Montana. Why would we choose
that? Because we were already looking at the long-term demographics that, there’s millions of baby boomers. It was around 65 million, but I’m not sure exactly the number today retiring. 10,000 baby boomers retiring every single day, that was already a demographic. Are they going to go live in New York City or San Francisco? Of course not. They’re going to go live somewhere where low income tax States where it’s affordable and where there’s things to do. And those things to do might be fishing or skiing like in Montana, or it might be in Florida just being near the beaches. But if you can buy a home for $200,000 to $300,000 in an area that’s nice and affordable and low state income taxes, that’s where the demographics they were moving anyway.

Andrew Lanoie: Yeah. It’s 3% loans, right? I mean, we’ve never seen rates this low.

Kathy Fettke: It’s incredible even for investment property, but especially for primary. So that momentum that was already happening, already the massive demographics moving out of those big cities, moving to more affordable locations, moving to cities that are reinvesting in the South that maybe had a bad reputation before, but are coming around, like Cleveland. Cleveland is such a cute city now really good restaurants and things to do. And there’s beautiful tree lined streets with old home homes that are just gorgeous and just need a little renovation. This is not something, I mean, we were thinking, but most people weren’t thinking 10 years ago, Ooh, I want to go to Cleveland. But after the last housing meltdown, so many third tier cities reinvested in themselves because money was cheap and they were able to do it. And those cities have really turned around and it makes an incredible opportunity for investors to buy around it.

Andrew Lanoie: So I just found a quote. I’ve been such a component of affordable housing now for a while. This was a quote that was actually, I think it was maybe December of 19. So not that long ago, but definitely prior to Covid and this is from the New York times, and it says millions of low income Americans are paying 70% or more of their incomes for shelter while rents continue to rise and construction of affordable rental apartments lag far behind the need. And with nearly 9 million households teetering on the verge of homelessness, the country

clearly needs more support for affordable housing not less. So that was from the New York Times. It’s so interesting, right? When it’s, we’re trying to, I’ve been listening to our, another mutual friend, our friend, Kenny, Ken McElroy about what he thinks is going to happen with a lot of this. And he’s been talking about, the courts have been essentially not open for months and months and months, and they were slow to begin with. And now all of, I can’t remember the number that he said, but a huge number of commercial mortgages were expected to fail through all this. And there’s a huge backlog and everything. And talking about kind of the black Swan events. I mean, we would typically have some sort of a real estate correction, what every seven or eight or nine years or something like that. So we’re 12 years in, we’re in this black Swan event, like you had said in predicted earlier. I mean, what are some of the things that you think are going to happen in the next 6 or 12 or 2 years down the line? I mean, what’s some of the things that you’re thinking?

Kathy Fettke: It’s a very good question and it’s been a difficult one. I usually have more clarity, but this has been, everything has been so shocking. We’ve never really lived through a time like this, but we also didn’t live through a housing meltdown of 2008 either. We had to figure it out. But even then, like I said, even then affordable housing was needed as rental property. So as in 2008, 2009, as people lost their homes, they wanted the same home. They just couldn’t own it. They rented it. And that’s what we’re probably going to see, except the big difference this time around is we did not have a surplus of housing. There might’ve been an overbuilding in the high end. And this is something I’ve talked about on my news podcast for years is that, it’s become so expensive to build that builders could only make a profit in the high end. So that’s really all they were building. People like me were building more affordable. We’re able to somehow even produce homes, brand new homes for $140,000 range in certain markets. So it’s still possible to do that, but most builders aren’t willing to make that little of a profit on some, they want to make 140,000 just in profit or whatever. So they were building the more expensive stuff. So as we saw that trend and yet a growing population, this was going to be an issue, especially since the biggest problem when you really study money and you and I have been lucky enough to know people who understand money and we’ve studied it. G.Edward Griffin, I read his book, I don’t know, 15 years ago, and was just blown away by how money works. Most people just don’t realize what’s behind it. But what’s behind it is the Federal Reserve and the central banking system that has to have the ability to print money. And when you print more money, just like anything, if there’s more of it, you generally worth less. When the market was flooded with foreclosures, property values went down. When you flood the market with dollars, the value of that dollar usually goes down and there’s more dollars chasing a limited number of assets. So that very basic understanding of money, most people don’t have a clue about. And unfortunately that’s what stripping wealth away from the masses. And that is what’s creating great wealth for those who do understand it. And that is probably why you and I are both on a mission to help people understand what is happening, what the tsunami really is. It’s not political per se. It doesn’t matter who’s in office. What matters is what the Federal Reserve is doing. That’s it, in my opinion, I mean, of course there’s little differences and so forth, but when the Federal Reserve is printing massive amounts of money, it almost guarantees that asset values will rise. It’s just, that’s why they do it. It’s inflationary. And when you own the asset that’s inflating, well, that’s good for you. If you don’t own the asset that’s inflating, that’s very, very bad. It’s going to get harder and harder to get into it. So when you boil it all down, the affordability issues that we’re seeing, it all comes down to what the fed has been doing. And it’s so sad. It’s so sad to me that more people don’t understand it and are diving in and buying real estate and taking an advantage of that side of the Seesaw versus the other.

Andrew Lanoie: Yeah. That’s so interesting. So kind of more, more on that. What would you, what, what advice would you give to someone who they’re, they’re either a new investor, they’re an existing investor in back to what you were saying earlier that when all of this started, we didn’t really, no one had a playbook for this right. Brand new, it was a black Swan, it was a global crisis. What advice would you have for someone who’s interested in investing during this time? What advice would you give someone?

Kathy Fettke: I think we’re really going to have some incredible opportunities. So I would learn, learn, learn, read as much as you can. I mean [33:55 inaudible] has got great books. I’ve got a book called retire, rich with rentals, of course Kiyosaki’s books. Do you have a book? You have a book, right?

Andrew Lanoie: I have a book coming out. Yep. Coming out.

Kathy Fettke: So read, learn. If you’re too busy, if you’re a busy working person, then work with someone like Andrew or me who can do it for you. But be very careful about who you choose to manage your real estate investments. Make sure

they have an incredible track record. Because I see Ponzi schemes all the time. It’s unbelievable. I feel like I’m constantly reporting on them because people don’t understand the basics. They just hand their money to anybody. Don’t do that. So understand. First and foremost, understand the investment that you’re investing in. If you don’t have time to do it, you can have someone else do it for you, but you still got to understand it. And that’s where people go wrong. But the bottom line being, I do see hard assets continuing to rise in value because the $4 trillion is, that’s what we know of. I think it’s more than that has been printed over the last couple of months. This is unprecedented, unprecedented. I mean, it’s literally a destruction of the US dollar, but the good news is, I guess if there’s good news is all currencies, worldwide are being destroyed at the same time. So in a way it’s sort of just all balances out. But what it does mean is those who have real things, real things, and real estate is a real thing along with gold and silver and even cigarettes and cigars, alcohol. I mean, all of these things are going to go up in value as the dollar, as the currency, the Fiat currency, the currency is basically, if you don’t know what Fiat currency, again, these are things to learn. It’s just a piece of paper that the government tells you is worth something.

That’s all it is. It’s worth nothing except for the government says it’s worth something. So that’s what we trade in. But we know for sure there’s intrinsic value in property. Just look around me. There’s stuff. I mean, this is all worth something. So if the currency completely dissolved into nothing, what would that mean? It would mean those who hold it and have it and save it don’t have anything, but those who have something else do. And I literally mean anything else. Your car will be worth more. So just really understanding the way money works and understanding investments is more important than ever right now. There’s going to be incredible opportunity over the next couple of years. It sure seems like in spite of all the horrible numbers that you just said, all the job losses and the people who haven’t paid their mortgages or their rent, I look at it like it’s more because they were allowed that, there was so many reasons that you didn’t have to and be forgiven for it. And so if someone says, hey, you don’t have to pay your rent for three months. Well, why would you? So we don’t really know yet how it’s going to play out once the stimulus has gone. But it’s my guess that because there is a limited supply of housing in the affordable range, that even if some people can’t pay, there will be others who can and want that. Because it’s in such short supply in the affordable range. And especially if you can get affordable real estate, that’s in great condition. And that’s in desirable areas. Desirable does not necessarily have to mean, like I said, San Francisco or LA I’m talking, again Florida I love because its people go there for vacation. How about to live?

Andrew Lanoie: The other thing that’s so interesting, I mean, no one has a crystal ball, but through all of this residential real estate is, maybe it’s not at an all-time high, but we’re certainly close to the top of the market or around the top of the market. And just like you had said, inventory is really low. What’s interesting as being just big believers in affordable housing and residential real estate, over time your equity is going to kind of ebb and flow as wherever we are in the market cycle. But rents historically don’t really decrease. I mean, there’s certainly some exceptions, but in general, rents are always going to increase even if you lose some equity. So if you’re looking at property and something pencils out, and you’re at a 2.9%, 30 year fixed interest rate and cash flows in, and even there is a real estate crash in four years and you lose 30% of that equity, your rents are never tied to that. So that’s another interesting thing about kind of investing in the different cycles. I mean, ideally everyone would be investing at the bottom of the market, but you can’t time that.

Kathy Fettke: Well, I mean, it’s a couple of really great points that you make that even during the downturn. And that was a huge housing crisis. I mean, it was in our industry. And yet like I said, people who lost houses, they just rented. I know people who didn’t even feel that recession and many of them were real wealth members because we showed them how to sell their bubble overpriced property in California and exchange it for the right price property in the right areas, areas where there was jobs. Like I said, job growth, jobs were moving there. It was very job friendly. And so that was bringing people and people need to live in houses and you want people that have a job. So, all those things come into play, but you could, in 2006, you could sell one property and buy four or five in Texas and quadruple your cash flow. So the people who did that and listened to us and let us help them with that, they did not even feel the recession because the people living in their homes needed a place to live and it was affordable. And it was an area where they weren’t losing their jobs. So today, and it’s interesting because back then, that was, again, that was about 2005, 2006, that we were, we were desperately helping people sell. We knew that the bubble was going to burst and we’re helping people get out and protect themselves in Texas. And the houses, the price points were about 122 to a 150,000 with the discounts we were able to get for a brand new home in this little area called Rockwall, which is really like the houses there like $400,000 or $500,000 now, but we were getting them for 120 to 150.

Andrew Lanoie: What year was that roughly?

Kathy Fettke: 2004 to 2006. So in the meantime people quadruple their cash flow by selling their California property and they tripled their, I mean, I don’t want to say equity. They 10X or 20X their equity, but the properties tripled in value in that time. So it’s just like, it’s incredible. But when you say overpriced, again, it’s the same thing. It depends on the market. There are markets in the U S that are not even close to overprice, not even close. Now where I live in California, yeah way overpriced. But we’re still, this is 15 years later than when we were buying in Texas. We’re buying properties in Florida for the same price. For between 120 and 150, 160. That’s incredible. That’s not overpriced. It’s incredible that we can even find or build homes at that price point. And the amazing thing is that the insurance and believe it or not, if you’re not in a flood zone, the insurance is pretty low in Florida and the property taxes are low and there’s no state income tax. So it’s even better cash flow today than when we were buying 15 years ago.

Andrew Lanoie: When you think about where people, you live in the Midwest somewhere where it’s full seasons and you have really hard winters, or maybe the Northeast and you want to retire somewhere, well, where are you going to move? You’re going to move to certainly not California, probably not anywhere coastal West coast. Or the Oregon’s or Seattle. A lot of the East coast is really expensive. Like the big markets there. So it’s Arizona, its New Mexico. It’s Florida, right? I mean, these are the areas that you think that you’re 65 years old you want to go somewhere where, you have arthritis and you want to be in a nice, mild climate or not snow. So Florida is pretty compelling, I think.

Kathy Fettke: Well, the whole Southeast and South in general, yes.

Andrew Lanoie: Kind of wrap things up. I talk about generational wealth a lot on the show and building a legacy and it means very different things to different people. And maybe just, if you want to talk about what you enrich, what that means to you. You’ve got this huge body of work with the podcast and all of the education that you guys have been doing for decades now. I mean what does that mean to you and maybe even with your family.

Kathy Fettke: It’s hard to, you’re going to make me cry. It’s hard to express what it feels like to have spent 15 years working nonstop, traveling all the time, trying to understand how to hire your first employee and screwing that up and then having to fire your first employee, the terror of that. I mean the process and the road, the road to get here was long and windy and often very difficult, but to finally feel like, I think we got this. I think we got this, we have 20 employees that are amazing. We know how to hire now. We know how to have core values for our company and hire only to those values. We are blown away by the talent within our company and Rich and I just decided that in the next six months, we literally think we’re going to have a self-managed company and we just come and peek in on every now and then, and see how they’re doing. They are that good and then we can just focus on writing and speaking and teaching more and raising this grandbaby that I, not raising them, but getting to visit them and seeing them and helping my daughter as she builds her life. I get to be grandma and I get to garden. It’s so weird. I haven’t had free time in so long cause we’ve been going, but all I can say is you can get there. You can get there 15, well, actually in 2009, when times were tough, I think we had about 200 bucks in our business account. So, we’ve had our ups, we’ve had our downs and we are just, all I can say is keep going, read, grow. Don’t waste your time. I see so many people wasting their time. We don’t even know how to waste time. We’re constantly reading and growing and learning and like, how do you build business better? How do you invest better? And so don’t waste your time because let me tell you, it’s worth it to get to a point where your investments are paying you so that you can do what you want. And even when, I mean, one more thing, like we tried the Airbnb thing, because we built a little guest house at our house and that has been so successful. It’s booked every night and now it’s almost like we live for free in our house. That is the value of building assets. So it’s worth it to be able to work really hard for a period of time so that you can enjoy the fruits of that labor later.

Andrew Lanoie: That’s so great. And obviously, I mean, time goes by so fast. You blink and it’s like, like right now I feel like, every week feels like a day sometimes. It’s just time goes by so quick. So I think the education part of it is just, we’re both pretty firm believers in that. And most of the folks that we are in the circles with, I mean, they’re all just read, read, read, and learn, and learn and learn and ask good questions and get around smarter people. And so it’s been so interesting.

Kathy Fettke: Don’t think for a second that I’ve had a completely charmed life. I mean, it’s been hard, we’ve made poor investments, we’ve trusted the wrong people. We’ve lost everything twice, and you just get back up and you go. And so every single up and every single down is part of the process for learning how to get it. It’s like anything. Like the first time you learned how to ski, you’re going to fall a lot. The first time you learn how to walk, you’re going to fall a lot. So you probably fall a lot in business and in real estate, but just get back up and keep going, but you’ll fall less the more you study along the way.

Andrew Lanoie: Yeah. Well, it’s even having the out of the box ideas. Like I have a feeling that when you guys were talking about your new place that you’re in now and whatever the guest house that was there, I’m going to guess that initially wasn’t going to be an Airbnb, but maybe you thought of that somewhere along the way. And now look, it’s probably paying for most of your expenses. I mean that’s pretty awesome.

Kathy Fettke: Yeah. Well, we thought about it. We kind of dove into this taking a big risk and we were thinking we would actually Airbnb the main house and live in the guest house. And then we had to move in kind of before the house was complete. So we lived in it during construction and unfortunately not unfortunately, but we got real comfortable in a big house. Like I’m not leaving now, I am used to it. And so we ended up with the whole, that’s another bonus from this whole COVID situation is that people can’t fly or they don’t want to fly. So they’re just going to Airbnbs that are within a two, three-hour driving distance. So we’ve been shocked at what a positive thing that’s been for us.

Andrew Lanoie: That’s so great. So for the listeners out there, if you have not followed Kathy on the podcast in real wealth network, we’ll list everything in the show notes and such a awesome time to talk with you, Kathy, and good to catch up. Appreciate you having you on the show.

Kathy Fettke: Thanks so much for having me.


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S P E A K E R | I N V E S T O R | P O D C A S T E R

Andrew is a founder and Managing Member of Four Peaks Capital Partners. He oversees the company’s acquisitions, asset management, and investor relations. He also co-directs the overall investment strategy along with Mike Ayala. He brings to the company over 10 years of experience in general management and new business development

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