Title: “Real Wealth Network: Building a Community of Real Estate Investors with Kathy Fettke”
Episode: 220
“Understand what you are trying to achieve and stick with it because it’s easy to get distracted.”
In this episode of Profit First for REI podcast, we have Kathy Fettke. She is the CEO and Co-Founder of Real Wealth Network and the host of The Real Wealth Show.
Kathy is a real estate investor, licensed Realtor, and a certified coach who will give you great information into the wholesale flip-side and the passive side. She also talks about her journey into the passive side of investing. Enjoy the show!
Key Takeaways:
[00:52] Introducing Kathy Fettke
[02:20] Start of Kathy’s real estate investing journey
[03:54] Her first property
[06:37] Understanding the power of leverage and where to use that leverage
[10:11] Over leveraged
[13:06] What goes on today with Real Wealth?
[15:16] Kathy’s advice for first-time real estate investors
[21:13] Learn and understand investment
[24:04] Connect with Kathy Fettke
Quotes:
[02:55] “Saving the 10% in investment and 10% in emergency savings, you could blow that quickly in an emergency. I wanted to be with my family and have a passive income where money still comes in and you are not working.”
[08:56] “It’s hard to fail when you know your stuff. It is easy to fail when you don’t because that’s when you trust people whom you think, do know.”
[15:27] “Where you start is figuring out what you need.”
Connect with Kathy:
Website: https://realwealth.com/
Tired of living deal to deal?
If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
Transcript:
Speaker 1 (00:00):
Understand what it is you’re trying to achieve and stick with it. Stick with it, because it’s really easy to get distracted and to say, oh, so-and-so’s doing this, or, oh, they’re buying notes and those guys are doing tax liens and that guy over there is doing foreclosures and you just like want to do it all and that’s where you get in trouble. So come up with your strategy, get really good at it before you look at anything else. Yeah,
Speaker 2 (00:25):
If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for REI podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
Speaker 3 (00:52):
Today we have Kathy Feki of the real wealth.com and Real Wealth Network. I’m super excited to have her on today. She gives great information if you’re looking to go from the wholesale flip side to the passive side, she’s a great resource, talks about her journey, but then talks about the passive side of investing. So many people I run across want to jump into the rentals, multifamily, syndications, all that. She gives some great advice. Listen to this episode, become more knowledgeable and get in her network as well too. She can help you as well. Thank you for being a listener and enjoy the episode. Hey, it’s David Richter here again of the Profit First REI podcast here with Kathy Feki of the Real Wealth Network. Super excited because she has made a huge impact, lots of investors’ lives, and excited to have her on the show. So Kathy, thanks for being a guest today on the show.
Speaker 1 (01:39):
Thank you so much. Happy to be here.
Speaker 3 (01:42):
Okay, so let’s just dive right into it. What even made you want to start Real Wealth Network and make the impact that you’ve made today?
Speaker 1 (01:50):
I’d like to say that I had an idea of what we were going to create, but I really didn’t at the time. It was a desperate attempt to understand how some people created this thing called passive income and were creating wealth, and I wanted to know how they did it. I didn’t know anyone personally who was independently wealthy.
Speaker 3 (02:10):
Okay, so that’s how you started, but then how did it transform into what you, I mean, did you start buying properties? Did you go through the ups and downs? Tell me a little bit about the journey. Yeah,
Speaker 1 (02:20):
It really started with a radio show that I had in San Francisco when my husband was told he had six months to live when they discovered he had melanoma. We had two young kids. I was a stay-at-Home mom. I had been working in the news business but hadn’t for years. So that was terrifying. Not to mention the thought of losing my husband, but also not knowing how to support my family. Rich is healthy and fine today, so that’s the good news. But what this moment in time did for me is had me really realize I need to have a backup plan because the saving, the 10% an investment and 10 in emergency savings, you can blow through that really quickly in an emergency. And I wanted to be with my family and be able to have this thing called passive income where money’s still coming in and you’re not working. I just thought that was incredible. And how do you do that? So I just shifted my entire radio show. It was just a Saturday show that I kept while I was a stay at home mom and shift to that concept of how do you do that? And I started interviewing people and that’s really how it started. The listenership of the show. They wanted more information too. They wanted the same thing I wanted. So together we learned, this was before podcast, before blogs. It was hard to get the information.
Speaker 3 (03:37):
Okay, so that’s what started, it sounds like that’s what started your educational journey too, down that road and interviewing people. And then did you start buying properties then? Was there one magic episode where you’re like, okay, I got to go do this, or I don’t know, how did you actually get started with the first property?
Speaker 1 (03:54):
Well, when we need money, we need things. You get desperate, you make things happen. And we were in that position, so I thought, well, how do I make money when I’m, I still want to be home. And the first thing that came to my mind was sponsorships because I did have the show and I hadn’t really worked on getting sponsorships. So at the time that’s when mortgage brokers were getting paid lots and lots of money. This is back in 2004. So I called all the mortgage brokers I could find and finally got one. And the only way I was able to get that sponsor to pay what I was asking was to offer kind of a co-host position. And he said yes. But I came home from that going, oh no, rich, I’ve just sold out. Now I have a mortgage show, I’m going to lose my audience.
(04:35):
And Rich said, well, why don’t you just find out what they’re doing with those loans? And that’s kind of how it started where I started to really understand what kinds of things you can do with leverage. I had no idea you could just go to a bank and get a loan because you can’t on most things, but with real estate you can because there’s an asset tied behind that loan. If you don’t pay, they take the house. So basically this method worked and our listeners were really fascinated as well as to what my sponsor’s clients were doing with those loans. So our phones rang off the hook. My sponsor said, this is far more successful than I expected, so why don’t you get your mortgage license and help me? And sure enough, our money issues were gone because back then it was pretty easy to do loans and you could make a lot of money.
(05:22):
My first loan was a million dollar refinance, and at one point, which was pretty typical, actually low, a lot of other mortgage brokers charged three points. I charged one and that was $10,000 for that one loan. So we didn’t have issues with making money after that. Great news that Rich was fine, but I started to see that these loans made no sense and that it was going to blow up because there was no qualification needed at all, no backup verification, nothing. And it just made no sense to me. So I was lucky enough to interview people like Robert Kiyosaki on the show where I would say this, does this make sense? And he’d say, no, it doesn’t. It’s going to blow up probably in 2007. And the way that I’m protecting myself is selling all my assets in these markets where prices have gone up so quickly. And he said, I’m exchanging and doing the 10 31 exchange and buying in Texas because the numbers still make sense. There’s job growth, there’s population growth, but it’s still affordable. So that just made sense. So an answer to your question, it was really that interview with Robert Kiyosaki. It was like number one, understanding the power of leverage and number two, where to use that leverage.
Speaker 3 (06:28):
Okay. So then did you take his advice? How did you fa the 2000 7, 8 9, that downturn of the market?
Speaker 1 (06:37):
Yeah, so you could technically say that we bought at the peak because it was 2004, 2005, even 2006 when we were buying in Texas. And those properties in Texas did fine. They stayed rented, they didn’t go down in value. And then by 2013 it just took off and prices went crazy in Texas. However, I didn’t stick to that plan. And this is something I have learned and I teach now is stay in your lane. Don’t do something that is new to you or new to someone else without really researching it. So if I had just stuck with what I had learned from Kiyosaki, which I could see, we would’ve really gotten through that recession with no problem. But instead, I kept a house, a couple of houses in California because I just thought, well, California always does well. And then bought three houses in Boise where there wasn’t really a lot of job diversification at the time.
(07:34):
There were two major employers and only one by the time the recession hit, we bought new construction in Tennessee. Again, all good markets today, but back then the foundation wasn’t, there wasn’t the kind of job growth in population growth happening in Texas. The problem in Tennessee is that we got construction loans that ballooned, and by 2009 balloon means basically you got to pay it. Once the house is built, you’ve got to find a way to pay off that loan, and usually that means you get another loan. Well, by 2009 you couldn’t, banks had failed, but also we were limited to 10 loans, whereas before that it was unlimited and we had more than 10 homes. So it was like we had to give those properties back to the bank. We didn’t have a way to pay that balloon payment.
Speaker 3 (08:21):
Okay. So would you say that’s one of the biggest lessons you’ve learned along the way? Stay in your lane, really dig into what you’re good at. I guess, is there any other ones that you’ve learned that on your real estate journey that are either bigger than that or hold water to that one?
Speaker 1 (08:37):
I have learned far too many lessons. I’m too trusting. And so it really does come back to what that main one is. Study, learn, know your stuff, then you just can’t really get ripped off. It’s hard to fail when you know your stuff. So it is easy to fail when you don’t because that’s when you trust people who you think do know. So that’s kind of the issue that I had. Some of the deals that I did later is again, venturing out into multifamily before really understanding it, venturing into development before really understanding it. And that’s so typical. Even a family member of mine during that time bought the house next door thinking, oh, we’ll just flip it. And turns out there’s a lot more to it than just like, oh, I’ll fix it up and sell it for a profit. So a lot of us do that, and that’s kind of the entrepreneurial American spirit is just jump in and figure it out. But I got to tell you, it’ll be a lot easier to not dive in the deep end to learn how to swim first.
Speaker 3 (09:35):
Yeah, yeah, no kidding. So looks like early on you learned the make money scale because on this podcast, profit First, making sure that you actually have a profit at the end of the day and you’re keeping money. Sounds like you learned how to make it up upfront through the mortgage industry and then you started buying the houses. You started on your passive income journey. Did you ever learn throughout that journey the keep money skill of like, okay, I’m going to work my butt off to get the deals in the door, but I need to make sure that the money’s actually being put to good use and I’m keeping some of it as well too. Did you ever have that along your journey?
Speaker 1 (10:12):
Well, and that again was what made 2009 very difficult is we over leveraged. So back then you could get, I don’t know if you know this or you might, but you could get unlimited investor loans, no money down, no verification, nothing. You just fill out some paperwork and you could get a loan. So it was pretty easy to over-leverage. Back then with the Texas properties, it didn’t matter, even if no money down, a hundred percent financing, no verification, those properties still did great. The fundamentals were still there, it worked. It’s like I said, with these other loans, these construction loans that ballooned, you better have a backup plan. So I’m very cautious about short-term loans, adjustable loans, that’s another thing that happened a lot back then is sure you could get a loan, but it would adjust to a bigger payment and most people were just qualifying and expecting that lower payment forever and all of a sudden when it adjusted, that’s what we’re seeing today in commercial real estate. So I very much stayed out of the mess that’s happening today in commercial real estate. I’d already been through that. I already know what it’s like to have an adjustable rate that shifts on you or a loan that’s due that you can’t pay, which a lot of people are experiencing today.
Speaker 3 (11:21):
So then when did Real Wealth Network really take off? When did this become more of a movement where you got a lot of people involved versus just the Saturday radio show?
Speaker 1 (11:31):
Oh, I love that you called a movement. Really what it felt like back then when I just started interviewing people, I felt like I was just getting this Secrets of the Wealthy that nobody knew about because it wasn’t out there. You didn’t have access to information like we do today. So I was getting these secrets and sharing these secrets with the audience, and it did become a movement and it grew really quickly. And because of that, I started to get invited to speak at local real estate investment groups or reas as they call them. And I would sit in the audience, they’d invite me to come speak or to be the mc or just kind show up, and I would sit in these different groups and just be like, oh my gosh, what they’re telling is incorrect and they’re misleading people and they’re charging a ton of money for it.
(12:14):
And I just couldn’t believe what I was seeing and I thought, there’s no way I can associate with these groups anymore. I don’t want to, even if it’s good exposure for my show and for what I didn’t want to do it. I thought, okay, well how about we just put them out of business, start our own. That’s honest. That’s going to tell people the truth. It’s real, the secrets of building wealth. And that’s when Rich and I were like, oh, real wealth. Yeah, we’ll call it that. Real wealth. We didn’t charge any money. There was never anything for sale. It was just come and learn, expand. Of course, I was a mortgage broker at the time, so it helped my mortgage business, but I just wanted people to have the information that would change their lives and was changing my life,
Speaker 3 (12:56):
And that’s what it grew into. Okay. So today, what do you have going, do you do webinars, live shows? Just if no one’s ever heard of you, how would you explain what goes on today with Real Wealth?
Speaker 1 (13:07):
Yeah. Today we have the same model. We give free education. There’s no fee to sign up and be a member. We give a lot of data information, try to help people understand where we are in the market, what’s going on with the economy, what’s a good opportunity today to help people understand investing so they know how to make decisions. If somebody says, is it a good time to invest or Where should I invest? You’re not ready, you should know. And so we want to provide that information so you have enough knowledge that you don’t have to ask those questions. You just know what your next move is going to be. And so tons of free resources, free webinars, over 500 on our website. We do fresh ones every Thursday at noon Pacific. We do tours to different areas. This is not altruistic. We are real estate brokers.
(13:53):
So if somebody buys a property, we do get a commission for that or a referral fee. But we want to make sure that we’re only referring our members to people that we have a long time relationship with. We have property teams and property management companies all across the country in the fastest growing markets that have been recommended by our over 70,000 members. It’s kind of like a Yelp for real estate where our members will tell us, Hey, this property manager is great or this one isn’t. And if we hear negative reviews, instead of just cutting them out of the network, we set up a mastermind in training to find out what’s your weak link? How can this property manager in Atlanta help you in Dallas, Texas be better? So we do a monthly training with them. That’s also free to them to just consistently improve the services that they offer. We don’t own those companies, but we just want them to have really high standards. If they’re not able to get there, we do take them off the referral list until they’ve improved their systems.
Speaker 3 (14:52):
Okay, that’s very neat. So you’ve created this network and you’ve created a great education platform as well too that just trying to help people it sounds like can do what they need to do in the real estate space. So then what would you say to someone who’s newer in the real estate space? I don’t know either where to start or a bigger lesson or something like that if they’re looking to get into the real estate game?
Speaker 1 (15:16):
Well, I wrote a book called Retire Rich with Rentals. To answer that question, that question would come up a lot. And the first chapter of my book is that it’s where do you start? And where you start is figuring out what you need. If you and I might have different needs, different starting places, it’s kind of like if we both want to get to Phoenix and let’s say Phoenix has just got a big bundle of gold and we want to get to Phoenix, but you’re in Atlanta and I’m in California, it’s different. We’re going to have different paths to get there. Same goal, different starting points. So that’s what you have to look at. And I know you teach this, it’s like where are you in your life journey and what’s going to be the best strategy if you have a really high paying job?
(16:02):
Let’s say you’re a doctor, a dentist, and in my case, a lot of tech workers around where I live and people in the entertainment industry, they make good money, but they have no free time. So the ultimate goal is they want more free time and they want a place to put their money that they know that over time when they don’t want to work anymore, that that money has created enough wealth that they can quit working. But then there’s other people who have tons of time, they have all the time and no money. So you’re going to have a different strategy if you have a lot of money and no time, you’re going to be looking for passive investments or you should be. I started to get invited to speak at these doctors and doctor’s events this past year, and it was all these doctors looking to syndicate multifamily.
(16:49):
I’m like, what are you doing? You can’t be a syndicator. A syndicator means that you run a project and you’re taking other people’s money. If you’re a doctor, you should be a doctor. You don’t have time to do this on the side. So I was really concerned about some of that, but if you don’t want to be a doctor, well that’s fine. Quit and do something else. But if you’ve got a good job and you’ve got good money, you probably are better off investing with someone who does have time and you can invest your money with them, make sure they have lots of experience in a track record and great integrity and values and so forth. Again, if you have lots of time, no job and no money, you’re going to have to scramble like I did. I was like, oh, when we blew through our savings and our investment funds during a time of challenge, you got to find out how to make some money, and then you’re not in a position to invest.
(17:41):
That’s important to understand. Investing comes later. You got to make money now. So the way that I knew how to do that was sponsorships. So you just have to figure out what’s the best way to make money. And that might be if your job of choice is to be in real estate, maybe you’ll be an active real estate investor, not passive. So active real estate investments would include flipping, flipping houses, wholesaling, houses, subject to these are the types of things that become a job for you, but they create income, but it’s not investing. It’s not investing. So really understanding the difference is important.
Speaker 3 (18:16):
Would you give the same advice to someone who’s in real estate, but they’re wholesaling or flipping or doing more of the active side? It’s like they already have a taste for real estate, but should they be the flipper and hire out the passive invested side, or should they go and dive into it themselves? What’s your opinion on someone that’s already kind of in that
Speaker 1 (18:35):
Realm? Oh my gosh, that’s such a great question. So Jamil Dany, who is, oh gosh, he’s one of the biggest wholesalers in country. Yeah, I was a co-host with him on the market, and he is great at making money in real estate as a job. What he was not great at is investing in real estate and had lost money over and over again. Lost a ton of money in 2008. So on the show, he said, Hey, you guys, I have the chance to wholesale this apartment building and make a million dollar wholesale fee, or I can keep it. I’m like, Jamil, wholesale it and take that million dollars and invest with somebody who knows how to manage an apartment. You don’t know how. And he goes, yeah, but I’m getting a good deal. I think I’m just going to do it while he ended up losing a million.
(19:26):
So it’s just like, yeah, an answer to your question, it’s the same thing. Just because real estate doesn’t mean you know it or understand it, what he knows is wholesaling. I don’t know how to wholesale. If I tried to wholesale, I would not do well. Maybe on the first one maybe I would don’t know, but I’d have to study it really carefully. But there’s so many different ways to make money in real estate. First is understanding, is it active? Is it passive? Okay. You got to know the difference between those. And then in this case of active, where he’s wholesaling, he didn’t know really how to value a building for hold and then what the asset management process is of that. And I said, if you’re going to do this, please get a partner. Who knows? Anyway, I can only talk about it here because he talked about it on the show and it’s already public knowledge.
(20:14):
And he’ll admit that he made his mistake there, which many of us have. Like I said, I syndicated an apartment building without having done it on my own first. And even though my partner was experienced, it turns out he was kind of a shyster and it was really challenging. I had to boot him out. It got legal involved, he lied and a bunch of things, and that’s no fun. So like I said, you can jump in the deep end, you’ll probably survive. You might not, but your life will be a lot easier if you just started in the shallow end and learn how to swim.
Speaker 3 (20:47):
Yeah, I hear that a lot from people that are in the real estate space. They just think, oh, I’m doing wholesale and I’m just going to buy some flips or rentals on the side, and it’s like, it’s a whole nother ball game there of being able to jump into that. I like that answer. I feel like this whole theme of this episode is staying in your lane, whatever you’re doing. So I think
Speaker 1 (21:09):
That’s Well, and I will urge everyone to learn and understand investment because I know too many flippers who have gotten closer to my age, and I’m older. I’ve been doing this for 30 years, so you’ll get old someday. Trust me. It happens whether you like it or not. And you don’t want to be that person who says, darn it, I wish I’d kept some of these properties. Now what do you want to flip houses till you’re 90? So you’ve got to really determine, yeah, you can make a lot of money flipping, wholesaling, all that, but then what are you doing with that money? And there are many ways to invest it. Just make sure you do at least 10% follow the rules. It’s a job versus investing, and you should be doing both.
Speaker 3 (21:56):
Well, that’s good. That’s good stuff. And that’s where it’s like you’ve created this whole community of this real wealth network to be able to, well, it sounds like you’ve got a ton of resources and knowledge. If they wanted to learn and go down the rabbit hole of the passive side, really what you focus on is the passive side.
Speaker 1 (22:14):
And only because I had to listen if I lived in anywhere but where I live, I live in California, I would be active. I think it would be fun. But Rich and I, we tried enough times here buying million Fixers, and it’s like it’s hard. It’s hard in a high priced market. So once I learned again from Kiyosaki that Dallas had the most important things to look for, job growth, population growth and affordability, it was like, okay, that makes sense. California has the job growth and population growth, not so much right now, but that affordability piece, that third piece of it wasn’t there. So to be able to fly to Dallas and at that time by $140,000 brand new homes in a class, neighborhoods that rented for more than 1% of that purchase price, so $140,000 purchase, they rent for 1500. It was like no brainer, just made sense and brand new.
(23:13):
So I could own it from afar, not worry too much about it. So it was really out of a necessity. And then when I started talking about that on the Real Wealth Show, our phones blew up. Again, not just people who wanted mortgages, but people who wanted that because they were used to having what Rich and I had a million dollar house that rents for 3000 a month or 2000 a month, they could have a million invested. They could 10 31 that and buy five or six properties. So more diversification in a landlord friendly area with growth and at that time, four x or five x their income. Yeah,
Speaker 3 (23:50):
Wow. That’s the power of it, and that’s the power of that knowledge, knowing that’s even out there and then having someone to guide you down that path. Speaking of guiding, how do they get in touch with you? This has been an awesome episode. So how do they become part of that network, that community?
Speaker 1 (24:04):
Thank you. It’s really easy. You just go to real wealth.com, real wealth.com. You sign up for free and you can have a discussion with one of our investment counselors. That’s also free. Again, we make our money if you buy and it comes from the broker, it’s broker, the broker feeds not marked up. I know other groups like this who mark up the properties by 10 grand. I won’t mention names. We don’t do that. We just share this little piece of the 3% commission, but we do not volume that everybody’s happy. We could pay our employees. So you can have that conversation to help understand what it is you’re looking for, what areas. There’s kind of linear markets where there are more cashflow, less growth, and then there’s growth markets where there’s more chance of appreciation, but less cashflow right now. And depending on where you are in life, one of those markets can be better for you or a mix of both. So we’ll help you go through that. So real wealth.com, you can hear the Real Wealth Show podcast, and then of course, I’m on BiggerPockets on the market podcast.
Speaker 3 (25:05):
Awesome. So real wealth.com, that’s where you can get a part of that community and then sounds like have a consultation call too with investment advisors of like, okay, here’s the different opportunities there. If they want to go down that road too, which is great. It’s great to have education, but it’s also great to take action too once you have that knowledge. So I like that you give them an outlet for that as well too. So this has been really awesome. Is there anything else you want to leave them with before we wrap up?
Speaker 1 (25:30):
Well, I got the chance to interview you, and I think what you’re doing is so great too. Just helping people really understand their strategy and how to scale properly, how to really understand what is the outcome. So I can’t emphasize that enough. Understand what it is you’re trying to achieve and stick with it. Stick with it, because it’s really easy to get distracted and to say, oh, so-and-so’s doing this, or, oh, they’re buying notes and those guys are doing tax liens and that guy over there is doing foreclosures, and you just want to do it all, and that’s where you get in trouble. So come up with your strategy, get really good at it before you look at anything else.
Speaker 3 (26:06):
Yeah, that’s really good. If you’re listening to this and you need someone like that in your life to make sure they’re pointing you in the right direction from the financial standpoint, you could head over to simple cfo.com, grab one of our fractional CFOs because if you like making money, you need to keep it to need someone there that understands that side, that can help you, especially if you’re thinking about jumping from wholesaling, flipping to rentals. It’s like, okay, what are the numbers? Before you get into that, I don’t want you losing a million dollars Jamil.
Speaker 1 (26:31):
It’s like making
Speaker 3 (26:32):
Sure you know what’s going on before you jump into it. Scaling profitably, like she said. This is great stuff. Thank you, Kathy for being a great guest today on the show. And remember, if you are listening to this Make Profit a Habit in your business. And Kathy, thank you once again.
Speaker 2 (26:49):
Thank you. This episode of The Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on The Profit First for REI podcast with David Richter.
