RPF0363-Katthy_Fettke_Interview
00:00:00.000 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,
00:00:05.560 | skills, insight, and encouragement you need to live a rich and meaningful life now while
00:00:10.840 | building a plan for financial freedom in ten years or less.
00:00:14.360 | Today my guest is Kathy Fetke from TheRealWealthNetwork.com.
00:00:17.840 | Kathy is an expert in real estate investing.
00:00:19.960 | Kathy, welcome to Radical Personal Finance.
00:00:22.280 | Thank you.
00:00:23.280 | Great to be here.
00:00:24.280 | Let's start off with your story.
00:00:26.440 | You have a unique and interesting story.
00:00:28.840 | How did you stumble across the world of real estate investing?
00:00:32.840 | Well, it was a bit by accident both times, really.
00:00:38.640 | The first time was when my father was panicking because he had invested in an apartment building,
00:00:45.800 | but he kind of not paid attention to it.
00:00:47.760 | It was being managed by somebody else.
00:00:49.400 | It was a group of investors.
00:00:52.400 | And they didn't manage it well.
00:00:53.400 | They didn't take care of it.
00:00:55.040 | And then they sold it because I think there were so many vacancies and vandalism and just
00:01:00.160 | the whole area went downhill.
00:01:02.440 | And so having had that apartment for many, many years and depreciating it, he would have
00:01:09.560 | owed hundreds of thousands of dollars in taxes, which he didn't have because he was literally
00:01:14.840 | just about to retire.
00:01:16.760 | And all of that money was his retirement and he would have had to pay it to taxes.
00:01:20.720 | So we have this wonderful thing called a 1031 exchange where if you sell one asset, you
00:01:26.440 | can exchange it into another.
00:01:28.920 | But you have to do it in 45 days.
00:01:30.640 | Now these managers were not even respectful enough to give my father a phone call.
00:01:35.320 | All he received was a letter.
00:01:37.000 | By the time he received it, he had about two weeks left to find that replacement property.
00:01:41.840 | So we jumped in.
00:01:43.200 | I had just literally been married.
00:01:45.520 | We were renting and my husband and I said, "Hey, is the biggest stress here that you
00:01:49.760 | just need to find a new property?"
00:01:53.400 | My dad's in retirement, so he didn't want to be a landlord or anything.
00:01:56.520 | So we said, "Listen, we'll find the property.
00:01:58.800 | We'll live in it.
00:01:59.800 | We'll be your tenants.
00:02:00.800 | We'll take care of everything.
00:02:01.800 | Don't worry."
00:02:02.800 | And we did.
00:02:03.800 | That's how we got into our first property.
00:02:04.800 | Dave: Did you have any experience or goal of doing this or you just stumbled across it
00:02:09.040 | and realized that you had an opportunity?
00:02:11.520 | Suzanne: It was really more a labor of love.
00:02:14.400 | He was so stressed out and really becoming ill.
00:02:19.400 | Some people have different skills.
00:02:21.960 | For me, at that age in my life, there was nothing stressful to me about that.
00:02:27.440 | It was, "Tell me what you're looking for.
00:02:30.040 | I'll find it."
00:02:31.040 | I literally found it.
00:02:33.880 | He needed it to be a certain price range because when you exchange, of course, it has to be
00:02:37.160 | the same price or more of what was sold.
00:02:40.560 | And so it had to be around $500,000, which in the San Francisco Bay Area is pretty easy
00:02:45.180 | to do.
00:02:46.520 | But we wanted it to be a place we would live in.
00:02:48.240 | So we just found this.
00:02:50.560 | I saw a sign on the road and I turned in and there it was.
00:02:55.920 | That's it.
00:02:56.920 | It was a big 4,000 square foot, six bedroom home.
00:03:02.560 | It was beautiful, my dream home.
00:03:04.680 | It was so large.
00:03:06.120 | It had an in-law unit and a separate area for an office.
00:03:12.240 | I said, "Oh my gosh.
00:03:13.720 | I can just turn this into a fourplex really easily.
00:03:17.720 | We can live in the main part of the house and rent the rest and take care of this situation
00:03:22.720 | for my dad."
00:03:23.720 | It just ended up being a miracle for us because we were able to refinance it later.
00:03:29.240 | The timing, without us knowing, was perfect.
00:03:31.560 | It was '97, so the bottom of the last downturn.
00:03:35.920 | So we were able to buy it at the bottom.
00:03:37.760 | Every single year after that, it went up $100,000 in value.
00:03:42.320 | We were able to refinance it, pay my dad anything back that he'd ever put into the property
00:03:46.760 | prior to that.
00:03:47.840 | So it boosted his retirement further and he never had to pay those taxes.
00:03:52.160 | The way it works here is that once he passed away, that property stepped up to market value.
00:04:00.260 | We inherited it and those taxes were wiped out.
00:04:04.520 | It was just a huge win-win.
00:04:06.360 | That's how we got our start.
00:04:07.360 | Dave: Fortuitous timing is always helpful when putting together a real estate deal,
00:04:11.440 | isn't it?
00:04:12.440 | Julie: Yes, and jumping in and just doing it too.
00:04:15.760 | Not stupidly, but we saw this was a beautiful home.
00:04:20.840 | Where we went well, I think, on this is that we did buy in a really nice neighborhood with
00:04:26.120 | really good schools and at the bottom of the market.
00:04:30.520 | It was just, literally, because it was right before real estate went up for 10 years.
00:04:37.240 | By 2008, about 10 years later, or 2007, that house was worth $1.8 million.
00:04:42.360 | We had paid $500.
00:04:43.360 | Then, of course, the next year it was worth about $800 again.
00:04:49.120 | Dave: So you said both times you got into real estate.
00:04:53.680 | What do you mean by the second time?
00:04:55.200 | Julie: Well, the second time, we had for 10 years been renting out these little pockets
00:05:00.320 | of the house.
00:05:01.800 | We never shared space.
00:05:02.880 | We literally turned it into separate living areas like a fourplex.
00:05:06.080 | Really, we barely paid anything to live in this beautiful home.
00:05:10.000 | We'd become landlords without really trying, I guess you could say, because we just learned
00:05:15.680 | how to rent and collected income and took care of the property.
00:05:20.920 | About 2012, my husband was doing really well.
00:05:26.160 | He had just published a book called Extreme Success.
00:05:29.480 | It was based on his extreme sports and how that ties to life.
00:05:36.080 | What it takes to overcome fears and really live the ultimate life.
00:05:41.920 | Of course, he related that to jumping off the Golden Gate Bridge and jumping off Half
00:05:45.360 | Dome in '70 and surfing tornado waves and all sorts of things, tsunami waves.
00:05:55.320 | Everything was going great.
00:05:56.560 | His New York publishers, Simon & Schuster, were kind of billing him as the new Tony Robbins.
00:06:01.720 | We couldn't be happier.
00:06:02.720 | We had this big, beautiful house and helping mom and dad.
00:06:05.640 | His career's taking off.
00:06:06.640 | We had two beautiful children.
00:06:07.880 | It was my dream, organic garden in the yard.
00:06:11.880 | I was in the kitchen cooking from the vegetables from our garden blissfully, just happy as
00:06:17.880 | could be.
00:06:19.680 | My husband literally proposed to me in a prince suit, so I felt like a princess.
00:06:25.600 | He walks in the door with tears in his eyes.
00:06:28.840 | The only time he ever cries is tears of joy.
00:06:31.600 | These were not tears of joy.
00:06:33.760 | I said, "What's wrong?"
00:06:34.760 | I dropped everything.
00:06:35.760 | He said he had just come from the doctor for a routine check.
00:06:42.920 | This freckle on his forehead and leg turned out to be melanoma and very fast moving.
00:06:48.200 | They did more tests and it looked like it had moved to his liver, in which case the
00:06:52.560 | doctor said, "If that's the case, you have six months to live."
00:07:00.240 | That was a game changer.
00:07:03.200 | He is totally healthy today.
00:07:06.520 | Everything's fine.
00:07:07.520 | The doctor was wrong, but at the time, we didn't know.
00:07:12.960 | I said, "If you have six months to live, you better live.
00:07:18.320 | We have these two young children.
00:07:19.880 | Spend time with them.
00:07:20.880 | Spend time with your friends and family.
00:07:22.360 | I'll figure out the money piece."
00:07:25.720 | At the time, I was a stay-at-home mom, but I had been in broadcasting most of my life.
00:07:34.400 | I had this radio show in San Francisco.
00:07:38.960 | I think it was KNEW at the time.
00:07:42.040 | I just thought, "Okay, I'm going to use this platform to interview wealthy people and just
00:07:47.840 | millionaires, people who became millionaires overnight through their own effort.
00:07:54.440 | I'm going to learn what they did and I'm going to do this so my husband can rest and that
00:07:58.560 | we have the money we need."
00:08:01.400 | Of course, medical bills blew up.
00:08:05.360 | It was pretty tough during that time.
00:08:08.840 | I interviewed millionaire after millionaire to learn their secrets.
00:08:13.400 | It came often to two things.
00:08:15.880 | They either had a business, a very successful business, and/or they owned real estate.
00:08:22.720 | That's what we did.
00:08:23.720 | We went to real estate.
00:08:24.720 | Why did you choose that instead of a business?
00:08:31.360 | It ended up being both, actually, because we'd had businesses all our lives, so we knew
00:08:38.360 | that.
00:08:39.360 | I wanted something where if the doctor was right, I didn't know really at the time how
00:08:45.060 | to run a business that didn't involve me.
00:08:47.400 | I didn't know how to run a self-managed business.
00:08:50.680 | I wanted something that would allow me to raise my children.
00:08:53.680 | I didn't want to be gone all day and be busy.
00:08:57.240 | Real estate seemed to be a choice where I could be more passively involved and be able
00:09:02.120 | to do what we had done, which is rent out space and have income come in.
00:09:09.600 | At the same time, I needed money that day.
00:09:12.560 | I started calling people to sponsor my show.
00:09:16.520 | One after the other, I went down the list.
00:09:17.920 | I'm like, "Okay, this is some quick money."
00:09:20.560 | I couldn't get anybody.
00:09:21.560 | It was always, "No, no, no."
00:09:23.120 | I would literally call somebody who had just advertised on another show before me and say,
00:09:28.160 | "Hey, you want to advertise on my show?"
00:09:29.600 | It was, "No, we already spent our budget."
00:09:31.680 | I'm like, "No, no, no, no.
00:09:33.040 | Down the list."
00:09:34.040 | Finally, I thought, "You know what?
00:09:35.360 | I really need money.
00:09:36.440 | I need it today.
00:09:37.720 | We've blown our savings, everything.
00:09:40.840 | It's a tough time."
00:09:41.840 | I thought, "My next phone call, I am going to make an offer the person who answers the
00:09:47.000 | phone cannot refuse."
00:09:49.480 | I boosted the amount of money I wanted significantly.
00:09:54.880 | I asked for a ton of money, but instead I said, "When I called, how would you like to
00:10:00.200 | co-host with me?
00:10:01.400 | I will make you a local celebrity and here's the price."
00:10:06.000 | He answered, "Yes."
00:10:08.120 | I ended up getting a lot of money from him that helped with our bills, but even more
00:10:13.080 | importantly, he was a mortgage broker who specialized in real estate investing.
00:10:17.240 | It was a perfect mix.
00:10:20.440 | On the show, which is the Real Wealth Show, I still have it today, I had no idea that
00:10:26.880 | something that has to do with mortgages could be interesting to anybody.
00:10:30.680 | I came home and told my husband, "Oh my gosh, I've just sold my soul.
00:10:34.000 | Now my show is going to be so boring.
00:10:35.000 | It's going to be on mortgages."
00:10:37.560 | He just laughed.
00:10:38.560 | He's like, "Oh, you'll figure it out."
00:10:40.480 | I would recommend human interest.
00:10:42.160 | I was like, "Oh, okay.
00:10:44.160 | We'll find out what people are doing with these mortgages."
00:10:47.080 | Once again, I interviewed one after the other, "What are you getting a mortgage for?"
00:10:50.440 | "Oh, I'm buying this investment property here and it's doing this."
00:10:53.120 | That person, "Well, I refined my home and I was able to invest it in these properties
00:10:58.120 | and now we're retired."
00:11:00.440 | All these fantastic stories behind the mortgage.
00:11:03.400 | Our phones started to blow up.
00:11:05.320 | Everybody wanted a mortgage.
00:11:07.160 | My co-host now said, "Listen, get your real estate license.
00:11:10.840 | I can't handle it.
00:11:11.840 | This show is far more successful than I expected.
00:11:14.540 | Get your license.
00:11:15.540 | You can't take all of these loans."
00:11:17.840 | I did.
00:11:19.120 | This was back in the mid-2000s where you could make a whole lot of money doing loans.
00:11:23.800 | It's harder today.
00:11:26.000 | I did.
00:11:27.000 | I got my license literally that month.
00:11:29.920 | Suddenly, I was one of the busiest mortgage brokers in the San Francisco Bay Area.
00:11:34.580 | We just had phones ringing off the hook.
00:11:37.620 | My very first loan was a million dollar loan.
00:11:40.280 | I made $10,000 and our financial troubles were over.
00:11:46.580 | You said you were a stay-at-home mom, but you also had the radio show.
00:11:49.240 | Did you have the radio show the whole time or did you go and get it when you decided
00:11:54.780 | that you needed to earn income?
00:11:56.980 | No.
00:11:57.980 | I loved broadcasting.
00:12:00.100 | I studied broadcasting.
00:12:01.100 | I worked at CNN and Fox and ABC.
00:12:05.580 | I loved news.
00:12:08.620 | I needed something to keep for myself, so I kept that show while having young children.
00:12:14.940 | It didn't take a lot of time.
00:12:15.940 | It was just once a week.
00:12:18.740 | I kept that, but I changed it because at the time, it had been more newsy and a little
00:12:23.540 | bit more Oprah style.
00:12:25.340 | Then I completely changed it to real estate and wealth building.
00:12:30.140 | When your husband was diagnosed with this disease, was he working at the time?
00:12:38.700 | Yeah.
00:12:39.860 | He was traveling the country promoting his new book, Extreme Success.
00:12:45.500 | He'd been given a big advance from Simon Schuster and he was business coaching.
00:12:50.060 | Still is today, but mostly our company.
00:12:54.220 | Coaching businesses all over the country, really just at the peak of his success.
00:13:00.220 | When you get that word from your doctor that you've got six months, let me tell you that
00:13:05.980 | the last thing he wanted to do was coach people in business.
00:13:10.700 | We just wanted him to be able to have those last six months be great.
00:13:15.620 | He still did a little coaching, but not very much.
00:13:18.700 | Once he came back completely fine and healthy, then he went back to coaching.
00:13:25.180 | By then, this business I started had just taken off.
00:13:29.840 | He also started with that.
00:13:31.100 | Now he's my co-CEO.
00:13:32.100 | Now we have 24,000 investor members.
00:13:37.260 | We're doing huge deals.
00:13:38.460 | We're helping lots of people get into real estate today and either buy their first rental
00:13:43.220 | property or get into some massive land development deals we're doing.
00:13:47.820 | It's a whole new world.
00:13:49.780 | Do you remember how much your monthly bills were when he was diagnosed with his illness?
00:13:57.740 | It was, I'm going to say probably $10,000 a month.
00:14:03.380 | Were you at that time earning any income from your radio show?
00:14:05.940 | You were just doing it as a hobby.
00:14:06.940 | Were you earning anything from it?
00:14:09.220 | I was that typical stay-at-home mom that made enough money for the fun stuff.
00:14:15.020 | I think I made around $2,000 a month just for vacations and stuff I wanted.
00:14:23.340 | What gave you the confidence that you could go from $2,000 a month to $10,000 a month
00:14:28.580 | to cover your bills?
00:14:30.340 | Desperation.
00:14:31.340 | I had no idea.
00:14:35.060 | I had absolutely no idea.
00:14:36.520 | I was terrified, but I had to figure it out.
00:14:40.660 | Another thing we did was because we had the six-bedroom house, we ended up renting.
00:14:45.820 | I found out about this student program where exchange students would pay $600, but you
00:14:53.260 | could stick four of them in a room.
00:14:55.300 | They didn't care.
00:14:56.300 | I got bunk beds and I had four students in a room.
00:14:59.540 | We just took the kids' playroom away.
00:15:01.340 | I mean, you do what you have to do, right?
00:15:05.500 | No.
00:15:06.500 | Many people don't do what they have to do.
00:15:07.500 | That's why I'm zeroing in on it because I think that's one of the most interesting aspects
00:15:12.820 | of your story is how you can go from a low income to a high income and then figuring
00:15:23.340 | out the plan along the way.
00:15:25.060 | My observation has been many times the people who are successful in different things, successful
00:15:32.620 | in real estate investing or successful in business investing, it really doesn't matter
00:15:36.720 | what the path is.
00:15:38.180 | It doesn't matter whether it's real estate or oil wells.
00:15:41.580 | It's a matter of the character traits and the person behind it.
00:15:45.980 | And then they just find a market that works.
00:15:47.740 | And if the real estate market wasn't working or if the mortgage market wasn't working,
00:15:51.060 | you'd find something else.
00:15:52.380 | Absolutely.
00:15:53.380 | And so to me, your story demonstrates how for some reason, somehow, you were able to
00:16:00.220 | find some ideas and then to pursue a path when you needed to.
00:16:05.460 | And adversity seems to bring out in some people their best where they say, "We're going to
00:16:10.460 | make this work out."
00:16:11.900 | And it brings out in some people their worst where they kind of sit down and get depressed
00:16:15.380 | and say, "I'm not going to do anything."
00:16:17.020 | And so to me, I'm interested in what makes a difference in the person.
00:16:22.860 | The real estate is easy.
00:16:23.900 | The business is easy.
00:16:24.900 | It's just a matter of learning the skills and applying them in the right context.
00:16:28.540 | It's a matter of that personal skill.
00:16:31.100 | So that's why I was probing there because it fascinates me.
00:16:34.220 | You're so right because I will say that I do have family members who could definitely
00:16:40.820 | – they're struggling financially.
00:16:42.380 | And of course, we're doing really well and I've tried to teach them the secrets and
00:16:47.780 | they just don't seem interested even though they absolutely have the skills, far better
00:16:53.580 | skills than I do.
00:16:55.180 | So I don't know what that thing is.
00:16:59.340 | For me, it was a labor of love wanting my husband to really enjoy those last six months
00:17:08.540 | if it was indeed true.
00:17:09.900 | And again, he's healthy and happy today.
00:17:13.540 | It was also my labor of love of not wanting to be the mom who is not home.
00:17:18.420 | I couldn't do it.
00:17:19.420 | I couldn't be the person who leaves the house at seven and comes home at seven and
00:17:23.420 | someone else raised my kids.
00:17:26.260 | And then I do remember there was like this turning point of absolute 100% conviction
00:17:33.020 | that I was going to make it happen.
00:17:34.020 | There was not a shred of doubt I was going to do it and I was going to figure it out
00:17:38.820 | and there were people smarter than me.
00:17:40.540 | I'm not smarter than me.
00:17:42.220 | People less smart than me who had done what I wanted to do so why not me?
00:17:47.600 | And I think that's what happened on the show is I would interview these people that
00:17:52.100 | were retired by the age of 30 and the way they did it, it's like, "Wait.
00:17:57.580 | Anyone can do that.
00:17:58.580 | You just have to do it."
00:18:02.660 | You mentioned that when you were interviewing all these wealthy people, it was either in
00:18:07.340 | business or real estate.
00:18:12.100 | Did you find that real estate, just in your experience, I know this is not academically
00:18:19.780 | rigorous objective data.
00:18:21.380 | I'm just curious about your personal gut level feeling of doing those interviews.
00:18:25.180 | What percentage of people had built their wealth through business, private business
00:18:29.740 | and what percentage had built it through real estate?
00:18:32.140 | That is a great question.
00:18:37.060 | Because it ended up being a mortgage show, of course, the people I interviewed were mostly
00:18:41.620 | real estate.
00:18:43.220 | But as I started to attract an audience who wanted that and then I suddenly overnight
00:18:52.140 | became a real estate celebrity even though I was learning it myself.
00:18:56.420 | But I had this pretty big radio show and suddenly that was my focus.
00:19:00.140 | I was being asked to keynote at different real estate events.
00:19:03.100 | I had to learn quickly.
00:19:05.700 | And it was in those scenarios where the audience was mostly business or many of them had spent
00:19:14.100 | most of their lives saving money the traditional way and just weren't happy with the way that
00:19:19.260 | went.
00:19:20.260 | Just IRAs and the stock market and S&P and all that.
00:19:25.380 | So, most of our members are that.
00:19:28.940 | They're people who have just saved really well or they have really, really good businesses
00:19:32.440 | and just about anything.
00:19:33.440 | I mean pizza, franchises, health clubs, car parts.
00:19:40.820 | There's so many different ways that people were able to find the money to use for real
00:19:45.740 | estate.
00:19:46.740 | But for my audience and the people I interviewed, we really pretty much focused on real estate
00:19:52.260 | at that point.
00:19:53.260 | I just want to clarify one thing.
00:19:54.580 | I believe the date that your husband was sick, was diagnosed with the illness was 2002, not
00:19:59.860 | 2012.
00:20:00.860 | Is that correct?
00:20:01.860 | Yeah, yeah, yeah.
00:20:02.860 | So, you had a misspoke and said 2012.
00:20:03.860 | I think I did.
00:20:04.860 | So, over the last, that'd be 14 years now.
00:20:07.660 | Over the last 14 years, set aside the network that you built and the business that you built.
00:20:13.700 | What was your path into investment yourself?
00:20:17.220 | So, as we were learning, we realized, wow, we're already doing this.
00:20:23.780 | We have this house.
00:20:24.780 | We've been renting every nook and cranny of it.
00:20:28.820 | It was such a lifesaver to have that house because there were times we paid almost no
00:20:32.780 | rent, quote unquote rent, because we were renting everybody else, all these other rooms,
00:20:38.260 | and that was covering the expenses and some.
00:20:42.420 | And so, we already knew the power of real estate from that perspective.
00:20:47.540 | And then, as I said, it was at a time when that property gained about $100,000 per year.
00:20:54.660 | So, it just made sense to do what we were hearing everybody else do, which was to refi
00:21:01.500 | and take some of the cash out and go buy property.
00:21:04.700 | Now, fortunately, I was being given some amazing advice from these people on the show.
00:21:12.660 | I'd interview like Robert Kiyosaki and Dennis Kaminsky and some pretty high level people
00:21:17.500 | because having that platform, I was able to get them to talk to me.
00:21:21.980 | And many of them, offline, I would say, "All right, come on.
00:21:24.780 | Tell me where you're investing.
00:21:25.900 | I need to know."
00:21:27.900 | And for many, most, it was Texas because in the mid-2000s, we were watching California
00:21:34.980 | real estate just bubble up.
00:21:36.940 | I mean, 100% of your paycheck going to basically going to pay for real estate, except for that
00:21:42.860 | little caveat that you didn't actually have to make your payment and you didn't actually
00:21:47.100 | have to qualify.
00:21:48.100 | So, you could qualify for a loan based on a teaser rate.
00:21:51.300 | So, when the adjustment would come, there was no way you could possibly make that payment.
00:21:56.460 | And so, we knew something was wrong and these experts on the show absolutely knew something
00:22:00.860 | was wrong and they said, "California is going to have a major meltdown."
00:22:04.100 | What most people didn't know is the entire country was.
00:22:07.820 | But Texas wasn't because they weren't doing those.
00:22:11.580 | They had very, very strict mortgage laws.
00:22:14.400 | They didn't allow 100% financing.
00:22:16.580 | They didn't allow 105% financing.
00:22:19.140 | In most of the country, you could get a loan on a property.
00:22:22.660 | You could purchase a property, not put a penny down, but instead get 5% back.
00:22:28.140 | You know, I mean, it was crazy.
00:22:29.140 | You get money back for buying a home.
00:22:30.420 | So, you could go buy your furniture or whatever.
00:22:33.060 | Insanity.
00:22:34.180 | And so, Texas didn't allow that.
00:22:37.780 | And you couldn't refi past 80% LTV because they'd already been through it.
00:22:43.100 | They had been through the SNL crisis and it wiped them out in the '80s and they weren't
00:22:46.500 | going to allow it again.
00:22:48.060 | So, after that SNL crisis, the government came into Texas and said, "We're going to
00:22:53.300 | make this the most job-friendly place in the U.S.
00:22:56.100 | And we're going to give tax credits and all kinds of incentives for business to come here
00:23:00.500 | and we're going to diversify out of oil."
00:23:02.660 | Because obviously, that did not work.
00:23:04.260 | They went into a major recession when, you know, worse than most of the country.
00:23:09.020 | So with good and strong leadership in Texas, it did work and it became the place with the
00:23:14.100 | strongest job and population growth in the country.
00:23:17.220 | And our experts on the show recognized that.
00:23:20.020 | And yet, home prices had not caught up.
00:23:23.020 | Nobody thought anything would ever happen in Texas when it comes to real estate because
00:23:26.580 | it never had.
00:23:27.980 | And so, prices were like 28% undervalued.
00:23:32.180 | Salaries going up, but home prices not doing anything.
00:23:34.860 | So, you know, my experts on the show were teaching us, "Hey, if you sell this overpriced
00:23:39.660 | bubble property in California and buy and instead, you know, exchange it for property
00:23:44.820 | in Texas, you can quadruple your cash flow and avoid the coming crash."
00:23:50.780 | And so, we didn't take all the advice.
00:23:53.100 | We kept the house.
00:23:54.100 | We just refied, took some cash out and bought eight properties in this part of Texas called
00:24:00.900 | Rockwall that is now one of the nicest places in Texas to live.
00:24:06.260 | But we were able to buy properties there for like $140,000, $150,000 for gorgeous brand
00:24:11.300 | new homes in this very nice part of Dallas near a lake.
00:24:16.520 | And we knew, the reason we chose that is we knew that the area, they were putting in a
00:24:21.260 | new freeway and that would connect this kind of remote little town to Dallas and you could
00:24:27.620 | get to downtown in 20 minutes.
00:24:29.300 | Whereas, at the time, you had to go around and it was going to take an hour.
00:24:32.580 | So, we bought eight.
00:24:35.060 | And sure enough, today, you know, those properties have doubled and it's been really lucrative.
00:24:40.820 | At the same time, I said, you know, I was talking about this on the show, so my listeners
00:24:46.460 | were interested and they did do what I said.
00:24:49.460 | So, I had like one lady who had three homes in Stockton, California.
00:24:53.840 | She sold them based on our advice for $400,000 each.
00:24:58.100 | They each rented for $1,200.
00:25:00.700 | So, you know, $3,600 a month gross she was getting on those properties.
00:25:06.220 | We were able to get her into 10 properties in Dallas that were each renting for $1,200
00:25:12.940 | as well, but brand new, in good neighborhoods.
00:25:15.540 | So, she literally walked into work the next day and quit her job.
00:25:19.660 | The next year, those properties in Stockton she sold were worth $100,000 each.
00:25:26.100 | So she would have lost everything had she not, you know, sold at the peak and bought
00:25:31.360 | at the trough in Dallas.
00:25:32.660 | And then, of course, since then her properties have doubled in value in Dallas.
00:25:36.900 | So, you know, that's basically how Real Wealth Network was born was we created a place where
00:25:43.420 | investors could come and just learn from these experts, understanding market cycles and how
00:25:48.740 | to identify a bubble and how to, you know, how to invest for cash flow because Californians
00:25:53.460 | don't know anything about that.
00:25:55.180 | They only invest for appreciation.
00:25:57.100 | So when that's not happening, when you've peaked and there's not appreciation and worse,
00:26:02.180 | you know, depreciation, values going down, then that method doesn't work.
00:26:08.100 | So we taught this new concept of cash flow and, you know, it just took off.
00:26:14.460 | So that's where we are today.
00:26:16.460 | So how long has Real Wealth Network been around?
00:26:21.600 | It basically started pretty early on because, you know, because I was, I think 2003, 2004,
00:26:29.220 | we were already starting little meetings because I was being asked to speak at these different
00:26:34.860 | events because I was now the host of this real estate show and everybody thought I knew
00:26:38.420 | something about it.
00:26:39.420 | I was really just learning myself, but we were also learning and doing and I was surrounding
00:26:44.580 | myself with experts.
00:26:46.460 | And so I would be asked to go speak at these real estate events and I would sit in the
00:26:50.900 | back of the room when I was done speaking and I would hear these, ah, people that just
00:26:57.580 | made my skin crawl, you know, and they would be talking about, you know, foreclosures and
00:27:01.980 | how to knock on doors and do this and do that.
00:27:04.620 | And, you know, for $20,000 you can buy the bootcamp and learn how to do it yourself.
00:27:08.060 | And I didn't know anything about foreclosures so I didn't know specifically that they were
00:27:11.860 | lying but they just, there was something sleazy about them.
00:27:16.360 | And this one time I was in the back of the room with a man who actually did buy properties
00:27:20.780 | at auctions and did do foreclosures and he knew the business inside and out and he just
00:27:24.940 | tapped me on the shoulder.
00:27:25.940 | And he was like, "These guys are lying.
00:27:27.860 | This is not true.
00:27:29.460 | What they're telling is just not true.
00:27:30.700 | It's not how it's done here.
00:27:31.960 | Maybe it's how they do it in Georgia or wherever they're from, but not here."
00:27:35.940 | So he raised his hand and said, "Sir, I think you've got the laws wrong here.
00:27:40.060 | You can't do that here."
00:27:41.540 | And the speaker said, "Oh, okay.
00:27:43.020 | We're going to take a break."
00:27:44.020 | And he comes to us because I'm sitting next to this guy and he escorts us out, tells us
00:27:50.620 | to leave.
00:27:51.860 | That's when I realized, oh wow, the only real estate groups and investment groups at that
00:27:57.540 | time were just selling these boot camps and these educational programs but not really
00:28:03.220 | teaching people legit investing.
00:28:06.260 | So we just saw this amazing opportunity and that's why we call it the real wealth network.
00:28:10.700 | It's like I wanted people who didn't have anything to sell, that they would just be
00:28:14.300 | willing to come, don't wear a suit, wear your baseball cap, whatever.
00:28:20.740 | It's like the millionaire next door type.
00:28:23.740 | And come and just tell us what you're doing.
00:28:26.100 | And nothing's for sale.
00:28:28.460 | And just make an investor group where people can legitimately learn the business.
00:28:32.900 | And that's what we did.
00:28:34.060 | And it just, again, it grew because there was such a starvation, such a need for real
00:28:38.700 | information.
00:28:41.220 | And so that's what we do.
00:28:42.220 | Now we charge a whopping $10 a month for our academy because we still have the belief that
00:28:48.820 | we want your money going into investment property, not into, I mean education's important and
00:28:53.780 | I'm not knocking people who charge a lot for good education.
00:28:56.980 | But we just feel like we want to provide the education and make it affordable so that your
00:29:01.740 | money goes into investing.
00:29:03.660 | So I don't understand fully your business model.
00:29:05.900 | If you're not charging your members, how are you earning income and profiting from the
00:29:09.780 | business?
00:29:10.780 | Well at the time I was doing mortgages.
00:29:13.780 | So in the very beginning, so like I mentioned the woman in Stockton.
00:29:17.620 | So I helped her buy those 10 properties in Dallas.
00:29:22.400 | And so I did 10 mortgages and that was good money.
00:29:26.820 | The mortgage world, the mortgage meltdown happened and then Dodd-Frank came along and
00:29:31.620 | there's 22,000 pages of regulations and oh my goodness.
00:29:37.740 | Mortgage brokers deserve a lot of credit because it is so, so hard to get it done today.
00:29:42.860 | There's so many regulations.
00:29:43.860 | So I didn't want to do that anymore.
00:29:45.660 | I went to the real estate side and decided to basically have a network across the country
00:29:54.420 | where we would do a referral type thing, basically realtor to realtor type thing.
00:30:00.140 | So I would go to Dallas and work with the real estate agent there and say, "All right,
00:30:05.460 | you've got your 3% commission you make on these 10 properties or whatever.
00:30:09.980 | I want half."
00:30:11.020 | So we co-brokered like that.
00:30:14.700 | And that's how we still do it today because I can't sell property in Texas or Ohio or
00:30:21.220 | Indiana or Florida or any of these places where we feel the opportunities are today
00:30:24.960 | but I can co-broker with agents there.
00:30:27.920 | So our members don't actually pay for our advice and our help because the broker does.
00:30:33.180 | And it's not any more than they'd have to pay anyway because there's always sales
00:30:36.380 | commissions, right?
00:30:37.380 | >> Sure.
00:30:38.380 | That's great.
00:30:39.380 | So now Real Wealth Network, you have information, you're in webinars, you're doing presentations
00:30:46.260 | and whatnot for the people that are there.
00:30:48.820 | And then you still have opportunities to set up referral relationships using your real
00:30:53.380 | estate license with other real estate agents so that as your members are investing in different
00:30:58.060 | locations, you're able to share in the commissions from that with the real estate agents who
00:31:02.160 | are selling the properties.
00:31:03.160 | Is that accurate?
00:31:04.160 | >> That's it.
00:31:05.160 | Although we went one step further because it's still really hard as a, you know, we've
00:31:11.960 | got investors from all over the world.
00:31:13.920 | We've got lots and lots of California investors and we're really promoting judicial states
00:31:18.240 | right now.
00:31:19.240 | These would be the states where there's still a backlog of foreclosures because of their
00:31:22.520 | very strict foreclosure laws that make it nearly impossible for a bank to foreclose.
00:31:26.400 | Like Florida, I mean, it takes six years to foreclose.
00:31:28.360 | It's crazy.
00:31:30.920 | So what we've done, it's still hard for someone from California to make offers on properties
00:31:37.080 | and then oversee a renovation because a property that's been sitting in foreclosure for six
00:31:41.140 | years is going to need work.
00:31:43.400 | Even if it was a brand new property at the time, it's been sitting or uncared for by
00:31:47.640 | the person who's been living there not making any mortgage payments for six years.
00:31:51.400 | So we just didn't want our members to have to deal with a renovation from afar.
00:31:56.840 | So we went one step further where our teams in these different areas actually buy the
00:32:01.960 | properties, renovate them, get a tenant in, a very highly qualified tenant, and offer
00:32:07.520 | ongoing property management for what we call real turnkey property.
00:32:12.760 | And real is an acronym for what that means.
00:32:15.680 | It means fully renovated, fully renovated so it's like new, everything replaced, new
00:32:19.680 | HVAC, new pipes, new, everything updated, new roof if needed.
00:32:26.080 | And evaluated so it's been inspected by an independent inspector and then appraised and
00:32:33.480 | then licensed property management in place so that basically an investor can come in
00:32:38.760 | and buy a rental property that's already done.
00:32:42.280 | All renovated, all taken care of.
00:32:43.640 | You can inspect it, appraise it, and know that it's exactly what we're saying it is.
00:32:47.840 | It's just, we still, there's some people who still prefer to buy the property and oversee
00:32:52.240 | the renovation but a lot more, there's more factors there.
00:32:55.800 | Things can go wrong.
00:32:56.800 | I don't know if you've done a renovation or tried to, I don't know if you've tried to
00:33:00.600 | manage contractors in your own home but that's not even easy so it's even harder from afar.
00:33:07.160 | The real estate business is a mixture of investment and business and it is a specialized business
00:33:13.660 | whether you're doing renovations, that's a specialized business.
00:33:18.400 | Every aspect of it is a specialized business.
00:33:20.720 | And so the challenge, and I was going to ask you about this, I want to, well let's go ahead
00:33:25.720 | and do it now.
00:33:26.720 | The challenge is often for real estate investors, people who have the expertise of investing
00:33:33.480 | often have built that expertise partly with their own money and often they are short on
00:33:39.080 | cash especially at the beginning of their career.
00:33:41.460 | So there are a few ways that you can creatively finance it.
00:33:44.060 | Sometimes you can get the sellers to finance it but I have a number of friends and I think
00:33:48.120 | it's a very viable, valid business model to use other people's investment dollars who
00:33:52.880 | are looking for good returns and you take and apply your skills with developing the
00:33:57.680 | property, renovating the property, getting it rented and you're using a private investor's
00:34:03.000 | money.
00:34:04.000 | And there are a lot of people who are interested in owning real estate whether that's for the
00:34:08.960 | potential of possibly higher returns and they can get in public and trade securities whether
00:34:13.640 | that's some of the getting the benefits of the depreciation expense for their tax planning
00:34:20.360 | whether it's from a perspective of diversification, owning some physical tangible property in
00:34:26.120 | a location that they want to own it in versus having everything be paper assets.
00:34:32.040 | There are various reasons that people could do that but it's a hard thing.
00:34:37.880 | It's hard to advise somebody who's making multiple six figures doing an excellent job
00:34:42.440 | at their job to say, "Well, you should go and you should dedicate your time to investing
00:34:47.680 | and finding a local property for $200,000, fixing it up and doing it."
00:34:52.480 | A highly compensated person, it's most likely not a good use of their time to go out and
00:34:59.440 | walk away from $1,000 an hour work to do $200 an hour work.
00:35:03.720 | So these networks and relationships and things like that can be a win-win.
00:35:08.080 | It can be a win-win for both people and so I see the value of them.
00:35:13.920 | The question always comes down to every single one of those things that you mentioned.
00:35:20.160 | There's a cost along the way when you have a professional doing that service.
00:35:23.240 | So if you have renovation, the person who is supervising that is functioning as essentially
00:35:30.360 | a contractor and they're going to be paid for their services as a contractor.
00:35:34.840 | The person who's doing the evaluation or who's supervising the evaluation, there's going
00:35:38.320 | to be payment for that.
00:35:40.200 | The appraisal process and then the property management is going to be put in place and
00:35:45.240 | sometimes I wonder if after layering on all of those layers of cost, I wonder if it's
00:35:52.680 | still worth it.
00:35:53.800 | I wonder if the benefits are still there with regard to the actual returns from the real
00:36:00.840 | estate.
00:36:01.840 | Because much of the real estate return potential seems to be from being able to take out and
00:36:07.840 | do – here I'm primarily thinking of single family houses.
00:36:12.160 | There are many ways to invest in real estate but many of the returns of working in things
00:36:15.800 | like single family houses seems to be in taking the profit from those various activities.
00:36:21.760 | So after your investors are going through and offering these properties to other investors,
00:36:28.400 | do you have any sense of how that impacts the returns for the money investor at least?
00:36:33.880 | Oh yeah.
00:36:34.880 | Here's the thing.
00:36:35.880 | I brought in a – now we're a legitimate company.
00:36:39.120 | Back in 2003, we were just figuring it all out and we were one of the first to figure
00:36:44.200 | it out and so of course, there are people who copy.
00:36:50.160 | And so there's a lot of people out there who are calling themselves turnkey rental
00:36:55.680 | properties.
00:36:56.680 | You can go online and search it all day long but I can tell you that most are not.
00:37:01.480 | We turn down nine out of ten companies who say they're turnkey.
00:37:05.920 | So I hired a Six Sigma black belt who is an expert, the highest trained expert on systems
00:37:14.640 | to verify when reviewing these companies that now say they're turnkey.
00:37:21.080 | And it's so easy because our list, it's on our website, the very, very high standards
00:37:27.280 | that we expect when we call – that's why we call it real turnkey, not just turnkey.
00:37:33.640 | We saw this one company that – it's these young guys who totally know how to do internet
00:37:38.280 | marketing.
00:37:39.280 | I mean they're brilliant internet marketers but they're doing exactly what you say.
00:37:43.360 | They're marking up the properties far beyond what they're worth yet the renovation is
00:37:48.600 | barely done.
00:37:50.040 | There's people in real estate and I think in any investment business, anywhere that
00:37:55.360 | has to do with money and big dollars that just literally don't care about the client.
00:37:59.960 | They just don't care.
00:38:00.960 | They're in it for the short term and they're not going to last.
00:38:03.760 | But these kids were marking up these properties and selling garbage and when my team went
00:38:10.440 | and said, "Well, I don't even think these properties look renovated and you've sold
00:38:13.720 | it in this condition."
00:38:15.360 | And the kids were like – I call them kids, they were in their early 20s – were like,
00:38:18.440 | "Yeah, we've got a wait list."
00:38:20.440 | We're like, "Do these people ever come out and look at these properties and see what
00:38:23.800 | they're buying?"
00:38:24.800 | And they go, "Oh no.
00:38:25.800 | They just look at the pictures we send them."
00:38:27.760 | So don't think that what I'm saying is easy for anyone to duplicate.
00:38:33.840 | Many have tried and it hasn't gone well for them.
00:38:36.500 | We are extremely strict on what we look for.
00:38:41.240 | Because I'm representing investors and I want a long term business where those investors
00:38:46.160 | rave about us and they do.
00:38:48.600 | And so if we find a company who's got their systems in place and they're doing volume
00:38:56.160 | because they're so good at what they do, well then they're going to get materials much,
00:39:01.000 | much cheaper than the individual.
00:39:02.920 | So I could go out and try to buy a property in Florida and renovate it and you still have
00:39:07.160 | to hire the construction people.
00:39:08.520 | You still have to do all that.
00:39:10.360 | The difference is I'm going to pay more for my materials and my contractors than the company
00:39:16.120 | who's doing 20 a month has contractors in-house.
00:39:20.520 | They've got deals with suppliers or they have their own supply companies.
00:39:24.920 | So it's a model where actually in the end it comes in cheaper.
00:39:31.640 | So that's the beautiful thing.
00:39:33.120 | It's happened so many times at our events.
00:39:35.680 | I'll have somebody come running up to the front of the room, grab my mic, and I'm not
00:39:40.680 | sure what they're going to say.
00:39:43.280 | And this guy will say, "I'm a real estate agent.
00:39:45.840 | I have been buying properties in Florida for years.
00:39:48.960 | I fly out there.
00:39:50.360 | I pay for hotels, airplanes.
00:39:52.960 | I hire my teams.
00:39:54.240 | I've got my real estate team in place and I cannot bring it in at these prices or at
00:39:59.960 | this level because it's just harder."
00:40:04.840 | And so it's really the opposite is true with the teams we work with where our investors
00:40:10.020 | are still getting it much cheaper than if they did it on their own.
00:40:14.080 | And it's all done for them, all managed for them.
00:40:17.120 | And yes, you're absolutely right.
00:40:18.200 | They do need to come out of pocket for that appraisal and that inspection.
00:40:21.000 | But those are $300, $400 and well worth every penny.
00:40:25.040 | And to have that inspection come back looking perfect gives you a lot of satisfaction.
00:40:30.960 | And same with the appraisal.
00:40:31.960 | A lot of times the appraisal comes in over.
00:40:34.720 | That makes you feel good.
00:40:35.720 | Sometimes it comes in under, but there's reasons for that.
00:40:38.440 | Appraisals, they're hard to do when in an area where there's a lot of foreclosures,
00:40:41.280 | it's hard to get the comps.
00:40:43.920 | But we always work it out.
00:40:45.260 | And because we are a really powerful network now that when we find a team, we refer really
00:40:51.600 | high level, really high level investors to that team.
00:40:55.080 | And the last thing they want to do is ruin this relationship.
00:40:58.480 | So if one of our investors is unhappy with something, that company is going to take care
00:41:05.680 | of it.
00:41:07.200 | And to the level of what's fair.
00:41:10.920 | Obviously real estate, things happen and sometimes things happen that you don't expect.
00:41:15.040 | Maybe a pipe breaks or something that didn't come up in the inspection.
00:41:17.960 | But in most cases, the company, the turnkey provider will go way beyond what would be
00:41:24.320 | normal to keep our investors happy because they want rave reviews.
00:41:30.640 | As we record this interview in July 19, 2016, what are the trends that you see for US American
00:41:39.160 | real estate prices?
00:41:40.680 | It's a great question.
00:41:45.000 | I've had nothing but economists on my show.
00:41:47.680 | Well, I've had a lot more.
00:41:48.680 | We do a lot of success stories.
00:41:50.320 | But I'm still interviewing people to figure out what in the world is going on in this
00:41:53.120 | country.
00:41:54.120 | It is craziness.
00:41:56.600 | The consensus seems to come to bread and butter.
00:42:00.720 | If you can really stay within the bread and butter properties, the good, hardworking Americans,
00:42:07.080 | the working class of America, what we call the B neighborhoods, the middle class, in
00:42:13.640 | the markets where prices, where fundamentals are still in place.
00:42:17.160 | In other words, if the average income of the area is $50,000, then the average home price
00:42:22.840 | should not be over $150,000.
00:42:25.760 | Whereas in California, the average income might be $100,000, but the average home price
00:42:29.800 | is a million or something like that.
00:42:31.640 | And that's just not sustainable.
00:42:33.600 | So bread and butter America in areas where there are sustainable jobs, not jobs that
00:42:39.200 | come and go.
00:42:40.200 | And let me tell you, jobs come and go every year because technologies are changing so
00:42:44.480 | rapidly.
00:42:45.520 | So an example is Reno, Nevada.
00:42:48.040 | We're doing actually more syndications, group investments, where we're pooling investor
00:42:54.380 | funds and buying land there.
00:42:56.560 | You know, Tesla's just gone in and put in the first of their battery factories that's
00:43:02.480 | the size of a football field, and there's going to be 10 of those.
00:43:05.680 | Now, do you think Tesla's going anywhere?
00:43:07.400 | Do you think they're going to be out of business next year?
00:43:09.320 | I doubt it.
00:43:10.720 | So to be able to provide housing in an area like that, where there's 50,000 jobs expected
00:43:17.660 | in that area, and there's only been 800 new homes every year, there's a need for housing.
00:43:24.080 | I'm not worried about an area like that.
00:43:26.360 | But when you go to another place that's maybe more dependent on the stock market or companies
00:43:34.040 | that might be dead tomorrow, I mean, I'll give you an example, retail.
00:43:40.160 | Retail's struggling, and it's going to continue to struggle.
00:43:43.280 | Retail REITs, you know, they're not doing well because, and when I say retail, it's
00:43:48.040 | like shopping centers, because, you know, what's changing?
00:43:51.280 | What's changing is the way people buy.
00:43:54.720 | And when that, that's what we have to pay attention to.
00:43:57.880 | And so my 24-year-old millennial daughter is working for a company called Build.com,
00:44:03.520 | where people buy their construction materials online for cheap.
00:44:09.840 | How's that going to affect these big box stores?
00:44:12.480 | You know, more and more, I told on another show, in Malibu, our daughter just went to
00:44:18.280 | a prom.
00:44:19.280 | And I asked her, you know, are you going to go shopping?
00:44:21.280 | And she's like, oh yeah, my friends are coming over, we're going to shop this afternoon.
00:44:23.680 | What do you mean?
00:44:25.480 | Online.
00:44:26.480 | So they all got together at our house, and they all bought their prom dresses online.
00:44:29.760 | When I bought prom dresses, we went to Macy's.
00:44:32.320 | So you know, it's, everything's changing.
00:44:34.980 | And so you can't do what we used to do when trying to figure out where to buy real estate.
00:44:39.640 | It used to be that you would buy near big box stores.
00:44:42.400 | Not anymore.
00:44:43.400 | That's changing.
00:44:44.400 | You've got to stay on top of those things and only buy where there's jobs that are not
00:44:48.740 | going away.
00:44:51.240 | How would you identify a job that's not going away?
00:44:55.040 | That's the trick, right?
00:44:56.920 | You know, one of the, you know, one of the things that we look at are, like I said with
00:45:02.600 | the Tesla plant, you know, that's a lot of money going into that.
00:45:06.400 | And Nevada wants it.
00:45:08.280 | This is creating tremendous jobs.
00:45:10.200 | And so it's looking at things that are here for the future.
00:45:16.920 | And so another example might be there's a lot of places in the South where we're investing.
00:45:21.740 | You know, I used to have people say, "Well, we're going to invest in Detroit because that's
00:45:24.500 | where the auto industry is."
00:45:25.900 | And you know, it's like, "Really?
00:45:27.060 | Is it?"
00:45:28.060 | You have to really look.
00:45:29.060 | Where is the auto industry?
00:45:30.120 | It's moving out of Detroit.
00:45:31.820 | And so, and a lot of it's moving to the South, to warmer climates, to cheaper areas where
00:45:35.960 | they don't have, you know, the same kind of, I guess, what am I trying to, union type,
00:45:43.940 | you know, the unions don't control.
00:45:45.940 | And so, you know, that's, if you're going to see a Toyota or a Mercedes Benz or, you
00:45:52.100 | know, they're going to build a huge plant, it's probably going to be jobs.
00:45:56.220 | Another thing we look at is, recently is the Panama Canal was just expanded.
00:46:01.380 | I mean, I think just this month it finally opened to much, much larger container ships
00:46:06.140 | moving through the Panama Canal.
00:46:08.260 | That means that huge container ships can now move to the East Coast instead of coming to
00:46:12.660 | Long Beach, California or Seattle and then training across the country or trucking.
00:46:17.820 | Now they can just go through the canal to the East Coast.
00:46:19.900 | Now, what's that going to do to the East Coast?
00:46:21.580 | A lot.
00:46:22.580 | So, we are focused on port cities on the East Coast because, again, these are like things
00:46:27.740 | that aren't going to go away overnight.
00:46:29.660 | So, for example, Jacksonville, Florida, great market.
00:46:33.020 | They're expanding to be able to take on these new container ships that then is going to
00:46:37.740 | affect the whole economy because now the trucking is coming from that side, you know?
00:46:42.420 | So, just things like that.
00:46:43.940 | Bigger deals, I guess you could say.
00:46:45.540 | I want to ask you about on your website, you have Chicago, Illinois listed as, I'm not
00:46:53.700 | sure, I don't know that you're saying it's the number one market, but you have it listed
00:46:57.380 | on the top of your list.
00:46:59.220 | Why Chicago, Illinois?
00:47:01.260 | That surprises me.
00:47:03.940 | It's a little, you know, I'm pretty honest, I'm not pretty honest, I'm totally honest
00:47:07.380 | and upfront with how I feel about different markets.
00:47:10.500 | Now, I don't like the politics of Chicago.
00:47:13.100 | It's very similar to Detroit.
00:47:15.520 | They have entitlement programs that they can't pay for and the city's going to go bankrupt.
00:47:19.700 | It just simply can't, you can't make promises you can't keep.
00:47:22.940 | I mean, all we have to do is look at, you know, Puerto Rico and, you know, Detroit and,
00:47:27.300 | you know, Chicago's headed in the same direction.
00:47:30.460 | So, here's the thing about both Detroit and Puerto Rico.
00:47:37.100 | People who bought bonds lost their money.
00:47:40.040 | You know, if you bought bonds in Puerto Rico, you're not getting it back.
00:47:43.620 | You didn't do your homework.
00:47:44.620 | You didn't look and see that they're broke.
00:47:47.180 | Can't pay you back.
00:47:48.180 | But you know what?
00:47:49.180 | If you bought real estate, you're doing just fine.
00:47:51.940 | So none of that affected it.
00:47:54.500 | I have close friends who own property in Puerto Rico and it's only done better because now
00:47:59.760 | that whole burden of debt is gone because they defaulted, you know?
00:48:04.940 | But the real estate's there.
00:48:06.340 | So they've still got renters.
00:48:08.180 | They've still, you know, the property's still, it's, you know, it's a beautiful part of Puerto
00:48:12.860 | Rico and it's doing well.
00:48:14.260 | Same with Detroit.
00:48:15.660 | Went bankrupt.
00:48:16.660 | But what did the property values do?
00:48:18.180 | They've only gone up.
00:48:19.820 | And so Chicago is the third largest, third or fourth, it keeps changing, largest city
00:48:25.960 | in the U.S.
00:48:27.620 | There is a lot of good stuff in Chicago.
00:48:30.060 | It's just their politics are terrible.
00:48:32.100 | And so they're going, you know, it's going to come to a head.
00:48:36.220 | They can't pay these entitlements.
00:48:37.700 | They're going to have to default.
00:48:39.660 | And that's not really going to affect real estate at certain levels.
00:48:42.860 | They have passed a bill where property taxes are going to go up 72 percent.
00:48:48.260 | I mean, you know, yeah, sure, let's blame the property taxes for our massive entitlement
00:48:53.380 | programs.
00:48:54.380 | But anyway, that's only affecting the higher end.
00:48:56.780 | So anything under $200,000 won't be affected by that new property tax.
00:49:00.820 | So what do you think that's going to do for those properties?
00:49:03.420 | So we're helping investors get into properties in Chicago that are between $120,000 and $150,000
00:49:10.460 | that rent and the cash flow is unbelievable.
00:49:12.820 | They're not affected by the taxes.
00:49:14.620 | They can offer lower rent because they're not paying that 72 percent increase in property
00:49:21.100 | tax.
00:49:22.100 | So, you know, it's a it's a great play.
00:49:23.620 | We have an unbelievable team there and it works.
00:49:25.580 | But that doesn't mean you should go running off to Chicago and buy property because there's
00:49:29.060 | neighborhoods you need to stay out of.
00:49:30.580 | We just we have very good teams there that know exactly how to how to do it.
00:49:34.220 | So you know, you've got to real estate is local and you got to know what you're doing
00:49:38.940 | and you know, you got to have really good teams.
00:49:42.100 | Two questions last on my list for you, Kathy.
00:49:45.940 | You and your family continue living in California.
00:49:48.500 | Is that right?
00:49:49.500 | Yeah, we love paying high taxes.
00:49:52.860 | It's our favorite.
00:49:56.660 | What is your prediction regarding California real estate prices and why do you continue
00:50:02.800 | to live there?
00:50:03.800 | We have this thing about surfing.
00:50:09.820 | So we really, really, really like to surf.
00:50:13.440 | We live two miles from the beach.
00:50:15.540 | We bought the cheapest and oldest house in Malibu.
00:50:17.980 | It was cheaper than the house we owned, you know, that I told you about earlier.
00:50:21.260 | It was, you know, just a dump.
00:50:23.460 | But we fixed it up.
00:50:24.460 | We love it.
00:50:25.460 | It's our home.
00:50:26.660 | And we have a daughter who, you know, our oldest daughter's already left and gone to
00:50:31.220 | college and is now working, like I said.
00:50:33.340 | But the younger one, we don't we don't want.
00:50:35.460 | She loves it, you know.
00:50:36.460 | So probably what we're going to do is once she's gone, we're going to buy a vacation,
00:50:41.540 | not a vacation, but we're going to move to Nevada and buy a property where we can ski
00:50:46.900 | in Tahoe.
00:50:47.900 | And that would be our primary.
00:50:49.740 | And we would keep the house in Malibu, which would then become our vacation home.
00:50:52.860 | So basically for taxes.
00:50:54.380 | But what do I think about California real estate?
00:50:59.140 | Well, California is California.
00:51:00.740 | Born and raised.
00:51:01.740 | I know it well.
00:51:02.740 | Prices go up.
00:51:03.740 | Prices go down.
00:51:04.740 | You can make a million.
00:51:05.740 | You can lose a million.
00:51:06.740 | You just need to know what you're doing.
00:51:07.740 | You either need to hold the property forever so you don't care or you need to time it well.
00:51:14.060 | So I'm more about timing because I think you can really make your millions, sell and then,
00:51:21.260 | you know, transfer the property somewhere else until the market crashes, come back by
00:51:25.380 | then.
00:51:26.380 | So what we're doing is, you know, absolutely 100 percent.
00:51:30.100 | It's a bubble.
00:51:31.100 | San Francisco is the most expensive place in the country, more than New York City.
00:51:36.340 | People can't afford to live there.
00:51:37.980 | It's not like the Silicon Valley is going to be there forever.
00:51:40.640 | It's moving.
00:51:41.640 | You know, there's tech jobs moving all over to Utah, to Austin, to Pittsburgh.
00:51:45.940 | You know, so to think that this one time in history, prices aren't going to go back down
00:51:50.860 | even though they've done it every 10 years, every decade.
00:51:53.420 | They go up, they go down.
00:51:54.900 | People forget.
00:51:56.060 | So we're telling everyone who will listen, it's time to sell.
00:52:01.300 | This is your time to cash in.
00:52:03.540 | Go buy in these other areas like I recommended before and cash, you know, quadruple your
00:52:09.140 | cash flow.
00:52:10.500 | Rent in California if you still want to live there.
00:52:12.900 | Wait till prices crash and then buy back in the market when prices are low.
00:52:17.780 | So it's already happening.
00:52:19.420 | It's already softening.
00:52:20.460 | The high end is already, you know, it's affected.
00:52:22.980 | I mean, the evaluations of these high tech Silicon Valley companies is just ridiculous.
00:52:29.340 | There's no fundamentals in place.
00:52:30.660 | So here we are.
00:52:32.800 | People will listen or they won't.
00:52:35.120 | How are you protecting yourself with regard to your personal property?
00:52:39.940 | How are you balancing, yes, we're living here but we also want to protect ourselves financially?
00:52:45.060 | Well, that's what I was saying before.
00:52:47.420 | Like if you love where you live and you're not going anywhere, if you're not moving and
00:52:54.740 | you can afford your payment, then you have nothing to worry about.
00:52:58.700 | It's just what you have to worry.
00:53:00.780 | So like I told you, we bought, it was a $750,000 home in Malibu.
00:53:05.260 | Now that might sound expensive to other people but in California that's cheap.
00:53:09.700 | We bought a one bedroom, one bath.
00:53:11.460 | Our daughter lives, we converted the garage for her room.
00:53:13.860 | I mean, we're living small.
00:53:15.100 | It's California.
00:53:16.100 | It's Malibu.
00:53:17.100 | You know, the average home price there is like $10 million.
00:53:19.940 | So we've got this little tiny cottage basically but we love it and we're not going anywhere.
00:53:25.460 | And so we're going to have it forever.
00:53:27.060 | It doesn't matter.
00:53:28.060 | We can afford it.
00:53:30.060 | But for people who come to me who are, and this happens every day, they're in their 50s,
00:53:35.460 | they're in their 60s, they're sitting in a dump, they don't love it, they're in a Silicon
00:53:39.420 | Valley, they're done.
00:53:40.420 | I just had a guy come to me, he got laid off.
00:53:43.300 | He's 65.
00:53:44.300 | He's in the Silicon Valley.
00:53:45.580 | Well, listen, you're in the most expensive place in the world to live.
00:53:50.300 | Bad idea if you don't have your retirement in place.
00:53:53.540 | Sell it.
00:53:54.540 | Take that $500,000 tax free gain and go live an hour outside of the Silicon Valley or somewhere
00:54:01.980 | else that's lovely.
00:54:03.860 | And buy, you know, I'm sitting in Chico, California right now in my daughter's place.
00:54:08.420 | It's two hours away from the Bay Area.
00:54:11.220 | You can buy a beautiful home here for $300,000, $200,000.
00:54:15.560 | So get out of the expensive stuff.
00:54:18.540 | Get into something you can afford.
00:54:20.540 | Take that extra money and invest it properly.
00:54:24.420 | That's what you got to do if you're later in life.
00:54:26.860 | Don't sit there and think you can live in the most expensive place in the world when
00:54:30.060 | you don't have your retirement set up.
00:54:32.580 | If you do, then good for you.
00:54:34.380 | Live wherever you want.
00:54:35.380 | But most people don't.
00:54:36.380 | - Last question.
00:54:38.780 | You have almost two things regarding real estate and business.
00:54:43.980 | You have some real estate investments and you have a business.
00:54:49.020 | Here's my question.
00:54:50.580 | Which has been better to your family's finances?
00:54:54.820 | - That's a close one because our business has taken off.
00:55:01.480 | Last year we literally said, "All right, this is growing too fast.
00:55:05.060 | We need to slow down.
00:55:06.360 | Just improve systems.
00:55:07.740 | Just make our customer service better, our quality better.
00:55:10.180 | Just slow down."
00:55:12.040 | And guess what?
00:55:13.040 | We didn't even try.
00:55:14.040 | We're just trying to improve systems.
00:55:17.580 | So we're just at that time in life where everybody gets that real estate's a safe investment
00:55:22.020 | and we're very, very busy.
00:55:23.900 | But really just trying to improve every little bit of it, every system we have.
00:55:31.280 | We did just make it to the Inc. 5,000.
00:55:33.740 | So we're excited about that.
00:55:34.740 | One of the fastest growing companies in the U.S. in spite of the fact that we're really
00:55:38.300 | just trying to slow down.
00:55:40.100 | So to compare that to our investments, like I said, our very first investment we made
00:55:45.300 | a million dollars just living in a house.
00:55:47.180 | So we bought those properties in Texas that 10 of them doubled.
00:55:53.220 | We've done well.
00:55:54.220 | Now we are buying, just to give you an example, we pooled together, I think it was 100 investors
00:56:00.860 | who each put in $50,000 each and we bought this land in Reno just outside that Tesla
00:56:07.220 | plant and bought it from a distressed seller.
00:56:10.700 | He was on a loan that ballooned.
00:56:13.380 | Balloon loans are terrible.
00:56:14.380 | It means you have to come up with a whole payment and if you don't you lose the property.
00:56:17.420 | So the seller was on a balloon because we were the only ones that could come in right
00:56:21.820 | away with cash.
00:56:24.340 | We bought this property for cheap.
00:56:26.420 | By the time we closed we had a national builder come in and ask for half the lots for more
00:56:33.180 | than we'd paid for all the lots.
00:56:35.200 | So now we're sitting on these lots in Reno free and clear.
00:56:39.260 | So I mean probably still our net worth is much higher in our investments.
00:56:47.460 | But the business is doing well too.
00:56:50.020 | Cathy, tell us about your website, any actions that you want my audience to take to follow
00:56:55.700 | up with you, who might be interested in your services and joining your network.
00:56:59.300 | Feel free to share with us all of the places that you'd like my audience to connect with
00:57:03.300 | you and to respond to the message that you have today.
00:57:06.500 | Thank you.
00:57:07.500 | It's realwealthnetwork.com.
00:57:08.500 | Real like real, wealth like your money and network, realwealthnetwork.com.
00:57:13.580 | Membership is free and that will give you access to our weekly webinars where we do
00:57:18.020 | these educational webinars on different parts of the country and the data that we have on
00:57:21.580 | economics.
00:57:22.580 | I also have my book, Retire Rich with Rentals, that you can buy on Amazon and that's real
00:57:27.900 | simple reading.
00:57:28.900 | You can do it in a day to help you make sure you don't make mistakes buying single families.
00:57:33.780 | People do and they shouldn't.
00:57:34.780 | It's not that hard but you got to do it right.
00:57:37.380 | So Retire Rich with Rentals and then my podcast is The Real Wealth Show on iTunes and also
00:57:46.940 | Real Estate News to keep people up on what's going on in the real estate world.
00:57:52.020 | Thanks for coming on today.
00:57:53.020 | Thank you.
00:57:54.020 | Thank you for listening to this episode of Radical Personal Finance.
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