Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in ten years or less. Today my guest is Kathy Fetke from TheRealWealthNetwork.com. Kathy is an expert in real estate investing.

Kathy, welcome to Radical Personal Finance. Thank you. Great to be here. Let's start off with your story. You have a unique and interesting story. How did you stumble across the world of real estate investing? Well, it was a bit by accident both times, really. The first time was when my father was panicking because he had invested in an apartment building, but he kind of not paid attention to it.

It was being managed by somebody else. It was a group of investors. And they didn't manage it well. They didn't take care of it. And then they sold it because I think there were so many vacancies and vandalism and just the whole area went downhill. And so having had that apartment for many, many years and depreciating it, he would have owed hundreds of thousands of dollars in taxes, which he didn't have because he was literally just about to retire.

And all of that money was his retirement and he would have had to pay it to taxes. So we have this wonderful thing called a 1031 exchange where if you sell one asset, you can exchange it into another. But you have to do it in 45 days. Now these managers were not even respectful enough to give my father a phone call.

All he received was a letter. By the time he received it, he had about two weeks left to find that replacement property. So we jumped in. I had just literally been married. We were renting and my husband and I said, "Hey, is the biggest stress here that you just need to find a new property?" My dad's in retirement, so he didn't want to be a landlord or anything.

So we said, "Listen, we'll find the property. We'll live in it. We'll be your tenants. We'll take care of everything. Don't worry." And we did. That's how we got into our first property. Dave: Did you have any experience or goal of doing this or you just stumbled across it and realized that you had an opportunity?

Suzanne: It was really more a labor of love. He was so stressed out and really becoming ill. Some people have different skills. For me, at that age in my life, there was nothing stressful to me about that. It was, "Tell me what you're looking for. I'll find it." I literally found it.

He needed it to be a certain price range because when you exchange, of course, it has to be the same price or more of what was sold. And so it had to be around $500,000, which in the San Francisco Bay Area is pretty easy to do. But we wanted it to be a place we would live in.

So we just found this. I saw a sign on the road and I turned in and there it was. That's it. It was a big 4,000 square foot, six bedroom home. It was beautiful, my dream home. It was so large. It had an in-law unit and a separate area for an office.

I said, "Oh my gosh. I can just turn this into a fourplex really easily. We can live in the main part of the house and rent the rest and take care of this situation for my dad." It just ended up being a miracle for us because we were able to refinance it later.

The timing, without us knowing, was perfect. It was '97, so the bottom of the last downturn. So we were able to buy it at the bottom. Every single year after that, it went up $100,000 in value. We were able to refinance it, pay my dad anything back that he'd ever put into the property prior to that.

So it boosted his retirement further and he never had to pay those taxes. The way it works here is that once he passed away, that property stepped up to market value. We inherited it and those taxes were wiped out. It was just a huge win-win. That's how we got our start.

Dave: Fortuitous timing is always helpful when putting together a real estate deal, isn't it? Julie: Yes, and jumping in and just doing it too. Not stupidly, but we saw this was a beautiful home. Where we went well, I think, on this is that we did buy in a really nice neighborhood with really good schools and at the bottom of the market.

It was just, literally, because it was right before real estate went up for 10 years. By 2008, about 10 years later, or 2007, that house was worth $1.8 million. We had paid $500. Then, of course, the next year it was worth about $800 again. Dave: So you said both times you got into real estate.

What do you mean by the second time? Julie: Well, the second time, we had for 10 years been renting out these little pockets of the house. We never shared space. We literally turned it into separate living areas like a fourplex. Really, we barely paid anything to live in this beautiful home.

We'd become landlords without really trying, I guess you could say, because we just learned how to rent and collected income and took care of the property. About 2012, my husband was doing really well. He had just published a book called Extreme Success. It was based on his extreme sports and how that ties to life.

What it takes to overcome fears and really live the ultimate life. Of course, he related that to jumping off the Golden Gate Bridge and jumping off Half Dome in '70 and surfing tornado waves and all sorts of things, tsunami waves. Everything was going great. His New York publishers, Simon & Schuster, were kind of billing him as the new Tony Robbins.

We couldn't be happier. We had this big, beautiful house and helping mom and dad. His career's taking off. We had two beautiful children. It was my dream, organic garden in the yard. I was in the kitchen cooking from the vegetables from our garden blissfully, just happy as could be.

My husband literally proposed to me in a prince suit, so I felt like a princess. He walks in the door with tears in his eyes. The only time he ever cries is tears of joy. These were not tears of joy. I said, "What's wrong?" I dropped everything. He said he had just come from the doctor for a routine check.

This freckle on his forehead and leg turned out to be melanoma and very fast moving. They did more tests and it looked like it had moved to his liver, in which case the doctor said, "If that's the case, you have six months to live." That was a game changer.

He is totally healthy today. Everything's fine. The doctor was wrong, but at the time, we didn't know. I said, "If you have six months to live, you better live. We have these two young children. Spend time with them. Spend time with your friends and family. I'll figure out the money piece." At the time, I was a stay-at-home mom, but I had been in broadcasting most of my life.

I had this radio show in San Francisco. I think it was KNEW at the time. I just thought, "Okay, I'm going to use this platform to interview wealthy people and just millionaires, people who became millionaires overnight through their own effort. I'm going to learn what they did and I'm going to do this so my husband can rest and that we have the money we need." Of course, medical bills blew up.

It was pretty tough during that time. I interviewed millionaire after millionaire to learn their secrets. It came often to two things. They either had a business, a very successful business, and/or they owned real estate. That's what we did. We went to real estate. Why did you choose that instead of a business?

It ended up being both, actually, because we'd had businesses all our lives, so we knew that. I wanted something where if the doctor was right, I didn't know really at the time how to run a business that didn't involve me. I didn't know how to run a self-managed business.

I wanted something that would allow me to raise my children. I didn't want to be gone all day and be busy. Real estate seemed to be a choice where I could be more passively involved and be able to do what we had done, which is rent out space and have income come in.

At the same time, I needed money that day. I started calling people to sponsor my show. One after the other, I went down the list. I'm like, "Okay, this is some quick money." I couldn't get anybody. It was always, "No, no, no." I would literally call somebody who had just advertised on another show before me and say, "Hey, you want to advertise on my show?" It was, "No, we already spent our budget." I'm like, "No, no, no, no.

Down the list." Finally, I thought, "You know what? I really need money. I need it today. We've blown our savings, everything. It's a tough time." I thought, "My next phone call, I am going to make an offer the person who answers the phone cannot refuse." I boosted the amount of money I wanted significantly.

I asked for a ton of money, but instead I said, "When I called, how would you like to co-host with me? I will make you a local celebrity and here's the price." He answered, "Yes." I ended up getting a lot of money from him that helped with our bills, but even more importantly, he was a mortgage broker who specialized in real estate investing.

It was a perfect mix. On the show, which is the Real Wealth Show, I still have it today, I had no idea that something that has to do with mortgages could be interesting to anybody. I came home and told my husband, "Oh my gosh, I've just sold my soul.

Now my show is going to be so boring. It's going to be on mortgages." He just laughed. He's like, "Oh, you'll figure it out." I would recommend human interest. I was like, "Oh, okay. We'll find out what people are doing with these mortgages." Once again, I interviewed one after the other, "What are you getting a mortgage for?" "Oh, I'm buying this investment property here and it's doing this." That person, "Well, I refined my home and I was able to invest it in these properties and now we're retired." All these fantastic stories behind the mortgage.

Our phones started to blow up. Everybody wanted a mortgage. My co-host now said, "Listen, get your real estate license. I can't handle it. This show is far more successful than I expected. Get your license. You can't take all of these loans." I did. This was back in the mid-2000s where you could make a whole lot of money doing loans.

It's harder today. I did. I got my license literally that month. Suddenly, I was one of the busiest mortgage brokers in the San Francisco Bay Area. We just had phones ringing off the hook. My very first loan was a million dollar loan. I made $10,000 and our financial troubles were over.

You said you were a stay-at-home mom, but you also had the radio show. Did you have the radio show the whole time or did you go and get it when you decided that you needed to earn income? No. I loved broadcasting. I studied broadcasting. I worked at CNN and Fox and ABC.

I loved news. I needed something to keep for myself, so I kept that show while having young children. It didn't take a lot of time. It was just once a week. I kept that, but I changed it because at the time, it had been more newsy and a little bit more Oprah style.

Then I completely changed it to real estate and wealth building. When your husband was diagnosed with this disease, was he working at the time? Yeah. He was traveling the country promoting his new book, Extreme Success. He'd been given a big advance from Simon Schuster and he was business coaching.

Still is today, but mostly our company. Coaching businesses all over the country, really just at the peak of his success. When you get that word from your doctor that you've got six months, let me tell you that the last thing he wanted to do was coach people in business.

We just wanted him to be able to have those last six months be great. He still did a little coaching, but not very much. Once he came back completely fine and healthy, then he went back to coaching. By then, this business I started had just taken off. He also started with that.

Now he's my co-CEO. Now we have 24,000 investor members. We're doing huge deals. We're helping lots of people get into real estate today and either buy their first rental property or get into some massive land development deals we're doing. It's a whole new world. Do you remember how much your monthly bills were when he was diagnosed with his illness?

It was, I'm going to say probably $10,000 a month. Were you at that time earning any income from your radio show? You were just doing it as a hobby. Were you earning anything from it? I was that typical stay-at-home mom that made enough money for the fun stuff. I think I made around $2,000 a month just for vacations and stuff I wanted.

What gave you the confidence that you could go from $2,000 a month to $10,000 a month to cover your bills? Desperation. I had no idea. I had absolutely no idea. I was terrified, but I had to figure it out. Another thing we did was because we had the six-bedroom house, we ended up renting.

I found out about this student program where exchange students would pay $600, but you could stick four of them in a room. They didn't care. I got bunk beds and I had four students in a room. We just took the kids' playroom away. I mean, you do what you have to do, right?

No. Many people don't do what they have to do. That's why I'm zeroing in on it because I think that's one of the most interesting aspects of your story is how you can go from a low income to a high income and then figuring out the plan along the way.

My observation has been many times the people who are successful in different things, successful in real estate investing or successful in business investing, it really doesn't matter what the path is. It doesn't matter whether it's real estate or oil wells. It's a matter of the character traits and the person behind it.

And then they just find a market that works. And if the real estate market wasn't working or if the mortgage market wasn't working, you'd find something else. Absolutely. And so to me, your story demonstrates how for some reason, somehow, you were able to find some ideas and then to pursue a path when you needed to.

And adversity seems to bring out in some people their best where they say, "We're going to make this work out." And it brings out in some people their worst where they kind of sit down and get depressed and say, "I'm not going to do anything." And so to me, I'm interested in what makes a difference in the person.

The real estate is easy. The business is easy. It's just a matter of learning the skills and applying them in the right context. It's a matter of that personal skill. So that's why I was probing there because it fascinates me. You're so right because I will say that I do have family members who could definitely – they're struggling financially.

And of course, we're doing really well and I've tried to teach them the secrets and they just don't seem interested even though they absolutely have the skills, far better skills than I do. So I don't know what that thing is. For me, it was a labor of love wanting my husband to really enjoy those last six months if it was indeed true.

And again, he's healthy and happy today. It was also my labor of love of not wanting to be the mom who is not home. I couldn't do it. I couldn't be the person who leaves the house at seven and comes home at seven and someone else raised my kids.

And then I do remember there was like this turning point of absolute 100% conviction that I was going to make it happen. There was not a shred of doubt I was going to do it and I was going to figure it out and there were people smarter than me.

I'm not smarter than me. People less smart than me who had done what I wanted to do so why not me? And I think that's what happened on the show is I would interview these people that were retired by the age of 30 and the way they did it, it's like, "Wait.

Anyone can do that. You just have to do it." You mentioned that when you were interviewing all these wealthy people, it was either in business or real estate. Did you find that real estate, just in your experience, I know this is not academically rigorous objective data. I'm just curious about your personal gut level feeling of doing those interviews.

What percentage of people had built their wealth through business, private business and what percentage had built it through real estate? That is a great question. Because it ended up being a mortgage show, of course, the people I interviewed were mostly real estate. But as I started to attract an audience who wanted that and then I suddenly overnight became a real estate celebrity even though I was learning it myself.

But I had this pretty big radio show and suddenly that was my focus. I was being asked to keynote at different real estate events. I had to learn quickly. And it was in those scenarios where the audience was mostly business or many of them had spent most of their lives saving money the traditional way and just weren't happy with the way that went.

Just IRAs and the stock market and S&P and all that. So, most of our members are that. They're people who have just saved really well or they have really, really good businesses and just about anything. I mean pizza, franchises, health clubs, car parts. There's so many different ways that people were able to find the money to use for real estate.

But for my audience and the people I interviewed, we really pretty much focused on real estate at that point. I just want to clarify one thing. I believe the date that your husband was sick, was diagnosed with the illness was 2002, not 2012. Is that correct? Yeah, yeah, yeah.

So, you had a misspoke and said 2012. I think I did. So, over the last, that'd be 14 years now. Over the last 14 years, set aside the network that you built and the business that you built. What was your path into investment yourself? So, as we were learning, we realized, wow, we're already doing this.

We have this house. We've been renting every nook and cranny of it. It was such a lifesaver to have that house because there were times we paid almost no rent, quote unquote rent, because we were renting everybody else, all these other rooms, and that was covering the expenses and some.

And so, we already knew the power of real estate from that perspective. And then, as I said, it was at a time when that property gained about $100,000 per year. So, it just made sense to do what we were hearing everybody else do, which was to refi and take some of the cash out and go buy property.

Now, fortunately, I was being given some amazing advice from these people on the show. I'd interview like Robert Kiyosaki and Dennis Kaminsky and some pretty high level people because having that platform, I was able to get them to talk to me. And many of them, offline, I would say, "All right, come on.

Tell me where you're investing. I need to know." And for many, most, it was Texas because in the mid-2000s, we were watching California real estate just bubble up. I mean, 100% of your paycheck going to basically going to pay for real estate, except for that little caveat that you didn't actually have to make your payment and you didn't actually have to qualify.

So, you could qualify for a loan based on a teaser rate. So, when the adjustment would come, there was no way you could possibly make that payment. And so, we knew something was wrong and these experts on the show absolutely knew something was wrong and they said, "California is going to have a major meltdown." What most people didn't know is the entire country was.

But Texas wasn't because they weren't doing those. They had very, very strict mortgage laws. They didn't allow 100% financing. They didn't allow 105% financing. In most of the country, you could get a loan on a property. You could purchase a property, not put a penny down, but instead get 5% back.

You know, I mean, it was crazy. You get money back for buying a home. So, you could go buy your furniture or whatever. Insanity. And so, Texas didn't allow that. And you couldn't refi past 80% LTV because they'd already been through it. They had been through the SNL crisis and it wiped them out in the '80s and they weren't going to allow it again.

So, after that SNL crisis, the government came into Texas and said, "We're going to make this the most job-friendly place in the U.S. And we're going to give tax credits and all kinds of incentives for business to come here and we're going to diversify out of oil." Because obviously, that did not work.

They went into a major recession when, you know, worse than most of the country. So with good and strong leadership in Texas, it did work and it became the place with the strongest job and population growth in the country. And our experts on the show recognized that. And yet, home prices had not caught up.

Nobody thought anything would ever happen in Texas when it comes to real estate because it never had. And so, prices were like 28% undervalued. Salaries going up, but home prices not doing anything. So, you know, my experts on the show were teaching us, "Hey, if you sell this overpriced bubble property in California and buy and instead, you know, exchange it for property in Texas, you can quadruple your cash flow and avoid the coming crash." And so, we didn't take all the advice.

We kept the house. We just refied, took some cash out and bought eight properties in this part of Texas called Rockwall that is now one of the nicest places in Texas to live. But we were able to buy properties there for like $140,000, $150,000 for gorgeous brand new homes in this very nice part of Dallas near a lake.

And we knew, the reason we chose that is we knew that the area, they were putting in a new freeway and that would connect this kind of remote little town to Dallas and you could get to downtown in 20 minutes. Whereas, at the time, you had to go around and it was going to take an hour.

So, we bought eight. And sure enough, today, you know, those properties have doubled and it's been really lucrative. At the same time, I said, you know, I was talking about this on the show, so my listeners were interested and they did do what I said. So, I had like one lady who had three homes in Stockton, California.

She sold them based on our advice for $400,000 each. They each rented for $1,200. So, you know, $3,600 a month gross she was getting on those properties. We were able to get her into 10 properties in Dallas that were each renting for $1,200 as well, but brand new, in good neighborhoods.

So, she literally walked into work the next day and quit her job. The next year, those properties in Stockton she sold were worth $100,000 each. So she would have lost everything had she not, you know, sold at the peak and bought at the trough in Dallas. And then, of course, since then her properties have doubled in value in Dallas.

So, you know, that's basically how Real Wealth Network was born was we created a place where investors could come and just learn from these experts, understanding market cycles and how to identify a bubble and how to, you know, how to invest for cash flow because Californians don't know anything about that.

They only invest for appreciation. So when that's not happening, when you've peaked and there's not appreciation and worse, you know, depreciation, values going down, then that method doesn't work. So we taught this new concept of cash flow and, you know, it just took off. So that's where we are today.

So how long has Real Wealth Network been around? It basically started pretty early on because, you know, because I was, I think 2003, 2004, we were already starting little meetings because I was being asked to speak at these different events because I was now the host of this real estate show and everybody thought I knew something about it.

I was really just learning myself, but we were also learning and doing and I was surrounding myself with experts. And so I would be asked to go speak at these real estate events and I would sit in the back of the room when I was done speaking and I would hear these, ah, people that just made my skin crawl, you know, and they would be talking about, you know, foreclosures and how to knock on doors and do this and do that.

And, you know, for $20,000 you can buy the bootcamp and learn how to do it yourself. And I didn't know anything about foreclosures so I didn't know specifically that they were lying but they just, there was something sleazy about them. And this one time I was in the back of the room with a man who actually did buy properties at auctions and did do foreclosures and he knew the business inside and out and he just tapped me on the shoulder.

And he was like, "These guys are lying. This is not true. What they're telling is just not true. It's not how it's done here. Maybe it's how they do it in Georgia or wherever they're from, but not here." So he raised his hand and said, "Sir, I think you've got the laws wrong here.

You can't do that here." And the speaker said, "Oh, okay. We're going to take a break." And he comes to us because I'm sitting next to this guy and he escorts us out, tells us to leave. That's when I realized, oh wow, the only real estate groups and investment groups at that time were just selling these boot camps and these educational programs but not really teaching people legit investing.

So we just saw this amazing opportunity and that's why we call it the real wealth network. It's like I wanted people who didn't have anything to sell, that they would just be willing to come, don't wear a suit, wear your baseball cap, whatever. It's like the millionaire next door type.

And come and just tell us what you're doing. And nothing's for sale. And just make an investor group where people can legitimately learn the business. And that's what we did. And it just, again, it grew because there was such a starvation, such a need for real information. And so that's what we do.

Now we charge a whopping $10 a month for our academy because we still have the belief that we want your money going into investment property, not into, I mean education's important and I'm not knocking people who charge a lot for good education. But we just feel like we want to provide the education and make it affordable so that your money goes into investing.

So I don't understand fully your business model. If you're not charging your members, how are you earning income and profiting from the business? Well at the time I was doing mortgages. So in the very beginning, so like I mentioned the woman in Stockton. So I helped her buy those 10 properties in Dallas.

And so I did 10 mortgages and that was good money. The mortgage world, the mortgage meltdown happened and then Dodd-Frank came along and there's 22,000 pages of regulations and oh my goodness. Mortgage brokers deserve a lot of credit because it is so, so hard to get it done today.

There's so many regulations. So I didn't want to do that anymore. I went to the real estate side and decided to basically have a network across the country where we would do a referral type thing, basically realtor to realtor type thing. So I would go to Dallas and work with the real estate agent there and say, "All right, you've got your 3% commission you make on these 10 properties or whatever.

I want half." So we co-brokered like that. And that's how we still do it today because I can't sell property in Texas or Ohio or Indiana or Florida or any of these places where we feel the opportunities are today but I can co-broker with agents there. So our members don't actually pay for our advice and our help because the broker does.

And it's not any more than they'd have to pay anyway because there's always sales commissions, right? >> Sure. That's great. So now Real Wealth Network, you have information, you're in webinars, you're doing presentations and whatnot for the people that are there. And then you still have opportunities to set up referral relationships using your real estate license with other real estate agents so that as your members are investing in different locations, you're able to share in the commissions from that with the real estate agents who are selling the properties.

Is that accurate? >> That's it. Although we went one step further because it's still really hard as a, you know, we've got investors from all over the world. We've got lots and lots of California investors and we're really promoting judicial states right now. These would be the states where there's still a backlog of foreclosures because of their very strict foreclosure laws that make it nearly impossible for a bank to foreclose.

Like Florida, I mean, it takes six years to foreclose. It's crazy. So what we've done, it's still hard for someone from California to make offers on properties and then oversee a renovation because a property that's been sitting in foreclosure for six years is going to need work. Even if it was a brand new property at the time, it's been sitting or uncared for by the person who's been living there not making any mortgage payments for six years.

So we just didn't want our members to have to deal with a renovation from afar. So we went one step further where our teams in these different areas actually buy the properties, renovate them, get a tenant in, a very highly qualified tenant, and offer ongoing property management for what we call real turnkey property.

And real is an acronym for what that means. It means fully renovated, fully renovated so it's like new, everything replaced, new HVAC, new pipes, new, everything updated, new roof if needed. And evaluated so it's been inspected by an independent inspector and then appraised and then licensed property management in place so that basically an investor can come in and buy a rental property that's already done.

All renovated, all taken care of. You can inspect it, appraise it, and know that it's exactly what we're saying it is. It's just, we still, there's some people who still prefer to buy the property and oversee the renovation but a lot more, there's more factors there. Things can go wrong.

I don't know if you've done a renovation or tried to, I don't know if you've tried to manage contractors in your own home but that's not even easy so it's even harder from afar. The real estate business is a mixture of investment and business and it is a specialized business whether you're doing renovations, that's a specialized business.

Every aspect of it is a specialized business. And so the challenge, and I was going to ask you about this, I want to, well let's go ahead and do it now. The challenge is often for real estate investors, people who have the expertise of investing often have built that expertise partly with their own money and often they are short on cash especially at the beginning of their career.

So there are a few ways that you can creatively finance it. Sometimes you can get the sellers to finance it but I have a number of friends and I think it's a very viable, valid business model to use other people's investment dollars who are looking for good returns and you take and apply your skills with developing the property, renovating the property, getting it rented and you're using a private investor's money.

And there are a lot of people who are interested in owning real estate whether that's for the potential of possibly higher returns and they can get in public and trade securities whether that's some of the getting the benefits of the depreciation expense for their tax planning whether it's from a perspective of diversification, owning some physical tangible property in a location that they want to own it in versus having everything be paper assets.

There are various reasons that people could do that but it's a hard thing. It's hard to advise somebody who's making multiple six figures doing an excellent job at their job to say, "Well, you should go and you should dedicate your time to investing and finding a local property for $200,000, fixing it up and doing it." A highly compensated person, it's most likely not a good use of their time to go out and walk away from $1,000 an hour work to do $200 an hour work.

So these networks and relationships and things like that can be a win-win. It can be a win-win for both people and so I see the value of them. The question always comes down to every single one of those things that you mentioned. There's a cost along the way when you have a professional doing that service.

So if you have renovation, the person who is supervising that is functioning as essentially a contractor and they're going to be paid for their services as a contractor. The person who's doing the evaluation or who's supervising the evaluation, there's going to be payment for that. The appraisal process and then the property management is going to be put in place and sometimes I wonder if after layering on all of those layers of cost, I wonder if it's still worth it.

I wonder if the benefits are still there with regard to the actual returns from the real estate. Because much of the real estate return potential seems to be from being able to take out and do – here I'm primarily thinking of single family houses. There are many ways to invest in real estate but many of the returns of working in things like single family houses seems to be in taking the profit from those various activities.

So after your investors are going through and offering these properties to other investors, do you have any sense of how that impacts the returns for the money investor at least? Oh yeah. Here's the thing. I brought in a – now we're a legitimate company. Back in 2003, we were just figuring it all out and we were one of the first to figure it out and so of course, there are people who copy.

And so there's a lot of people out there who are calling themselves turnkey rental properties. You can go online and search it all day long but I can tell you that most are not. We turn down nine out of ten companies who say they're turnkey. So I hired a Six Sigma black belt who is an expert, the highest trained expert on systems to verify when reviewing these companies that now say they're turnkey.

And it's so easy because our list, it's on our website, the very, very high standards that we expect when we call – that's why we call it real turnkey, not just turnkey. We saw this one company that – it's these young guys who totally know how to do internet marketing.

I mean they're brilliant internet marketers but they're doing exactly what you say. They're marking up the properties far beyond what they're worth yet the renovation is barely done. There's people in real estate and I think in any investment business, anywhere that has to do with money and big dollars that just literally don't care about the client.

They just don't care. They're in it for the short term and they're not going to last. But these kids were marking up these properties and selling garbage and when my team went and said, "Well, I don't even think these properties look renovated and you've sold it in this condition." And the kids were like – I call them kids, they were in their early 20s – were like, "Yeah, we've got a wait list." We're like, "Do these people ever come out and look at these properties and see what they're buying?" And they go, "Oh no.

They just look at the pictures we send them." So don't think that what I'm saying is easy for anyone to duplicate. Many have tried and it hasn't gone well for them. We are extremely strict on what we look for. Because I'm representing investors and I want a long term business where those investors rave about us and they do.

And so if we find a company who's got their systems in place and they're doing volume because they're so good at what they do, well then they're going to get materials much, much cheaper than the individual. So I could go out and try to buy a property in Florida and renovate it and you still have to hire the construction people.

You still have to do all that. The difference is I'm going to pay more for my materials and my contractors than the company who's doing 20 a month has contractors in-house. They've got deals with suppliers or they have their own supply companies. So it's a model where actually in the end it comes in cheaper.

So that's the beautiful thing. It's happened so many times at our events. I'll have somebody come running up to the front of the room, grab my mic, and I'm not sure what they're going to say. And this guy will say, "I'm a real estate agent. I have been buying properties in Florida for years.

I fly out there. I pay for hotels, airplanes. I hire my teams. I've got my real estate team in place and I cannot bring it in at these prices or at this level because it's just harder." And so it's really the opposite is true with the teams we work with where our investors are still getting it much cheaper than if they did it on their own.

And it's all done for them, all managed for them. And yes, you're absolutely right. They do need to come out of pocket for that appraisal and that inspection. But those are $300, $400 and well worth every penny. And to have that inspection come back looking perfect gives you a lot of satisfaction.

And same with the appraisal. A lot of times the appraisal comes in over. That makes you feel good. Sometimes it comes in under, but there's reasons for that. Appraisals, they're hard to do when in an area where there's a lot of foreclosures, it's hard to get the comps. But we always work it out.

And because we are a really powerful network now that when we find a team, we refer really high level, really high level investors to that team. And the last thing they want to do is ruin this relationship. So if one of our investors is unhappy with something, that company is going to take care of it.

And to the level of what's fair. Obviously real estate, things happen and sometimes things happen that you don't expect. Maybe a pipe breaks or something that didn't come up in the inspection. But in most cases, the company, the turnkey provider will go way beyond what would be normal to keep our investors happy because they want rave reviews.

As we record this interview in July 19, 2016, what are the trends that you see for US American real estate prices? It's a great question. I've had nothing but economists on my show. Well, I've had a lot more. We do a lot of success stories. But I'm still interviewing people to figure out what in the world is going on in this country.

It is craziness. The consensus seems to come to bread and butter. If you can really stay within the bread and butter properties, the good, hardworking Americans, the working class of America, what we call the B neighborhoods, the middle class, in the markets where prices, where fundamentals are still in place.

In other words, if the average income of the area is $50,000, then the average home price should not be over $150,000. Whereas in California, the average income might be $100,000, but the average home price is a million or something like that. And that's just not sustainable. So bread and butter America in areas where there are sustainable jobs, not jobs that come and go.

And let me tell you, jobs come and go every year because technologies are changing so rapidly. So an example is Reno, Nevada. We're doing actually more syndications, group investments, where we're pooling investor funds and buying land there. You know, Tesla's just gone in and put in the first of their battery factories that's the size of a football field, and there's going to be 10 of those.

Now, do you think Tesla's going anywhere? Do you think they're going to be out of business next year? I doubt it. So to be able to provide housing in an area like that, where there's 50,000 jobs expected in that area, and there's only been 800 new homes every year, there's a need for housing.

I'm not worried about an area like that. But when you go to another place that's maybe more dependent on the stock market or companies that might be dead tomorrow, I mean, I'll give you an example, retail. Retail's struggling, and it's going to continue to struggle. Retail REITs, you know, they're not doing well because, and when I say retail, it's like shopping centers, because, you know, what's changing?

What's changing is the way people buy. And when that, that's what we have to pay attention to. And so my 24-year-old millennial daughter is working for a company called Build.com, where people buy their construction materials online for cheap. How's that going to affect these big box stores? You know, more and more, I told on another show, in Malibu, our daughter just went to a prom.

And I asked her, you know, are you going to go shopping? And she's like, oh yeah, my friends are coming over, we're going to shop this afternoon. What do you mean? Online. So they all got together at our house, and they all bought their prom dresses online. When I bought prom dresses, we went to Macy's.

So you know, it's, everything's changing. And so you can't do what we used to do when trying to figure out where to buy real estate. It used to be that you would buy near big box stores. Not anymore. That's changing. You've got to stay on top of those things and only buy where there's jobs that are not going away.

How would you identify a job that's not going away? That's the trick, right? You know, one of the, you know, one of the things that we look at are, like I said with the Tesla plant, you know, that's a lot of money going into that. And Nevada wants it.

This is creating tremendous jobs. And so it's looking at things that are here for the future. And so another example might be there's a lot of places in the South where we're investing. You know, I used to have people say, "Well, we're going to invest in Detroit because that's where the auto industry is." And you know, it's like, "Really?

Is it?" You have to really look. Where is the auto industry? It's moving out of Detroit. And so, and a lot of it's moving to the South, to warmer climates, to cheaper areas where they don't have, you know, the same kind of, I guess, what am I trying to, union type, you know, the unions don't control.

And so, you know, that's, if you're going to see a Toyota or a Mercedes Benz or, you know, they're going to build a huge plant, it's probably going to be jobs. Another thing we look at is, recently is the Panama Canal was just expanded. I mean, I think just this month it finally opened to much, much larger container ships moving through the Panama Canal.

That means that huge container ships can now move to the East Coast instead of coming to Long Beach, California or Seattle and then training across the country or trucking. Now they can just go through the canal to the East Coast. Now, what's that going to do to the East Coast?

A lot. So, we are focused on port cities on the East Coast because, again, these are like things that aren't going to go away overnight. So, for example, Jacksonville, Florida, great market. They're expanding to be able to take on these new container ships that then is going to affect the whole economy because now the trucking is coming from that side, you know?

So, just things like that. Bigger deals, I guess you could say. I want to ask you about on your website, you have Chicago, Illinois listed as, I'm not sure, I don't know that you're saying it's the number one market, but you have it listed on the top of your list.

Why Chicago, Illinois? That surprises me. It's a little, you know, I'm pretty honest, I'm not pretty honest, I'm totally honest and upfront with how I feel about different markets. Now, I don't like the politics of Chicago. It's very similar to Detroit. They have entitlement programs that they can't pay for and the city's going to go bankrupt.

It just simply can't, you can't make promises you can't keep. I mean, all we have to do is look at, you know, Puerto Rico and, you know, Detroit and, you know, Chicago's headed in the same direction. So, here's the thing about both Detroit and Puerto Rico. People who bought bonds lost their money.

You know, if you bought bonds in Puerto Rico, you're not getting it back. You didn't do your homework. You didn't look and see that they're broke. Can't pay you back. But you know what? If you bought real estate, you're doing just fine. So none of that affected it. I have close friends who own property in Puerto Rico and it's only done better because now that whole burden of debt is gone because they defaulted, you know?

But the real estate's there. So they've still got renters. They've still, you know, the property's still, it's, you know, it's a beautiful part of Puerto Rico and it's doing well. Same with Detroit. Went bankrupt. But what did the property values do? They've only gone up. And so Chicago is the third largest, third or fourth, it keeps changing, largest city in the U.S.

There is a lot of good stuff in Chicago. It's just their politics are terrible. And so they're going, you know, it's going to come to a head. They can't pay these entitlements. They're going to have to default. And that's not really going to affect real estate at certain levels.

They have passed a bill where property taxes are going to go up 72 percent. I mean, you know, yeah, sure, let's blame the property taxes for our massive entitlement programs. But anyway, that's only affecting the higher end. So anything under $200,000 won't be affected by that new property tax.

So what do you think that's going to do for those properties? So we're helping investors get into properties in Chicago that are between $120,000 and $150,000 that rent and the cash flow is unbelievable. They're not affected by the taxes. They can offer lower rent because they're not paying that 72 percent increase in property tax.

So, you know, it's a it's a great play. We have an unbelievable team there and it works. But that doesn't mean you should go running off to Chicago and buy property because there's neighborhoods you need to stay out of. We just we have very good teams there that know exactly how to how to do it.

So you know, you've got to real estate is local and you got to know what you're doing and you know, you got to have really good teams. Two questions last on my list for you, Kathy. You and your family continue living in California. Is that right? Yeah, we love paying high taxes.

It's our favorite. What is your prediction regarding California real estate prices and why do you continue to live there? We have this thing about surfing. So we really, really, really like to surf. We live two miles from the beach. We bought the cheapest and oldest house in Malibu. It was cheaper than the house we owned, you know, that I told you about earlier.

It was, you know, just a dump. But we fixed it up. We love it. It's our home. And we have a daughter who, you know, our oldest daughter's already left and gone to college and is now working, like I said. But the younger one, we don't we don't want.

She loves it, you know. So probably what we're going to do is once she's gone, we're going to buy a vacation, not a vacation, but we're going to move to Nevada and buy a property where we can ski in Tahoe. And that would be our primary. And we would keep the house in Malibu, which would then become our vacation home.

So basically for taxes. But what do I think about California real estate? Well, California is California. Born and raised. I know it well. Prices go up. Prices go down. You can make a million. You can lose a million. You just need to know what you're doing. You either need to hold the property forever so you don't care or you need to time it well.

So I'm more about timing because I think you can really make your millions, sell and then, you know, transfer the property somewhere else until the market crashes, come back by then. So what we're doing is, you know, absolutely 100 percent. It's a bubble. San Francisco is the most expensive place in the country, more than New York City.

People can't afford to live there. It's not like the Silicon Valley is going to be there forever. It's moving. You know, there's tech jobs moving all over to Utah, to Austin, to Pittsburgh. You know, so to think that this one time in history, prices aren't going to go back down even though they've done it every 10 years, every decade.

They go up, they go down. People forget. So we're telling everyone who will listen, it's time to sell. This is your time to cash in. Go buy in these other areas like I recommended before and cash, you know, quadruple your cash flow. Rent in California if you still want to live there.

Wait till prices crash and then buy back in the market when prices are low. So it's already happening. It's already softening. The high end is already, you know, it's affected. I mean, the evaluations of these high tech Silicon Valley companies is just ridiculous. There's no fundamentals in place. So here we are.

People will listen or they won't. How are you protecting yourself with regard to your personal property? How are you balancing, yes, we're living here but we also want to protect ourselves financially? Well, that's what I was saying before. Like if you love where you live and you're not going anywhere, if you're not moving and you can afford your payment, then you have nothing to worry about.

It's just what you have to worry. So like I told you, we bought, it was a $750,000 home in Malibu. Now that might sound expensive to other people but in California that's cheap. We bought a one bedroom, one bath. Our daughter lives, we converted the garage for her room.

I mean, we're living small. It's California. It's Malibu. You know, the average home price there is like $10 million. So we've got this little tiny cottage basically but we love it and we're not going anywhere. And so we're going to have it forever. It doesn't matter. We can afford it.

But for people who come to me who are, and this happens every day, they're in their 50s, they're in their 60s, they're sitting in a dump, they don't love it, they're in a Silicon Valley, they're done. I just had a guy come to me, he got laid off. He's 65.

He's in the Silicon Valley. Well, listen, you're in the most expensive place in the world to live. Bad idea if you don't have your retirement in place. Sell it. Take that $500,000 tax free gain and go live an hour outside of the Silicon Valley or somewhere else that's lovely.

And buy, you know, I'm sitting in Chico, California right now in my daughter's place. It's two hours away from the Bay Area. You can buy a beautiful home here for $300,000, $200,000. So get out of the expensive stuff. Get into something you can afford. Take that extra money and invest it properly.

That's what you got to do if you're later in life. Don't sit there and think you can live in the most expensive place in the world when you don't have your retirement set up. If you do, then good for you. Live wherever you want. But most people don't. - Last question.

You have almost two things regarding real estate and business. You have some real estate investments and you have a business. Here's my question. Which has been better to your family's finances? - That's a close one because our business has taken off. Last year we literally said, "All right, this is growing too fast.

We need to slow down. Just improve systems. Just make our customer service better, our quality better. Just slow down." And guess what? We didn't even try. We're just trying to improve systems. So we're just at that time in life where everybody gets that real estate's a safe investment and we're very, very busy.

But really just trying to improve every little bit of it, every system we have. We did just make it to the Inc. 5,000. So we're excited about that. One of the fastest growing companies in the U.S. in spite of the fact that we're really just trying to slow down.

So to compare that to our investments, like I said, our very first investment we made a million dollars just living in a house. So we bought those properties in Texas that 10 of them doubled. We've done well. Now we are buying, just to give you an example, we pooled together, I think it was 100 investors who each put in $50,000 each and we bought this land in Reno just outside that Tesla plant and bought it from a distressed seller.

He was on a loan that ballooned. Balloon loans are terrible. It means you have to come up with a whole payment and if you don't you lose the property. So the seller was on a balloon because we were the only ones that could come in right away with cash.

We bought this property for cheap. By the time we closed we had a national builder come in and ask for half the lots for more than we'd paid for all the lots. So now we're sitting on these lots in Reno free and clear. So I mean probably still our net worth is much higher in our investments.

But the business is doing well too. Cathy, tell us about your website, any actions that you want my audience to take to follow up with you, who might be interested in your services and joining your network. Feel free to share with us all of the places that you'd like my audience to connect with you and to respond to the message that you have today.

Thank you. It's realwealthnetwork.com. Real like real, wealth like your money and network, realwealthnetwork.com. Membership is free and that will give you access to our weekly webinars where we do these educational webinars on different parts of the country and the data that we have on economics. I also have my book, Retire Rich with Rentals, that you can buy on Amazon and that's real simple reading.

You can do it in a day to help you make sure you don't make mistakes buying single families. People do and they shouldn't. It's not that hard but you got to do it right. So Retire Rich with Rentals and then my podcast is The Real Wealth Show on iTunes and also Real Estate News to keep people up on what's going on in the real estate world.

Thanks for coming on today. Thank you. Thank you for listening to this episode of Radical Personal Finance. If you're interested in building financial freedom for yourself and your family, please subscribe to the podcast with our free mobile app so you don't miss a single episode. Just search the app store on your mobile device for Radical Personal Finance and download our free app which also contains an archive of every past episode of the show.

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