Podcast 117: Investing in Rental Properties While in San Francisco with Kathy Fettke

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Kathy Fettke has seen a lot of ups and downs in the real estate market while living in San Francisco. She has bought rentals in San Francisco, but it can be really tough when almost every property costs more than one million dollars. After a health scare with her husband, she knew she had to find a way to create passive income while living in one of the most expensive markets in the United States. She has learned to buy rentals and even develop land in other markets to create that passive income and wealth. Kathy has also become an expert at helping others invest in other markets for cash flow. She tells us all about how she got started in the real estate business, how she built passive income in the face of a crisis, and how she helps others build more cash flow from markets across the country. You can listen to it all on this episode of the InvestFourMore Real Estate Podcast.

Click on the green button below to listen to Kathy and Me

How did Kathy Fettke get her start in real estate?

Kathy’s father was a dentist who also invested in real estate. In 1997, a property manager for one of her father’s properties sold the property without telling him! Her father needed to do a fast 1031 exchange with $500,000, so Kathy helped him pick a property in San Francisco that she and her husband could rent. Kathy ended up turning the house into a fourplex to help pay the rent, and her investing career began. Eventually, she inherited the property when it was worth $1.8 million. Kathy refinanced the property to finance other investments, but the market in San Francisco crashed, forcing her to sell the fourplex for a loss.

In 2003, Kathy’s husband was diagnosed with melanoma and wasn’t given long to live. Kathy and her husband decided to build as much passive income as they could so they could enjoy life and not work. Luckily, the doctors were wrong and her husband is alive and healthy today, but along the way, they bought many rentals and have created a fantastic life thanks to real estate.

How to get started investing in real estate.

What are good areas to invest in real estate in the United States?

Kathy has bought—and helped others buy—houses all over the United States. I asked her which markets she likes to invest in, and she mentions that markets that are not on peoples’ radar are usually the best to invest in. The prices have not been pushed up by speculation, and there is opportunity for cash flow and appreciation. Here are a few markets she talks about on the podcast:

  • Cleveland: I own a turn-key rental in Cleveland myself, which has done well. Kathy likes Cleveland because of the medical industry in the area, and millennials are moving into the area.
  • Atlanta: Atlanta used to have great cash flow, but the market has improved there. She thinks there are still areas that are great for rentals.
  • Kansas City: I have had a few people on my podcast who were from Kansas City, and they also agreed the market was great for rentals.
  • Detroit: Many people are scared of Detroit because of the huge crash in their real estate market. However, the city scraped many houses, and the market has improved greatly. Kathy warns that you need to know where to invest in Detroit, but there are a lot of great opportunities there.

How to invest in long distance turn-key properties.

How has Kathy invested in new construction projects and developments?

I tried to develop a minor subdivision last year on some land I bought. I ended up selling the land and making a profit, but I did not create a subdivision. The process to create a subdivision would have taken over a year and taken a ton of cash. I see why there is so little development going on in Colorado, even though we have one of the hottest real estate markets in the country. Kathy got into developing real estate by taking over subdivisions that were not quite finished but had most of the work already done. She let the original developer plat the land and get utilities in place, and when that developer ran out of money, she stepped in with other investors to take over the project. She talks all about the process and how she got started developing on the podcast.

What are the top nine ways to invest in real estate?

How can you contact Kathy?

Kathy created The Real Wealth Network and the Real Wealth Podcast to help others learn how to invest in real estate. You can find a lot of information about her at realwealthnetwork.com and on her podcast.

Thank you for all the support for Hurricane Harvey victims!

For those of you who are on my email list, Facebook, or saw my post on helping the hurricane victims, thank you! I put all my books on sale, and over Labor Day weekend, I had close to $1,000 in sales that I will be donating to the area.

EPISODE 117

 

[INTRODUCTION]

 

[0:00:13.9] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties, with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.

 

So on this show, we like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, how I buy properties, check out investfourmore.com.

 

[INTERVIEW]

 

[0:00:13.3] MF: Welcome to the Invest Four More Real Estate Podcast. My name is Mark Ferguson and I am your host. I’m a house flipper. I flip 10 to 15 houses a year. I own 13 rental properties with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01. I run a team of nine and we sell close to 200 houses a year.

 

On this show, we’d like to interview house flippers, landlords, and the best real estate agents in the business. Stay tuned for some great shows. If you want more information on my rentals, on the numbers, how I buy properties? Check out investfourmore.com.

 

Hey everyone, it’s Mark Ferguson with Invest Four More and welcome to another episode of the Invest Four More real estate podcast. Today I have very exciting guest, Kathy Fettke with the Real Wealth Network. She’s been very busy as an author. She’s been featured on many major networks, loves to teach people about real estate and as an investor herself. We’re going to talk about all types of different things, figure out how she got started in the business and what she is up to now.

 

Kathy, thank you so much for being on the show. How are you?

 

[0:01:28.8] KF: Wonderful. Thanks for having me.

 

[0:01:30.5] MF: Oh! Great. Appreciate you joining us. I always start everybody out, I want to know exactly how you got started in real estate. What was it that triggered you to start investing or become interested? What first got you into it?

 

[0:01:43.5] KF: You know, it was two things. The first was totally by accident where my dad had gone on vacation, he was a dentist. Notoriously, they are not great with investing. I hate to say it, but it’s true. He had invested in an apartment and had depreciated it for years, but he was just a silent partner. The managers of that apartment sold it and didn’t tell him. No phone call, nothing. He just got a letter in the mail when he came back from vacation saying that the property is sold, which meant that if he didn’t find a replacement property and do a 1031 exchange he would’ve paid hundreds of thousands of dollars in back taxes and he just was on the verge of retiring and this would have changed his plan.

 

He was panicked. My husband and I had just got married, this is January of ‘97. 20 years ago. It’s our 20 year anniversary year.

 

[0:02:39.4] MF: Congratulations.

 

[0:02:40.7] KF: Thank you. I just kind of looked at my dad, he was in a panic and called. They didn’t know what to do. I said, “Slow down here. You need to find a property to rent? Rick and I got married, we were renting.” I just said, “Let me help you with this. We’ll find a property and we’ll live in it and take care of it for you.”

 

We did. The next day I found a really big house, because it was a big exchange. We had to spend about five or $600,000, but this is 20 years ago. Even in the San Francisco, Bay Area, that was a hefty sum and so I got to buy this six bedroom house right outside of San Francisco. 97 was the bottom of that kind of down market, that cycle, and we didn’t know anything about that, but bought the six bedroom house and just turn kind of turn it into a four-plex all by accident. It just made sense. We got to live in this beautiful big, new home and a great school district for our family and then kind of discovered that we could live there very inexpensively by renting out these different rooms.

 

That’s how we became landlords, living inside our house. What I didn’t know, and we made an agreement with my dad, we take care of everything, we’d refi the house and pay him back anything he had ever put into this property or past properties as part of the exchange and pay the trust back. We ended up inheriting that property 10 years later after he passed and it went from 500, because he died at the peak of the market. They said we bought at the bottom in ’97. By the time we inherited it, it was worth about 1.8 million.

 

[0:04:25.0] MF: That’s a slight improvement there.

 

[0:04:28.7] KF: Yeah. It was a crazy market, but keep in mind that was 2007 at that point. It was just a few years later that everything went back down again. It was just a temporary moment of massive wealth and then it was gone.

 

[0:04:43.9] MF: Do you still have a property or did you end up selling it?

 

[0:04:46.7] KF: Again, we were by then into real estate, but into it heavily. Because we had taken that property and refinanced it, taken a bunch of the cash out to buy other investment properties, it was really overleveraged. It was just negative cash flow. We ended up selling it at a loss. That was a big bummer. It hurts, but lots and lots of lessons learned. Just like every failure, every success, we learn so much, but we learn more from the failures so we can have more success in the future.

 

[0:05:18.4] MF: Right. It sounds like it wasn’t a waste obviously. You learned a lot and if you’re able to cash out money and buy other real estate, in the end I’m sure it ended up being a great deal.

 

[0:05:27.4] KF: Yeah. Like I said, probably the best thing we got out of all of that, the run-up. This is why I’m m passionate about what I teach people today, is when we got into real estate we only knew an upmarket for 10 years. We didn’t really know there was any other kind of market, and so every year the house we bought made $100,000. No kidding. We wouldn’t really have had to work if all we do was just keep refining, taking that hundred thousand dollars off out and living on it, which a lot of people did. We did something different and invested that money because of kind of story number two, which is how did I know get more into real estate and create the Real Wealth Network and sort of do what I do today.

 

That is in 2003. I think it was 2002. I should really know. My husband came home from the doctor and was told he had melanoma and after more testing that they thought it spread and that if it did he had six months to live. He was in shock. Healthy guy, extreme athlete, takes good care of himself. It was just a shock.

 

Here we had this big house that we’d already kind of learned how to rent out, and so I said, “Well, let’s just do more of that so you can get better and not work. If the doctor is right, spends six months doing everything you want and spending time with our young children or with friends, whatever. Let me figure out the money peace.”

 

At the time I had a radio show on KSFO in San Francisco and I just started interviewing people on how to make passive income and we’d already kind of been doing it, but at that point we couldn’t buy in the San Francisco, Bay Area like you can really in a lot of places today. We had to learn how to invest elsewhere and that’s kind of what started me being passionate about finding the best places nationwide to buy income properties that create passive income.

 

The good part of the story, the positive side, is that Rich is totally fine today, healthy as can be and the doctor was wrong. That’s good.

 

[0:07:34.6] MF: Yes. That is very good. I saw him on your websites, so I was assuming he’s okay.

 

[0:07:39.4] KF: Yeah.

 

[0:07:40.9] MF: I know San Francisco is one of the toughest places in the country to invest in, because you said the price points are so high. It kind of has the same issue with Colorado, but multiplied where it’s really hard to build anything, all you do prices keep going up.

 

What do you look for in other markets? How do you first start figuring out where a good place to invest is?

 

[0:08:04.5] KF: If people are looking for cash flow, so if you’re in the age range of 50s or 60s and you’re really wondering, “How am I going to ever stop working?” Because you look at maybe what you’ve saved and your investments and it’s just not enough if we’re going to live as long as we think we’re going to live. It probably isn’t enough money.

 

What I’m able to show a lot of people in high-priced markets, like San Francisco, is one tiny shift and their portfolio could change that scenario dramatically. What I mean by that is — I’ll give you an example of a woman that came to me 10 years ago, very similar market, prices were already up way, way past previous highs and the affordability was out of whack. That was already in 2005, and this woman came to me and had three dilapidated, just awful old properties in the worst part of Stockton, California. But because the market was so insane she could sell those for about 400,000 each, and they rented each for about 1,200.

 

When she came to me, because I had — As I said, I had a Real Wealth Show in San Francisco and she heard me talk about what we were doing. She said I want to know what I can do because I want to retire and I hate my job.” She was just working for a tyrant of a boss and had the dream of turning in that piece of paper that says I quit it, just walking out.

 

We looked at those properties and said, “Okay. If you sell this, you’ve got a $1.2 million exchange. We can go to a place like Texas and buy nine properties and each of those properties is going to rent for the same amount that your three properties rent for in the California.” We did. We knew where the path of progress was in Dallas 10 years ago. We were following where new freeway were going in and where the new infrastructure was being built and we helped her buy brand-new homes there that, like I said, rented for 1,200 each. So she tripled her cash flow. You can imagine, it went from 3,600 a month to 9,000 a month and was able to do that thing and wrote down I quit and handed the piece of paper to her boss.

 

[0:10:21.0] MF: That was probably a good feeling.

 

[0:10:23.1] KF: A great feeling. That’s a lot of what we help people do is to see, “Okay. Maybe you bought all right.” A lot of people bought really well back in 2009 up until about even 2012. You could almost buy cash flow properties in California. It was decent. A lot of people did, but since then, depending on when you bought, the values have gone up maybe three times.

 

Now, when you look at all the equity in those properties, they might have made sense before when you bought them, but now that’s a whole lot of dead equity just sitting there that could be repurposed, like I said.

 

We’re helping a lot of people who made smart decisions 5 to 7, 8 years ago and are now ready to make another smart decision which is to sell those and exchange them for high cash flow properties elsewhere, and that literally can be the thing that has them be job optional.

 

[0:11:17.8] MF: Yeah. That’s a great topic to talk about, because I thought about the same thing myself where I was buying properties for hundred thousand dollars, putting $10,000 of work into them, renting them out for 14 to $1,500 a month and it was awesome. It was a great cash flow in properties, plus I got great deals on them. Now those properties are worth $250,000 and I’m getting maybe $1,600 a month in rent.

 

Like you said, there’s so much equity in there and when you figure out the percentages, I’m making 5% on my money, which isn’t very good in the real estate world and thinking, “Man, do I want to sell? Do I want to exchange? Do I want to go in different markets?” I have sold a few of my own properties to use that money to flip more houses and buy some commercial things. Yeah, it’s tricky. You see a really good investment you made, but then it’s like, “Well, do I want to make an even better one and sell these properties or do I want to hold on to them?” It’s tough.

 

[0:12:12.4] KF: Yeah. I spoke in an event in Orange County last week and kind of basically telling them what I was telling you. This woman in the front row said, “Well, I’m cash flowing in my California property.” I said, “Really? Tell me more.” She said, “I bought it for this price and I get this much rent.” I said, “Okay. What’s it worth now?” She said, “I don’t know and I don’t care.”

 

That’s actually a somewhat normal and powerful response really, because if you’re just owning buy-and-hold real estate you don’t really necessarily need to think about the value, because if values go up or values go down, it doesn’t really matter if what you really wanting is the rental income.

 

However, in her case, because the difference was so dramatic where she may be spent $600,000 on this property. Now, it’s worth 2 million. That kind of equity. I showed her, “Well, you can go from this $6,000 a month that you’re making and you could be making $20,000 a month. That’s the difference that can change your life.”

 

That’s what I’m constantly doing is educating people, number one. How to just repurpose their investments so that, again, you get more cash flow, but also to stop people from thinking that if they buy today they’re going to enjoy this massive run-up that we’ve had over the past 7, 8 years because that’s what I see people do. That is just the biggest mistake.

 

This one woman came to an event that we had in the San Francisco, Bay Area and said very proudly, “I just bought a four-plex in Berkeley.” I said, “Oh my gosh! Are you cash flowing?” She kind of looked at me and she’s like, “What do you mean?” I said, “Do you know how much you’re getting in rent?” She was like, “No.” I said, “Okay. Would you know what your expenses are?” “Not really.” I said, “Why did you buy this?” She said, “It’s Berkeley. It’s California. Prices never go down.” That is — I don’t know where people get that idea. Prices definitely go up dramatically in California, but they also go down. If you bought it in 2006 or 2007 and you bought at the last peak and then you watched your values go down 50%, you’re maybe 10 years later back to where you were, maybe slightly above what you paid, but that’s 10 whole years of not getting appreciation because you went down and then a slow up. Don’t buy at the peak of a market thinking that you’re going to have another 10 years of run-up. It just rarely, rarely works that way. I can’t imagine that could be possible in a high-priced market. Certainly not in California, San Francisco or L.A. There’s no physical way that people could afford properties that are double what they are today. It’s just not going to happen. Not right now, maybe someday.

 

[0:15:01.6] MF: I completely agree with you on the strategy. There’s a lot of people who buy with negative cash flow just hoping prices go up and nobody knows for sure what’s going to happen. Yes, you have an idea and you can follow the path of progress, but there’s so many things that can change and there’s also a lot of other people doing the same things. If too many of those other people are doing it, then prices might built up too high for what the people can afford. There’s just so many things to look at.

 

Like you said, if someone had bought in 2007 at the peak but they had cash flow, then they’re making money that whole time. It’s not as big of a deal, but if they don’t have cash flow, they’re losing money that whole time, and when you do sell, you’ve got selling costs. There’s just a lot of costs that are involved in real estate where if you’re not making money while you hold it, it can add up really fast.

 

[0:15:44.3] KF: Absolutely. I hope people aren’t doing that, but they are. People who are doing that are crazy today. Yeah.

 

[0:15:52.5] MF: What are some of the different markets across the country that you like right now?

 

[0:15:56.4] KF: We like sort of the areas with a bad reputation. I hate to say it. When you go into an area that the rest of the world doesn’t even know exist. If you go to some foreign country and say “Oh, invested in the U.S. It’s a safe place to invest.” They’re going to know L.A., San Francisco, Chicago, Las Vegas. They’re going to know some of these areas, but they’re not going to know Cleveland, or Pittsburgh, or maybe even Atlanta, Milwaukee, like you and I had talked about before. These aren’t cities that they probably even have heard of. Because of that, you’re eliminating kind of this whole foreign buyer elements that has helped to drive prices up in some of the more well-known market.

 

In fact, I just did, again, another story on real estate news podcast that said foreign buyers were good. A number of purchase were up like over 40% this year. When that kind of money comes in, and they’re not really looking for the same things we’re looking for. They’re looking for safety. They don’t mind paying more. It’s very common that they drive prices up.

 

I want to be in areas that are kind of out of their sight and out of the site of the institutional buyers and investors in general, but not just some random market. I’ve heard people love to invest in — I’m going to be kind of mean now, Jackson, Mississippi. Nothing from my data and research shows that there’s anything fabulous happening there. I could be wrong, but it’s just a pure cash flow play. The only thing that scares me about an area that only cash flow and no growth, no economic growth, no population growth, is that if you just need one repair, a roof, just new pipes and plumbing, whatever, that’s probably going to eat up your cash flow for the year.

 

Whereas if you can get into a market that is just being discovered, it’s a growth market, there’s a revitalization happening there and you can get properties cheap but you know that growth is coming, then you get the mixture of high cash flow and appreciation. Like you did in your state, and sure a lot of those cash flow properties you bought were back before the growth is happening, right?

 

[0:18:11.8] MF: Yes, for sure.

 

[0:18:13.0] KF: Yeah. To answer your question, we know that we’ve got two massive populations in the U.S. that really are driving the economy. We’ve got the baby boomers who were retiring and we’ve got the millennials who were just going out and starting their life. These two groups are really going to be the housing demand of the future, so we’ve got to follow where are they going. What we’re seeing is there is job growth in certain markets that where businesses have said, “Forget all these high taxes and high property values and high salaries we have to pay in California or elsewhere. We’re going to go a rather unknown place and we’re going to put our business there, because there’s tax incentives and we can pay people less and they can have a higher quality of life.”

 

Some of those areas would be, like I said, Kansas City. Cleveland, Ohio, this is an area that’s become a huge medical city, and so that serves both of those populations. The baby boomers want that medical care and the young millennials want to be in that business. You’ve got universities all around Cleveland. People who are coming out as nurses and doctors and in that medical world and high paid and they’re looking for housing. It’s a great market. I bought a property there for — I don’t know, $55,000 in rented for 900. It’s definitely worth more today. You can still get incredible value.

 

Detroit is an area I avoided like the plague until recently, where that area now has billions of dollars in revitalization and yet you could still get properties for that kind of same price they paid in Cleveland years ago. You can get something for around 60 to 70,000 that rents for more than the 1% of purchase price. We want to be only in neighborhood in Detroit that are in the path of progress. Don’t want to be in the areas that are going to take longer to turn around. There’s just a few.

 

[0:20:05.1] MF: Yeah. That’s great. It’s weird. I have a house in Cleveland too. I kind of bought it as a turnkey rental and I’ve never seen it. I’ve never been to Cleveland, but a company that trusted work there. I have no idea what the value has been since I bought it. I’ve asked a few people and they’ve given me varying answers. I bought it $45,000 and it rents for $800 now too. Yeah, there’s definitely good numbers there.

 

In Detroit is one of the hottest real estate markets in the country right now, when a few years ago people had given up on it and thought the whole city was going to implode basically. It’s crazy.

 

[0:20:39.9] KF: You know, some of dynamics there, and these are the things that I look at and share with my audience when we do events on my show, is what is responsible for changing Detroit from just a place where they were giving properties away and no one would take of?

 

What happened is because of just the devastation from everything that happened to that city. Crime rose to 50% rate. It was just a scary place, but this city came in and tore down, the raved thousands and thousands of home so that there wouldn’t be the vagrants and there wouldn’t be the crime in those neighborhoods. They just tore the buildings down. At the same time, the city went bankrupt and just kind of let go of a lot of debt that was weighing it down.

 

Then a couple of billionaires came in who really care about the city, have businesses there and they revitalized parts of it and now it’s become a real millennial magnet. It’s amazing. It’s kind of become a cool place to be as long as you know where that is and, again, where the path of progress is, because there’s still parts that are really dangerous that you definitely want to stay out of. Detroit matches everything we look for, which again, is cheap, but with growth in the future. Yeah, it’s cash flow today and probably equity growth in the future.

 

[0:22:04.9] MF: That’s a funny story, because like we’ve talked about before, the Colorado and San Francisco and markets going up in price because there’s not enough homes. The opposite in Detroit where prices dropped through the floor because there’re too many houses for the people there but they just tore them down to fix that problem, which was actually a brilliant plan instead of just leaving them there. It seems like a waste, but at the same time it probably helped their market tremendously.

 

[0:22:28.5] KF: Yeah, I think so. They turned a lot of those areas into parks or just completely revitalized them with new building. It’s really coming around. Like I said, certain parts are going to take longer than others, but that’s what we look for. Even in area like Atlanta where prices went up pretty fast and it’s just like Denver, it hard to get cash flow now whereas it used to be a lot easier. It used to be a cash flow market, now it’s not, but there’s revitalization happening in part of Atlanta as well with the new beltline which is very similar to New York Highline. They’re taking an old train track and putting parks on it and little new cute neighborhoods around it and. Even in a city like Atlanta where it’s been getting harder to find cash flow, you can go into those areas and get both cash flow and probably some appreciation in the future.

 

[0:23:17.0] MF: Yeah. There’re opportunities all over. One other thing I want to talk about with you which I know you’ve been working on two, is with it being harder to get cash flow, find existing properties, you’ve you been venturing into new constructions. How has that gone and what are some of the challenges with that business?

 

[0:23:34.5] KF: Seven years ago I had one of the members of Real Wealth Network come to me and say, “You have got to meet this developer.” I said, “I don’t know anything about development. Why do I need to meet this guy?” He said, “Just do it.”

 

I drove down to Carmel Valley and it turns out it was this beautiful, beautiful home with a tennis court and horses. Okay, this guy is definitely established. Then I looked at his resume and he’s developed property all over Monterey, and California and San Jose and just all over for 40 years. I thought, “Okay. I’ll listen to what this guy has to say.”

 

It turns out that every single decade when there is a housing downturn or some kind of recession and properties go back to the bank, the asset managers would call him because they didn’t know what to do with some of the assets, mostly the land, and he did know what to do with it.

 

He said, “Look. I just found 27 townhomes, waterfront, 70% complete. They had the whole the exterior done. It was just the interior that needs to be finished out,” but the bank failed. The credit line disappeared in 2008 and it went to the FDIC. He was able to negotiate this $20 million project down to $3 million and he said, “Can you raise $3 million so we can buy this?” Because he couldn’t just walk into a bank, banks just did not have money at the time. I said, “I don’t know.”

 

I sent out an email to our list and said, “Hey, we’ve got this opportunity. Anybody interested?” We raised the $3 million in an hour. I thought, “Okay. I didn’t know that there was appetite for this with our investors, but apparently there is.”

 

We ended up syndicating that. We raised $3 million. Finished it out and back in middle of 2010, right at the double dip recession, our investors got out of that and made about 20% IRR. From there on this developer’s name spread, kept finding more and more deals. He found some land outside of Tampa. It was $160 million. It’s been in escrow and they were about to close when the market just crashed in Florida and that whole project went back to the banks and Fred walked in and talked to the asset manager and walks out with these 4,200 lots for one-tenth of what it had been in escrow for.

 

Once again, our group raised the money and we’re just about to get those properties out, get them online probably next year. We did the same in California. I learned that, “Hey, I’m never going to want to develop a property. It’s way too complicated and hard, but I will partner with people who know how to do it and have done it successfully for 40 years.” That’s basically how we’ve gotten into it. It is very exciting and very lucrative with the right team.

 

[0:26:24.6] MF: No. That’s a really cool strategy, because I tried to build my own minor subdivision in the hoops you had it jump through just for a minor simple subdivision with the county were incredible. It was going to take two years to finish the whole thing, even though it was only like seven lots. I’m just, “This isn’t worth my time,” but if you can jump in there after it’s all been kind of plotted and developed and approved, that’s the way to do it if you ask me. That’s great.

 

[0:26:50.2] KF: Exactly, and with people who just know that business. I look at you and say, “Boy! I don’t know that I could do what you’re doing flipping so many homes and managing so many crews. I’d rather buy and hold.” If I tried to jump in to the flip market, I probably fail. Whereas same if I tried to jump into development, I’d I fail, but if you partner with people who that’s what they do and that’s what they know, then your chances are much better. That what I tell people, “If you’re going to flip property, do it with someone who’s done it many times. Don’t try it on your own at first.”

 

[0:27:19.4] MF: Yeah. There’s a lot that goes into it that’s not portrayed correctly by a lot of the world. That’s for sure.

 

[0:27:25.9] KF: Yeah.

 

[0:27:27.2] MF: Very cool. You got the new construction. Obviously, you’re helping people invest in other markets. Anything else you want to share that’s going on right now with you?

 

[0:27:34.9] KF: Yeah. Right now we’re building. We’re doing another syndication in Reno. Reno in the booming market. Oh my gosh! It’s just four hours, kind of east, northeast of Silicon Valley, San Jose and San Francisco, but over across the border in Nevada. A lot of Silicon Valley companies, especially startups, are moving to Nevada for the same reason they moved to Texas 10 years ago for the business incentives, the tax incentive.

 

The biggest news, of course, is that Tesla moved their battery factory there. It’s like a $5 billion project or something and then right after them, Amazon and Google and Switch, all these big tech companies moved up there. It’s booming. There’s not enough housing. We were able to tie up some land from a developer who kind of did what you just said. They tried to get entitlements on their land, took longer. They finally got them, but they had also taken on a hard money loan and they had to get out of it or they’re going to lose everything.

 

We came in. We were able to raise the money really quickly and buy that land from them. Saved them from the hard money loan, but also we walked out with land that probably we paid what it was worth before entitlement, but we got it fully entitled. Now, we’re breaking ground in a couple of months. Yeah, anyone interested in Reno, we’ve got a lots of information on that city. It’s amazing what happening there.

 

[0:29:04.5] MF: That’s great information. Can you cash flow in Reno? I’m curious, if you buy existing houses.

 

[0:29:08.9] KF: It’s kind of the same problem you’re facing in Denver. You could. You could have three or four years ago. It’s real tough now. But we are looking at building an apartment there and that will cash flow.

 

[0:29:19.0] MF: Okay. Great. Great information. I ask that about every market. It’s always interesting to see what’s going on across the country.

 

[0:29:26.1] KF: Sure. Yeah.

 

[0:29:26.9] MF: Great. Kathy, awesome information. If people want to get in touch with you, if they want to tune in to your podcast, what’s the best way for them to reach you?

 

[0:29:33.1] KF: Sure. They can go to realwealthnetwork.com, that’s our website. It’s free and we give a lot of information on these different market. We also have teams in the markets, so we can refer people to to help them find deals. Then, the Real Wealth Show is my podcast, on iTunes or Stitcher.

 

[0:29:49.6] MF: Awesome. I’ll have links to both of those in the show notes so everybody can find you. Yeah, before we head out of here, great information. Any tips or tricks for people who maybe they’re looking to buy another market and they can’t buy in their market. What was the one good tip for them to watch out for?

 

[0:30:05.6] KF: Oh boy! There’s so many, but definitely look at the track record. There’s a lot of turnkey companies that they’re anything but turnkey and there’s just an implosion in Chicago with a group there, a big turnkey group that they — Anyway, I would say make sure that you see their track record and that you talk to investors to know that they have happy clients. Check them out. Do the Google search, background check, all that.

 

Most importantly, make sure you get everything in writing and get your inspections and your appraisals so that —I see too many people going into handshake deals, and that’s never good. Get everything in writing and treat it like a real business.

 

[0:30:45.1] MF: That’s great information. Chicago scares me, not only are their property taxes astronomical there, but the whole government bankruptcy talks and everything. It would scare me to invest in that city right now.

 

[0:30:58.3] KF: Yeah. There’s a lot of unknown. If they do go bankrupt, which I don’t think they will, but if they did they could go the way of Detroit, which actually it was good for Detroit. At some point there’s going to be a pension problem for sure. There is one. They just have been able to kick that one down the road.

 

[0:31:13.9] MF: Again, great information. Thank you so much for being on the show. Yeah, we’ll have to keep in touch. Good luck with everything you’re involved in.

 

[0:31:22.0] KF: Thank you so much.

 

[0:31:23.3] MF: All right. Have a great rest of your summer.

 

[0:31:25.8] KF: All right, you too.

 

[END]

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