The 1% Buys When Everyone Else Is Scared — Kathy Fettke Explains Why

When there's fear out there, that means there's better deals. I hate to say that, but that's just the way it goes. There's a 1% of wealth in this world for a reason, is because they're not doing what everybody else is doing. They're doing the opposite.

AI is not going to cut it, people. You got to get into it. You got to go get wet.

The number one most important thing we look for at RealWealth when we choose a market, and that is a market that has—

I am so excited today to interview One of my heroes in the real estate industry. She is a woman that has left an imprint on thousands and thousands of investors' lives and has done so much to help real estate and real estate investors have an experience that's positive, successful, and building wealth. She's a co-founder of RealWealth, an education company and a facilitator for again, thousands of investors around the country, and also led multiple syndications under RealWealth Development. She is the host of the podcast, The RealWealth Show, and also does a daily broadcast on real estate news for investors. She's a big influence in the BiggerPockets community. She's spoken on hundreds of stages. She's amazing. I'm so grateful that many of you get to hear from her today. about what's going on currently in the real estate market and opportunities therein. Well, Kathy, thanks for joining us. This is a real treat. My followers need this. I need this. We've got to catch the wave and get an update on the real estate market. I think there's so much misinformation about the opportunities that still lie in real estate, and I'm, I'm not being facetious. So tell me your thoughts on that perception and what's reality.

Well, that's what we love to hear, honestly, because when, when there's fear out there, that means there's better deals. And I hate to say that, but that's just the way it goes. There's a 1%, there's a 10% of wealth in this world for a reason, is because they're not doing what everybody else is doing. They're doing the opposite of what everybody else is doing. So if you want to really build wealth, you just got to stop listening to other people. You got to stop listening to headlines. You got to stop living in fear and look for opportunity. So that's, that's like my best answer for, for that. And when there's a lot of fear, there's even more opportunity. And that's what we're seeing in the housing market today.

Well, and I love watching your updates that you do daily, and you sometimes quote a headline that you just blow up. Do you have anything recent that comes to your mind of a headline that just drove you crazy and you're like, no, that's not reality? Anything come to mind? I just—

Yeah. Yeah. The recent bill that was passed, you know, the recent bill that basically attacked institutional firms from buying property as rental. That has been capped to— if a fund already owns 350 properties, they can't buy more. Although there are some— if it's new, there's some caveats in there that people don't realize. But there was this— there's this hate for people, especially Wall Street, that comes in and buys housing. And they say, you know, keep Wall Street out of Main Street, basically. But what's not paid attention to in that is that people also rent. You know, what about the renters? Don't they have rights too? And if a fund— I mean, we have single-family rental funds, and we provide housing, affordable housing for people. Why should we be banished by doing what is needed, which is affordable rental housing? So, you know, the bill It really is a political thing in my opinion, because there were so many caveats. Like if you buy an older home, if these funds buy an older home and fix it, put a certain amount into it, they can still buy it. Or if it's brand new from a builder. But the message was, you know, gosh, these dirty Wall Street guys and people who own housing. When in reality, here's the reality of it. Over the past 5 years since COVID The amount of rental housing compared to houses on the market has gone way down. If you look at the chart, it goes down. So it's not like we're flooded with rental housing. We have less of it. And I think the reason is because prices went up so much over COVID. You could sell your rental property and make way more money and cash in than, than just keep it as a rental. So a lot of people sold and we have a desperate need for rental housing. So it's really the opposite is true. Like, we should be trying to help the renters. They are the ones who are distressed today. And yet, you know, there's these bans on it.

Do you think that the message was Wall Street, stay out of real estate? You're making it— you have an unfair advantage with your deep pockets for the average real estate investor or homebuyer, even though there's a lot of caveats and workarounds. Do you think that will help, though, the real estate market, the real estate investors like, oh, I want to get back in the action. I won't get outbid at an auction by a private equity fund, or—

Yeah.

What do you think?

So in 2012, that was a big problem. I remember telling everybody I knew, like, get real estate, listen to me. But again, time of great fear. I was even on Fox News debating Robert Shiller. Robert Shiller of the of the of the Case-Shiller Index, you know, study that has all the data on housing. And I was on live TV debating him. He said it was a terrible and dangerous time to buy, and I'm telling everybody get out there and buy. We are at the bottom, and you are going to get you are going to ride this wave up. I was of course right. San Francisco State versus Yale. I don't know how San Francisco State won that debate. But there was fear at the time. I was telling everybody, get out there and buy. When they finally, like, tried, they were outbid every single time by a hedge fund. I get it. That was not cool. And, you know, California eventually, and way too late, tried to come up with— and I think this would have been a great idea— they should be able to buy what's left over, you know, like let the homeowner get a chance. But, you know, a seller also has rights, so they should be able to sell whoever they want to for the highest price they can. So, you know, it's always a balancing act there. But I did see a lot of friends get bid out, and that was sad to see. Now you fast forward to today, this is what people remember. It's etched in their memories. If they had to go up against a hedge fund, not fair. But they haven't really been doing that. They've been really pivoted to build-to-rent communities. So a lot of the hedge funds were actually Solving a problem, providing more housing, more much-needed rental housing in these build-to-rent communities. So I think, again, it's just misinformation about what they were buying. There were certain cities where there were funds going in and still buying, I think Atlanta being one of them. But in general, no, there wasn't— there aren't auctions. You know, like, this isn't a thing anymore. It was then. But banks learned, they like, we don't want to sell stuff at a discount. Banks learned that, hey, it's better if we hold it. They even started fixing their own properties and, you know, selling them at a profit. They were like, why are we giving these things away? So you're not really seeing those auctions. Of course there are some, but people who own houses today, they're not in distress. So you're not seeing these like distressed sales. There's always some, but when you look at the chart, it's, it's at very low levels, very pre-pandemic, way below, below average levels right now. So, you know, that's not going to make a big dent. I'm not going to auctions and buying. The average person isn't doing that. They have to have all cash. So it's really not going to affect the first-time buyer at all.

Such a great point for you to bring up the complexities of a bill like this. There's always the whereases and wherefores and, and then also the misinformation that comes out. But setting all that aside, can I still get a good deal in real estate today?

You know, this is what's so funny is you can always get a good deal. You could— people look back at 2021 when, you know, you bought a house maybe a few years earlier and bam, some markets— I think you're in Arizona— there were some parts of Arizona that went up 40% in one year. So, you know, you thought you were a rock star, right? If you had bought before that. But the masses, remember the 80% that's not the 20%? The 20% of wealth, the 10% of wealth. There's this massive group of people who don't have that and want to be. Those are the ones that go, whoa, prices just went up 40% in Arizona. Now I'm going to buy. You know what? Prices— you missed it. Like the wave already went. You know, you're not surfing that thing. It's already gone. And that, you know, they come in too late. They see what happened last year. They're following bad data. Or old data like, like Robert Shiller. It's like you're looking at old data. This is— I'm looking at the future, you know?

Yeah. So you've, you've said this so many times that don't invest based on the headlines, which is exactly what you're talking about. You're always going to be late. You're going to miss what really happened. But you've talked about invest based on the property or the neighborhood or the area. Don't look at what's coming through the news cycle. Get into the numbers of the real acquisition. Can you explain like how that—

Yeah, I mean, kind of to my point, what I was saying is people are super eager and courageous to invest when the timing's wrong, you know, when the prices have already gone up. There were 90 offers on one property in 2021 when the values had peaked. And now you fast forward to today where we've only seen the housing market hasn't crashed, but it's only gone up a few percentage points every year, which is still amazing that it hasn't crashed given, you know, rates going up and the lack of affordability. But like I said earlier, people who own housing today, they're either in super low rates or they did get to ride that wave. They have a ton of equity. The amount, the trillions of dollars of equity sitting in homes today means homeowners are wealthy. So you're not going to—

Right.

You're not going to be able to go find somebody who's, you know, got—

Desperate.

$200,000, $300,000 equity and try to get a deal, right? It doesn't work that way. They're comfortable. Their payments compared to their income are the lowest in history. So the real distress today is with renters finding something affordable for them. And can you create that? You know, can— and how do you You know, how do you find affordable housing or create it so that you could solve that problem? Which is, again, renters, they don't, they can't afford to buy and they need a place to rent. But most of the things that are for rent are too expensive.

If I may interject, that's why this new law coming out of the feds, you're like, whatever, because your funds that you focused on in the last, gosh, 4 to 5 years at least, but you're like, Let's just build it. Let's build affordable rental housing. The feds don't care. I'm not stealing a deal away from someone else. I'm going out and creating new value. Where can you just tell us an example of one of the projects you're doing now even?

Yeah, I mean, that's what we've been doing at RealWealth for over 25 years because affordability isn't a new thing. It's, it's been a problem for a while. So we've always focused our, Our investment group, RealWealth, helps busy professionals invest in real estate passively, kind of passively or totally passively. One is through turnkey real estate where you still own it, you still have to get the loan, you still need to manage your property manager, but we put all that in place for you. And then the other is through funds where you just invest with us and we do all the work for you and you get your quarterly payments and so forth. So there's— But our focus has always been for 25 years affordability. We want to find an area where there's great need for housing and it's just not, it's not there for people. And usually, so here's, I'll just start with the number one important, most important thing we look for at RealWealth when we choose a market. And that is a market that has job growth and that you see more and more jobs coming to that area. Because one thing that's going to kill your deal or kill real estate over the long run, and that's what we're focused on. We're not flippers, we're not looking for another job. We are long-term buy-and-hold investors that this, this, we want these properties to make us wealthy in 10 years so that we, when we're ready to leave our jobs, we've, you know, we've made, we've had all these little golden gooses all over the country building wealth for us while we're working. That's what we're looking for. So the number one most important thing is getting in the right market. Kind of like I said earlier, if I compare real estate and the way we invest to surfing, and I'm from California, I love to surf.

Yeah.

One of the hardest parts about surfing is getting to the part of the wave that's going to, you know, that's going to peak. If you go too inside, it'll crash on you and you'll get eaten alive by that wave. Or if you go kind of too far out, you miss it. But if you really know how to see, oh, here's where it's starting to build, it's starting to build, I'm going to get right there and I'm just going to have this beautiful ride. So that's what we do. We're looking for where's that buildup? And it's jobs. People need jobs. And they're going to move to where they can get employed, where they can see wage growth, and where they can afford to live. Where they are, you know, look at San Francisco, there's job growth, but they can't afford to live. That's not going to be a place where we're going to invest. And also the landlord laws are terrible there. So Texas has been one of those areas that it's a machine that just won't stop. That the parts of Texas that we're looking at at RealWealth are just every— it seems like every month we get a new headline of jobs that are moving there and leaving California, you know, and New York.

Sure.

Because of You know, they're looking— these employers are looking for places where they're welcome, where their businesses are welcome, and where they can provide a better life for their employees. So that's our focus. Where's the jobs going? That means where are the people going? Where are they going to see some wage growth so that they can afford our rents? And then we buy little houses all around there or build them.

I love that. And I mean, Rip and Beth, they went from Montana down to Texas and I mean, they were semi-welcome. You know, they're building jobs on their ranch, but I'm a big fan. So—

I haven't watched that part yet. I haven't seen the Texas part.

Yeah, right. I won't say anything because we like Wyoming too.

Yeah.

But to get very specific, so I want to summarize what you said and dive a little deeper. So I love that you found some of the metrics or algorithm that, for lack of a better word, of where you want to be to get into that perfect spot on the wave. And I've surfed a little bit in my life and I love it. There's a surfing concept here too, that you've got to have paddle power. You got to be able to get into that spot on the wave because surfing is not for the lighthearted. You got to be in shape. And I think with real estate investing, it's that same concept. You just can't go out on a Saturday and not regularly be surfing and think you're going to catch that wave. You got to be You've got to be out learning and practicing and staying involved to the point you can make a wise decision of where, how you turn or paddle.

Yeah.

And I want to encourage everyone down in the description, we'll have links to Kathy's regular updates and education because at their group, who we've worked with for years, will help educate their clients because some may say, I'm a— I've got a real estate professional status. I want to own my own property. And others are like, I don't have that status and I want a great ROI, but I'd rather be in a fund that's a little more passive. And so peeling away the onion in Texas, you're doing both of those. Someone that may want to build and have direct ownership or be in a group.

Yeah, we have a build-to-rent community in San Antonio. That investment is closed to investors. But we do have a single-family rental fund also in North Dallas where, again, You just have to follow the important news, not the headlines, but like what's really— where are the jobs going? And during the Biden administration, he passed the CHIPS Act, and that was a huge amount of money that went to companies that would bring chip manufacturing back to the US. There's been a few areas. I know there's one in Arizona, and there's one just north of Dallas in a little town called Sherman, Texas. So as soon as we heard that news, I called my you know, we have, we've got teams all around the country, brokers around the country, property managers that kind of we've been working with like you for over, you know, 20 years with some of these people. So I call our Dallas, you know, property manager like, we've got to buy some property in Sherman because there's billions of dollars pouring into this area. New freeways, new schools, new everything. You know, when there's new jobs, one job One job creates like 5 because all the people that moving there now, you know, you need your hairdresser and you need your barber and you need, you know, your groceries. So it just grows. It does that way. That wave gets bigger and bigger. So we did, we put a fund together very quickly. And this was right when the market, the housing market froze. This is right when the Fed said they were going to start raising rates and all the headlines were saying, oh, the housing's going to crash. And I just, I don't even, I don't even listen. All I know is, oh my gosh, billions of dollars coming into this little town with not enough housing. Let's go. And we were buying because the market was frozen and everybody was scared because of what they were hearing in the headlines. We had zero competition. This is literally a month after there was only competition. You couldn't even— like, to me, I don't even want to be in that 2021 hot market where you, you know, you can't even get inspections because there's like 100 people who want the same property. No, I want to be in the market where there's no one. So literally a month later, there's no one. We dive in and we bought— we were buying stuff for $50,000 in this little town. It's worth $150,000 now, just a few years later. So there's always a good time. There's always a good time. And I think it helps at RealWealth because I've been doing this so long, 25 years. We have, like I said, these teams across the country that we trust, we've been working with. They're our boots on the street. And they just like, they tell us what's really going on. Same with COVID You know, there were these— Black Knight came out and said there were going to be 5 million foreclosures, you know, in 2020. And, you know, everybody's freaking out. Again, the market just froze. Everybody's freaked out. So I started doing daily webinars because, I mean, it was stay— we had to stay at home stuff, right? So I'm home, might as well do something. So I did daily webinars with a property manager each day, one day in Chicago, one day in Atlanta, one day in Dallas, like, tell me what's going on. You know, is the market falling apart? And they're like, we don't know what's going on, but we've literally got lines out the door of people who want property. They need a place to live. So our boots-on-the-street information was telling us the truth. The news, these huge organizations, Black Knight that studies mortgages, like, oh, there's going to be this housing crash. And we're like, we don't see it. So our investors at RealWealth dove in, bought in 2020, and of course made a ton of money.

And for my followers and listeners, Listeners, my clients listening, watching this today. What I'd love you to comment on that mindset that you're just referencing: that if I'm in my local area and I'm seeing not a lot of opportunity, and if I buy a home that I it's really difficult to flip it, and I can't cash flow it because I'm there it's too expensive. That that may be. your little circle of life right there.

Yeah.

It doesn't mean that 2 states away, 5 states away, there's an opportunity. And I think people get really fearful. Well, if I can't go drive by that every day, it's a bad— it's bad investor mindset. And I try to unwind that all the time and let people know, you know, the smart people learn how to manage their property manager, not manage a property. And you just talked about calling your property managers. that are boots on ground. Could you talk to that a little bit about that shift of not worrying about it being around the corner and that it's okay if it's a little further away?

Yeah, I mean, that is so old school. That's how— that was the mentality 25 years ago when you didn't have Google Maps, I guess. You know, you didn't have the internet. I'm sure it was probably a lot scarier then. But we do help people overcome that fear by doing property tours, Like, I want you to come out and see it. It's foreign. Of course it's scary. We're always afraid of things we don't know or understand. But when you go and see it and learn it and understand it, it's not scary anymore. So we do these tours. We show people, you know, it's not that different. And the fact of the matter is, let me ask you, like, Marc, could I become an attorney tomorrow? Like, can I? I want to.

Yes.

I would like to start doing legal work for people tomorrow.

Yeah.

You're going to— no, absolutely not. So then why is an accountant or a business, a contractor or like, well, contractor, maybe they would understand. But, you know, somebody who runs their business, somebody who is a CPA, why do you think you can just go out and do real estate tomorrow? You know, like, I can't go out and be a CPA tomorrow. So you've got to get the right people in place. And even if you bought the house next door, but you're a busy CPA, You're going to screw up that property because you don't know what you're doing.

Yeah, but I watch HGTV and I stay at a Holiday Inn on a regular basis.

So like there's— what is it, the 10,000-hour rule until you're an expert? So until you're an expert, rely on experts because you're going to mess it up. And that is, that is the biggest mistake people make is I need it to be close. I need to see it. Well, you know what? You're going to mess it up. Get out of it. Get professionals who understand this stuff. Especially if you're investing in real estate and don't understand landlord laws or construction, you are going to create yourself a nightmare. There's 2 businesses. There's a lot of businesses with real estate, but the 2 I want to explain is there's the active business and there's the passive. Of course, you probably talk about this all the time, and people just get this confused all the time because they watch HGTV. They're like, I want to flip a house and make all this money. Now you've become active. That's a business. You already have a business. You're already busy. You have a job. Unless you don't have a job, then sure, go get your 10,000 hours learning how to be a flipper, but you're going to make mistakes along the way and probably lose money because you're not an expert yet. But then there's the passive, which means you're investing. When you invest, you need to invest in somebody who knows what they're doing, right? And has the experience, has the 10,000 hours. So that's what we find with property managers. We're not going to find a property manager that's put up their flag overnight and, you know, doesn't know anything about real estate. These are people who've been doing this for years. They know the laws. They've got the list of, you know, they've got their marketing out there. They're able to attract the right people. They know how to vet. Yeah. Try, try putting your first tenant in by yourself and see what happens.

It's really hard.

You want an expert doing that.

Yeah, it's crazy. And I, again, we got to do a whole show just on surfing because again, the analogy Are incredible. For those that have gotten out, gone out in a wave and gotten pummeled.

Yeah.

If you really want to get good at surfing, you go hang out with surfers. You go catch the little waves and surf with others that have a lot of hours doing it. They'll block for you, give you a push, whatever. And maybe you won't catch a big wave initially, but you'll work up to that. And catching little waves It's still fun. And it's like the real estate. You don't have to hit a home run every time you do a real estate deal. Just catch a little wave, catch a little wave. As you get better and better and surf and work with others that know what they're doing, when that big wave comes along, maybe you'll be in the right spot.

And I love that you said that because my daughter Krista, who you know very well. Yeah, I do. Yeah. She always wanted to look cool when she was at San Diego State. She got a shortboard. And, you know, she could never get up on it because it's a shortboard and you gotta work your way up to that. But, you know, so she just sit out there on the board and look cute and I guess that was enough.

Yeah. Yeah.

But I, on Monday, literally on Monday, I'm like, girl, we're going out. And I hired a coach and we went out. He brought a proper board for her. She's very tall. She shouldn't be on a shortboard. And she caught so many waves and they were big waves. So many, one after the other, one after the other, one after the other. So, Yeah. Having, having that expert there beside you to give you the right instruction, make sure you're, you know, she was like, Mom, all this time I didn't know you're supposed to pop up right at the, you know, all the like, yes, all that time you've been wasting doing it wrong.

You know, then someday you can work up to be Kathy Fekke, who's, who's like Soul Surfer. She goes out there and just touches the water and she's like, okay, I know where the wave's coming.

See?

And that's like real estate. Kathy's like, I know where it's coming.

And so that's— Because I go to one break and I know the break and I'm the only lady, I'm the only female. It's all these dudes. And I know I could surf right around them because I know the break. And that also—

Yeah.

It's a parallel in real estate. Like, don't— even if you've learned a certain kind of real estate, you try a different kind, you might fail because, you know, you don't know it as well. So, and that's what I was saying about the passive versus active. People think, I'm going to go flip a house. That is active. You're doing stuff. You're creating active income versus buying a rental. This is— that's what we focus on is the long-term wealth. Buy a rental. Let somebody else pay off your debt for you. The government gives you tax benefits for providing this housing. And I mean, there's— and then the market, if you're in the right market, you'll see appreciation too. And I— trust me, in 10 years, If you buy a good quality property in a good area that's growing, you're going to make money. You're going to make a lot of money.

You will outperform Wall Street 2 to 3x every time. And it's proven instead of trying to go hit a home run and getting pummeled and just getting chewed up by and getting stuck inside those waves. And man, this is like a surf session. I mean, like, we're surfing instruction 101. No, this is so good. Well, I love that your surf break is Texas. You know Texas backwards and forwards. You can scoot around there really quickly, catch the right little waves here and there. I just— there's so many parallels. This is neat. Well, Kathy, how can— what I— again, I said I'd have some of your information in the description, but what are— just do you want to mention what you would recommend a new— someone new to real wealth, where they should start to tap into some of your resources?

Yeah, I mean, education is everything. And I know people are so busy, they're so busy. It's like hard to even read a book these days. But if you have time, just read my— I actually have had teenagers say they've read my book in an afternoon. It's sit by, you know, just take a few moments, maybe read one chapter a day of Retire Rich with Rentals. That will give you a lot of information. Retire—

AI is not going to cut it, people. You can't get a one-page summary and think you're going to absorb it. You got to get into it. You got to go get wet. You got to go hit the, hit the waves. You got to get out there with your board. You got to read the book and then pay attention to your, your updates. I think are just great too, teaching people what to see.

Yeah, we, we do webinars every Thursday. We highlight different markets. You'll start to get to know these different markets. We'll show you what to look for in a property and especially most important, understanding what is your What is your goal before you even read any books? Talk to Marc. Like, what is your goal? What are you trying to create? Because people get that wrong all the time. And then it's kind of like Rich has a great part in his book. We wrote a book together called Scaling Smart, and he talks about this time when he was little and his brother would always swim out to this island and he was like, I'm going to do it. I'm, I'm big enough. And so he gets in the water and he just starts swimming. But he never looks up and he's like, ends up like zigzagging all around, never makes it to the island. So often that's what we do. We're just like, oh, so-and-so just made this money here, I'm going to do that. Oh, so-and-so, I'm going to do that. Oh, like, where are you going? What are you trying to do? For me, it's always been clear, like, I want to retire on this day. And retire meaning I want to be financially free. I'm never going to retire. I love what I do. But to, you know, to have enough income to cover my expenses so I don't have to work. You know, I'm going to do that on this day. And so now I got to work backwards. What do I need to do to get there? So for me, it was always a long-term plan. For other people, it's like, hey, I don't have a job, I need a job, so I'm going to go flip houses. Great, you could, you could make your fast money that way. You could make the money you live on that way. But then you still need to take— all the flippers I talk to tell me, gosh darn it, why didn't I follow Kathy's plan, the Real Wealth Plan, and take a portion of that of my earnings from flipping houses and invest long-term buy and hold because they sell these houses. They look at us and I didn't fix anything and I made more money. Yeah, no, I just sat on it.

Yes, totally. And having that plan in advance of where you're going to, where you're going to go, where you're going to paddle to. And I think it's really a combination as we're doing because you have a trifecta. I know you do. And I love that. And I love your RealWealth coaches. I've talked to them before that are like, okay, let's dial in on your real estate goals inside of your overall trifecta of income and assets and legacy. And so I would encourage everyone there, you can have an initial discovery call with one of your coaches to, to create that real estate plan. And I think that's a really smart thing to do too.

So, and that's free to do. And joining RealWealth is free. There's no catch. We are brokerage. We receive referral fees from our broker, from the broker. If you buy a property in Dallas, we get a part of their broker fee. So there's no fee. We just get paid on the back end through the broker, a fee that you'd be paying anyway. So yeah, realwealth.com, and then you can have, you can speak with one of our investment counselors. They all are very, very experienced investors. These aren't just kids we pulled off the street. They know what they're doing.

They do. It's so good. Well, Kathy, thanks for spending time with me today. I appreciate it. And good luck out on the waves and on the real estate markets that you're surfing. So I just think you're doing such a great job. Thank you so much.

Thank you. Thank you so much for having me.

Well, thanks everybody for joining me for another episode of the Main Street Business Podcast. Wow. Tons of great information. I encourage you to take action. Check out the description below. More education and learning from real-life people and examples. It's going to add layers and layers upon any AI search you do. So please give Kathy and Real Wealth a look and get over there and check it out. And if you like the show, again, give us a 2-star, 5-star, 2 thumbs up, not 2-star, 5-star, 2 thumbs up, 10-star, whatever. And we'll see you next time on another episode of the Main Street Business Podcast. Thanks.