Do you want to be among women of influence? Kathy Fettke is a woman of influence and has learned from some of the most powerful women around. She knows how to build a brand, give back, and is not afraid to be in front of the camera. If you want to learn more about real estate investing or just become a more powerful woman, then this is the episode for you. Listen in to hear why Kathy’s real wealth membership has grown to over 72,000 members.
Table of Contents:
- Where To Listen To The Podcast
- A Veteran Real Estate Investor
- Important Things Women of Influence Focus On
- When Times Get Tough, Women of Influence Get Tougher
- Women of Influence Know the Different Segments of the Real Estate Market
- How Women of Influence Become Role Models
- Women of Influence Don't Take Advantage of Others
- How to Reach Kathy Fettke
A Veteran Real Estate Investor
Darin: Kathy Fettke lives in California with her family. She started out on TV, she had a news show and a radio show. She's a veteran real estate investor who loves to give back while still enjoying life. Yes, she lives in California and yes, she surfs.
This is the first time that Kathy and I were talking, but I reached out to her because we were both down at a conference in Charlotte. We passed in the hall, but we were just too busy, and I didn't get a chance to stop and introduce myself. She's a player in the whole multifamily world. I've seen her around social media a lot. She's got two podcasts, she's an author. I'm really interested in this conversation. With that, typically the first question I ask is how many properties and how many units you're invested in.
Kathy: I think you won't be very impressed because we sold.
Darin: You sold everything?
Kathy: We have five single family subdivisions that we're still working on and building, and we have single family rental funds, but our multifamily, we did sell. But I'm actively looking because I think that we're heading into some times where there'll be lots and lots of opportunities.
Darin: That was one of the questions I was going to ask later in the agenda, but I'll just ask it now. I play in the syndication space. I'm in the Dallas area, Kathy's in California, but I know some syndicators that are like, "We're at a top and I'm selling and I'm out."
A Great Inflation Hedge
Darin: I have others that are bullish with inflation, and real estate is a great inflation hedge. Then I have others that are like, "I'm not going to stop buying because I don't know what's going to happen. I'm not going to go all in right now, but I'm going to continue to look for good deals. When they arise, I'm going to take it." Where do you fall in that camp? It sounds like you guys were out, but now you're saying, you're still looking.
Kathy: Unfortunately, I thought that things were going to go a different way at the beginning of COVID, so I missed that run-up. I'd like to say that I timed it well. I can say from my colleagues that a lot of people who are in the space realized that it was an amazing time to sell over the past year, but then you've got to find something else to buy or just pay a lot of tax.
But it was a really good time to unload some assets that weren't as high performing because there was a market for them. I did know in January that we were going to see a big shift in the market. I got to speak at the Best Ever Conference and be on the debate of whether or not this was going to be a higher volume year than last year or less. And I was put on the side, I didn't choose it, to argue that probably there would be less volume this year.
A Panel of Women of Influence
Kathy: I got to be on that panel, on that debate with John Chang of Marcus & Millichap, who comes out with lots of great content. But I knew, and we knew back in January that the Fed was going to reverse policy dramatically. They had come out and said, "Seven rate hikes in one year." That's pretty unprecedented. A little scary.
We knew that inflation was raging and wouldn't slow down for obvious reasons. When the Fed came in, it was mind-boggling. I don't get it, but when the Fed comes in and increases the money supply by 40%, meaning that the money circulating today is 40% higher than two years ago, just new money. That's going to create inflation. They kept saying, "No, it's transitory," but people like me were going, "How's that possible?" Of course, it's not transitory.
When there's that much capital circulating, it usually ends up in stocks and real estate. I just knew that they were going to try to fight inflation by raising rates. That would really change the multifamily market because you have a lot of people that weren't prepared for that change.
Darin: Part of that has played out. As you said, with the increase in money supply, inflation was due to come and not necessarily transitory. But the other piece still is a question mark in terms of, "What's next? Does real estate really play as an inflation hedge or is there a correction?" There are people on both sides of the camp that are out there screaming as loud as they can to get attention. There's a crash coming, or stay in because if wages go up then they should be able to afford higher rents.
Legit Housing Crash
Kathy: It always comes down to the asset class that you're in and the city, the metro area that you're in. I know that back in 2008, 2009, we did have a real legit housing crash. Back then, our clients at RealWealth didn't really feel it, which is amazing. But we knew it was coming and we helped direct people out of the bubble markets starting in 2007, 2008. We knew which markets were bubbling. It's obvious.
It's the ones that make the headlines, the ones where there's a 40% increase in prices in a year and that's not sustainable. That's going to slow down and it could be considered a bubble when things slow down. Back in 2008, we were really directing people to sell anything in the sand states, California, Arizona, Nevada, and Florida. Buy in growth markets, areas that were still affordable but had population growth and job growth primarily. Look for job growth. With job growth comes population growth and a need for housing.
Our clients back then, those who listened and sold and 1031 exchanged into Dallas properties, because that was really what we were targeting, we saw so much growth happening there. They just rode right through that recession as if it didn't exist. In fact, if anything, they got increases in rent because so many people lost their homes, that they had to rent. Not every area in Dallas was doing well and thriving. You really have to understand your sub-market as well. There were people who got absolutely hammered in Dallas during the recession, because maybe a lot of the C-class properties, those people had a really hard time paying.
Women of Influence Know the Right Market
Kathy: A class can be tough too, during a recession like that. Just make sure that in the market, choose the right market and then choose the right sub-market in that market. The way we do that is we're constantly looking at, where are the jobs going. I already said it. Where are the jobs going?
But also, where's the infrastructure being built in that area? Where does the city see the path of progress and growth? If you can get ahead of that, they're already investing millions or billions, probably billions in those areas. They're going to continue to do that. That's what we did in Dallas. We focused on north Dallas because that's where we saw the freeways going in and the new headquarters. There was an area called Headquarters Row, all these businesses came to Dallas. We weren't going into the areas of Dallas that were not growing. Same thing today.
Darin: What are you recommending to your clients now?
Kathy: It always comes down to supply and demand anytime. Supply and demand is the key to most things economics, but certainly in housing. In today's environment, with rising interest rates, there are going to be areas that will be more affected than others. The key question is, where is that? I would say the areas that haven't had a lot of activity honestly, that haven't seen the builders come in and bring in a lot of new supply.
Darin: Those are the markets that are going to get hit the worst, you're saying?
Supply and Demand
Kathy: No, I think if there's an area where there's growth slated, but it hasn't been overbuilt yet, then there isn't enough supply for the demand. There are some areas that may have too much supply. They brought in a lot of new supply over the last couple of years and now with things slowing down, that could be a problem. I know for sure, at least in the new home market, not multifamily, but new home sales slowdown the first generally when rates go up.
That's unfortunate because I have five subdivisions we're building. We're feeling it. It's been a really tough couple of years with material costs going up, but home builders are going to feel it. It will be a great opportunity to negotiate with new home builders. Again, I'm not doing myself a favor here because we're trying to sell homes.
Darin: It's hard because it's like prices have gone up so fast in that market that even if it comes down a little, it's going to be hard for the consumer to know when it's a good value.
Darin: Even if it cracks, is it 2%, 5% or are they waiting for the 10, 20, 40? That may never come.
Kathy: I don't worry. I am not worried about a housing crash in the one-to-four unit sector. I know there's a lot of talk about that, but I do not see that happening. There are certain markets that are softening more than others, Seattle, San Francisco, some of these markets that just boomed, Boise, and Austin. When you've seen prices go up so dramatically, it's not a crash so much as a reset to what would be normal, there's no bidding wars going a 100, 200,000 over the asking price.
Important Things Women of Influence Focus On
Kathy: It's just coming back to what it should be. But again, one of the most important things I focus on is staying in the median range. I always want to be in an area where the average person can afford the average rent or the average home. If you're in an area where it's gotten so out of whack, how are people going to afford to live there? It's a really serious problem today. It's a terrible problem. There are bidding wars over rental property.
Darin: People send letters and have to try to justify why you should rent to me.
Kathy: It's just sad from a global and compassionate perspective. People just want a place to live. We have the largest demographic ever now facing first-time home-buying age, or just forming families, getting married, or having babies. Just imagine trying to start your family and not only not being able to afford to buy a home at a typical home-buying age, but not being able to afford rent. It's really unfortunate. In those areas that is simply a supply-demand problem. If there was more supply, it wouldn't be an issue.
Darin: What markets do you think are poised to have that growth that isn't already overbuilt?
Kathy: We know for a fact that the Southeast has been one of the fastest growing parts of the country anyway, which was slated to continue through the decade. We knew that 10 years ago that's why we've been focused on those areas. So, we like parts of Florida that are more inland and more out of the flood zone.
From Northeast to Southeast
Kathy: When you go and look at flood zones and maps for sea rising and so forth, there are areas that are really not that affected. You would think, I don't want to be in Florida.
Darin: There's water all the way around.
Kathy: I don't want that.
Darin: Orlando's in the middle.
Kathy: It's in the middle. It's not really affected when you look at the flood map. We really like all that central Florida and up by Jacksonville, although that's obviously getting more expensive. But growing, continuing to grow because you still got so many companies moving from the Northeast to the Southeast and people moving along with those jobs.
Darin: For the listeners' benefit, you got a ton of insight into the industry. Share a little bit about what you did before you got into real estate and why. You're giving a lot of great advice and great data, but knowing where you came from, adds to that credibility.
Kathy: I don't remember why. A friend of mine was working at KGO in San Francisco, ABC station. I got to go in and see a live news show. It was one of those moments, I don't know if you've had those, where you just go, "I belong here."
The chaos of it and the franticness fits my personality, I loved it. I ended up going to San Francisco State, getting my degree in broadcast communications and in political science, ended up interning at CNN in San Francisco. That was my first job. Then, I worked at KTV, which is the Fox News affiliate there. Let me tell you back then, and I'm probably dating myself, there was no slant. Fox was just news. There was no slant.
Women of Influence Keep Themselves Relevant
Kathy: The same as when I ended up working at ABC7. So, my career was in broadcasting. When I got married, my husband and I formed a family and I didn't want to be chasing fires and murderers and so forth with babies. I took some time off, but I kept a radio show on the side in San Francisco just to have fun and keep myself somewhat relevant in the industry. That was just Saturday, the weekend show, while I was raising kids. Meanwhile, my husband was a motivational speaker. He wrote a book called Extreme Success.
Simon and Schuster were doing a massive national book tour on all the major media outlets. He came home from that book tour, and everything was awesome in our lives. We'd just bought our first house and had our kids and living the dream. He comes home from the media tour and notices a freckle. The guy is a redhead, he's got a million freckles, but he noticed this one freckle and he went and got it checked. It turned out to be melanoma. The doctor looked at him and did more studies and said, "We think it spread. And that means you probably have six months to live."
Darin: How long ago was that?
Kathy: That was 20 years ago. Now, Rich is alive and healthy. We're very lucky because melanoma's a killer. Back then, there weren't many solutions, but he survived it and he's doing great today and healthy today, although he gets his skin checked all the time. But he's still rock climbing and surfing and doing all those things, those naughty things, but it's worth it.
Rich Is Healthy
Kathy: But it was obviously in that moment when we didn't know that I thought, I've got to figure this out. Obviously, I was heartbroken and devastated, but we just put our heads together and we're like, "Okay, first of all, the doctor's going to be wrong. The doctor's wrong." It turns out he was. Rich is healthy today. He had melanoma, but he didn't die. That was the first thing. The second was, that I need to take over the finances, but how?
I had been a stay-at-home mom and I didn't want to be away from the kids 10 hours a day, I couldn't do it. So, I just took my radio show and thought, how do I monetize this? I hadn't. It was just a hobby, but I thought, this is one thing I do have, and I can do, and I can monetize it. I started to look for sponsors. How else do you monetize a radio show? I went down the phone book, which existed at the time.
Darin: I remember those days. My kids are like, "What is that?"
Kathy: The phone book, you open it up, you go down the list. I started listening to radio shows and listening to who was advertising, and this was the early 2000s. It was mortgage brokers. They were the ones; I don't know if you remember but every single ad was a mortgage broker because that's when it was easy lending. So, I went down this list of mortgage brokers, and I was like, they're loaded. They'll sponsor my show. One by one, they were like, "No. We've already spent our budget." Or, "No."
Kathy: I didn't know how to make the pitch. Finally, I just went outside and I'm like, okay, what am I doing wrong? I thought I'm making this about me. I'm calling people and basically asking for money, "You want to sponsor my show?" That's not how you make a deal. I'm sure you know this. I had to figure out what was in it for them and what would be absolutely irresistible in this negotiation. The next mortgage broker I called, I just said, "I'm looking for a co-host." He was like, "Great." And he goes, "I was looking for a radio show to be a co-host on." I'm like, "Great, well, that's me."
It was like, it just came out of my mouth, and I thought, oh no, now I have a mortgage show. But he paid a lot of money, which solved some of our financial issues at that time. I got a large sponsorship, but I came home and told Rich, "I have a mortgage show. I've just lost all credibility. This is going to be the most boring thing in the world."
He goes, "Well, what if you just interviewed his clients and find out what they're doing with mortgages? Make it a human-interest story and not just talking about mortgage rates." Because of course, that would be boring. That's what I did. I just said, "Let's just interview your clients." One by one, I'm interviewing people who were flipping property, doing buy and hold, apartments, obviously all kinds of things.
Darin: Then you learned from each one of these people.
Women of Influence Can Help More People
Kathy: I did that, and this was back in 2003. There weren't podcasts and there wasn't really a way to learn it. So, I learned from people doing it, and so did my audience.
Darin: Listeners, she was humble about what she said, but she was on TV. It's probably a long time for you and it's not something that gets you crazed up anymore probably. But people are still like, "Wow, she was on TV," and you're still a guest on a lot of different programs on CNBC and others now. That really differentiates you and it gets you in front of a lot more people and part of that can benefit you. It gives you the ability to help way more people.
Kathy: It was funny to go from news reporter to guest expert, but it took a while. I wasn't an expert for those years because, in those early years, I was just desperately trying to learn from these people. It opened my eyes to this concept of passive income that I didn't know, had never been exposed to, just the mindset of wealthy people and successful people. I’ve been working like most people, by the hour, making money from working.
We'd invest in the way our financial planner told us to do it and put 10% aside and give it to the financial planner. When Rich had the medical issues, you can wipe out that 10% of savings fast, that’s what we learned. We just bought this big house and then couldn't pay the bills. That's when we became landlords, as we had overbought, which ended up being a good thing. We bought a six-bedroom house.
When Times Get Tough, Women of Influence Get Tougher
Kathy: When times get tough, that's hard to deal with. But it was actually better because we learned how to rent out rooms. We turned it into a fourplex and that was our first experience being landlords. It covered everything. We could live there for free during those difficult times.
Darin: I know that you have two podcasts and you've just talked about the one with the mortgage guy, so you've interviewed a lot of people over the years, I'm sure. There are a lot of people that started by becoming accidental landlords. They bought a townhouse and then suddenly, they got relocated to another state and it was a bad time to sell. So, they just rented it. Suddenly, they're like, the cash flow's good. I'm going to do more of this. For the listeners, whether you become an accidental landlord, every person starts with no investments.
Everybody starts with their first, whether it's renting out a room in your house, or it's doing a 200-unit apartment complex and partnering up with other people, the point is, do it. Get out there and do something. You must buy something until you actually see it for yourself. See the wealth-building opportunity, you're just going to continue to let another week, another month, or another year go by. Now, what's interesting about you is, that you ended up taking over the reins. You ended up figuring out real estate was a way to go to build your finances. Once you did that, you didn't just sail off into the cool wind and sit on the beach.
Women of Influence Mastermind
Darin: You've got two podcasts. I see you at conferences all the time. You're a guest speaker on different radio shows and TV shows and you've authored a book. I recently saw that you had a Women's Mastermind at your home. Why do you keep doing all these things?
Kathy: We've really built a brand and we've had people try to come and buy it from us and it's become so much of who we are. We have over 72,000 members now at RealWealth.
In answer to your comment about getting started, I would say that's what we've been the best at. It’s getting people started. Sometimes, it's just something little, it's just one rental property, just one unit because there's so much to learn in that process. It's a foreign language, the whole real estate world. Just going through the process of getting a loan and understanding how to read the pro forma and talking to the property manager, that's enough.
Darin: It's scary because it's new. I came from your world where people said, "Get good grades, get a good job, put 10, 20% away in the stock market, and just, it'll grow." But you could buy stock, you could put $1,000, you could put $5,000. But when you get into an investment, a lot of times the investment dollars for that first investment are larger than your first stock investment. That can scare a lot of people. I know that in my first one, I was scared about our duplex, and I was scared of doing that and I had plenty of capital to do it. It was just that it was foreign. How do you inspire people to get off the fence and do it?
Why People Need to Be a Little Scared
Kathy: Honestly, people should be a little scared. You can really make a big mistake and it can cause an enormous amount of stress in your life if you do it wrong. I was just speaking to somebody yesterday who is in a lot of pain. They made some mistakes in their investing and it's costing them a lot of money. I've been down that road too. Just trusting the wrong people, not understanding the investment well enough, or taking risks, like buying a condo that wasn't built yet.
Never got built. When you're new to investing, generally people are honest. They don't realize that the investment world, whether it's stocks or real estate, can come just like cars, with a lot of sharks. You can get the used car guy that's going to sell you something for more than it's worth or try to cover up the problems with the property. That's really typical and common. It's good to be scared because that would force you to do your research and your homework and understand what you're doing.
I'm on the BiggerPockets podcast now, the On the Market one. We get lots of calls of people saying, "I found this property in Kansas City, or something, and maybe a good market, maybe near jobs or whatever." They're like, "Should I buy it?" Well, how can I know?
Darin: "Should I buy it?"
Kathy: The fact that you're asking, is problematic. Have you seen it, have you had an inspection? Do you know what condition it's in? Have you spoken with the property manager and told him what they think about it, what it will rent for, or have you just found it online? You're just trusting the salesperson?
The Flip Side of People Who Can Analyze Deals
Kathy: The salesperson's going to make a commission, and the person selling it gets the money. Don't trust those people.
Darin: There's that balance. You should definitely be educated, but then there's the flip side of people who can analyze deals for years and never buy anything.
Kathy: I have often said that fear comes from not knowing and not having the information, but there is more to it. Once you have the information and you've done your due diligence, then the path should be clear for you. The fact of the matter is there's risk in everything.
Darin: I'll just share a little experience of mine. The first multifamily deal that I put an offer on was a 64-unit deal. I remember my wife saying, "Are you excited?" And I was like, "I'm scared sh**." What happens if they say yes? I don't know if I'm ready, and I think I was number two or number three in that, and it traded away. But the fact that it traded away actually gave me confidence that I'm not way overpaying. The underwriting that I'm doing is right in the ballpark of where it traded. It gave me confidence for the next deal, but you still have to take action.
Kathy: That's a big first investment.
Darin: I lost that deal, but my first syndication deal was a 76 unit, so a duplex to 76 units.
Kathy: That's a good jump.
Darin: Surrounding yourself with other like-minded people, I wouldn't have been able to do it if I didn't see a lot of other people doing it and learn from them.
How Should New People Start?
Kathy: When you say, "How should new people start?"
It's read, that'll get you part of the way. It's still just cerebral. You're just learning. But then being around people who are doing it, takes it to the next level of really getting it in your bones. Then maybe if you are really terrified and scared, partner with someone with experience. That will take away a lot of those jitters because you'll have someone there who's done it before. I would say that's a wonderful way to go if you're busy and don't have the time to really do all the work.
Darin: That's great advice, to partner. I would go a step further and say on the large-scale multifamily, I don't think you can win a deal without partnering with somebody with experience. Now, the number of offers is starting to go down a little bit now, with interest rates going up and loan proceeds getting cut, but still, the brokers want to push the deal to somebody that they know will close. If you partner with somebody with experience, not only are you going to get that comfort, but you're also going to have a better chance of winning the deal.
Kathy: I deal with a lot of people like this, let's say you're selling a property in San Francisco for a million or $2 million. And that's a real thing. People just selling a small unit and having a lot of money to place somewhere else, then you might be able to do it on your own.
Proper Property Management
Kathy: In a 1031 exchange, the key there would be making sure that you have proper property management in place for that. Even if there's already property management in place for the apartment you're buying, you need someone who can oversee that.
Darin: The property management company, it's really the person that's on the ground. It could be a great property management company, but if all of a sudden, they put a brand-new person that has never done it before on your property, you're going to have to have a lot more oversight than if you had somebody that has been in the business for 10, 20 years and is an expert.
Kathy: I know lots of the onsite property managers; I know what goes on behind the scenes. It does need to be monitored because anything unsupervised, things can happen. I've seen situations where a property manager was doing a short-term rental on the side in one of the units and just saying it was vacant, keeping the money. There are all kinds of things, there must be supervision over your property management.
Darin: I was driving back with somebody yesterday. We were out visiting a multifamily property that we own, and he was telling me a story about vendors. One of his vendors came back and said, "I just want to let you know that I had to pay your property manager, basically a commission to win the deal for the rehab." That probably happens and you don't even hear about it. Thankfully, he heard about it and he's taken action, but there's a lot of stuff that can happen for sure. You have to monitor it.
Women of Influence Know the Different Segments of the Real Estate Market
Darin: You've been doing this for a long time. Talk about the different segments of the real estate market that you've played in. You've definitely played in multifamily, you've played in single family, and you're in single family development now. Are there other segments that you've been in and out of?
Kathy: We've done lending and office. We did one commercial thing that we're still working through. It was such a great idea, but didn't happen or hasn't happened yet.
Darin: Didn't work out.
Kathy: I can give you a lot of insight into things not to do. One of the things not to do that I've learned sadly the hard way is if it's new or different, this concept, it may be a wonderful idea. But if it's different than what banks are used to lending on, they might not do it. This means that you would have to find a lender that is more expensive and more willing to do different things. What I'm talking about is, that we bought some land in Northern California that we were going to turn into a wine village.
That's basically a place you pull off the freeway and you can try the different wines of the area. I’m sure you've seen those. Wineries tend to be willing to pay more for those little tasting rooms because they get exposure to the public. They can sell directly to the public instead of going through distribution. The distributors take 50%. So, the idea was really wonderful, and it got approved by the city. After years of getting everything in line, the financing was no longer there to build it.
A Great Concept
Kathy: Such a great concept, with wineries lined up and the city approving it and the public is excited, but it still can't get a lender.
Darin: You still own the land?
Kathy: We still own the land and now I'm just looking at it like. That type of thing that's different where the lender can't go, "This is multifamily. They know what to do with that." It's just too different, even though it's similar. We're just renting out space. To wineries, it's not that different, but it was different enough that we needed creative finance. We were just having trouble getting it. Now I'm like, let's just do something.
Let's just put storage there, something that a bank can understand. There is a lake nearby and there's a need for boat and RV storage. That's probably what we'll do with it, that would be my advice. Some of these things, Rich and I had a cool deal come across our desk that we were like, were so interested in doing. It was one of those wave parks where you can surf in the middle of the desert. Have you seen those?
Darin: I have seen those. They even have those little surf things on boats, on the big, huge cruise ships now.
Kathy: This is a lake though, that they have these machines that make it a legit swell that you can surf at any time. It's the perfect wave. Being surfers, we're like, "We got to invest in this." Then if you were first in as an investor, you could have a house right there. It was so cool. But it was just too different. It's too big.
Angel and Tech Investing
Kathy: Unless you have money that you don't mind not getting back. That's the thing. Anything speculative like that, if you're wealthy enough that it doesn't matter if you lose it, then by all means. That's who should invest in those kinds of projects.
Darin: That's like angel investing, tech investing.
Kathy: Exactly. We walked away.
Darin: You could end up getting one highflyer, but you might lose on 19 others. But you know what I like about what you said? Another thing that I think is interesting about real estate is my business partner on the first syndication was Raj Gupta out in Chicago. I don't know if you know him.
But he told me, "Darin when you get into real estate, it's all about problem-solving." I was like when you buy your personal residence, you think of, well, this is my home. And it goes up in value over time. And that's where you build wealth, but you don't really think about problem-solving. Well, here you are in a situation, you bought this land for one purpose, but it's not panning out. Rather than just fold, you guys think to yourself, well, what else can we do? How can we repurpose it?
I'm invested in a deal, and I don't know how it's going to pan out, but in Atlanta. It was an office building that they were converting to apartments. I think that there's a need to have different buildings repurposed at different times. You may end up seeing a large box store, suddenly turn into a church, or whatever the case may be. Trying to figure out and problem solve is a key component to being good in real estate from what I've been told.
Women of Influence Doing Slam Dunk Projects
Kathy: All the way through, with some of our projects that were absolute slam dunks. We started syndicating in 2009 when deals were everywhere and cheap. There weren't any classes yet. We were one of the first syndicators, so there wasn't a mentor for me. I just had to figure it out. It was hard. It's much easier today to syndicate.
There are so many training programs and mentors that can, if you find the deal, they'll partner with you. There's a lot more opportunity, but I didn't have that. Some of our deals were just out of the park amazing, with 40% returns because we got everything so cheap. The other ones were just awful and challenging. We were buying foreclosed subdivisions.
While we got these almost completed homes for super cheap, what we didn't know is at that time that there was no financing. We knew that, but the cities were shut down, like with COVID. That happened during the recession, cities would just shut down. They'd be open just a couple of days a week because there was no funding. There was no government money. People weren't collecting their taxes.
Darin: I never even thought of that. The city's actually closing down three days a week.
Kathy: Because of so many foreclosures, they were really suffering. This was Oakland, a big city, and they furloughed employees. We're trying to get the approvals to finish construction. We'd have to sit and wait outside the door with the line of people because a couple of days that they were open it was just awful. What looked like an amazing deal, got it at the right price, in the right location. Then you've got things like that.
The Passion to Bring Women of Influence Together
Kathy: Then, when you finally get the person at the planning commission to talk to you they'll say, "Well, we don't have access to any of the documents. We don't know if the piers were put in correctly or if this property was built to code." We’re like, "What do you mean you signed off on it?" "Well, we don't have it." So I had to track down the developer who had been foreclosed on and it took six months, but I found him.
Darin: How did you do on that property?
Kathy: We did horrible. It was very difficult. We had a similar one that again, people made 40% returns on. It was a loss. I put those investors in another deal so that they could get their money back.
Darin: Talk about the Women Mastermind that you had. Was that at your house?
Kathy: I've been oftentimes the only woman on the stage for years and sometimes it'll be 19 guys and me, so I do have a passion to bring up other women. I know they're out there. I know there are better female investors than me and I just want to give them the spotlight. So, I just started by calling in some top syndicators, bringing us all together to help each other, but also to help raise their visibility in the industry. I’m going to start a mastermind for women, and I'm excited about that. I don't have all the details yet, but it will be announced soon.
Darin: I admire people like you that could go sit on a beach, but you decide, you make a choice to put yourself out there and attract more people to get involved.
Darin: I'm sure with the mastermind and with other things that you're involved with, there's a financial gain. But just like you said before, when you started, you didn't have people to go to. You can really shrink the time it takes to succeed by working with somebody that's already done it.
Kathy: I searched high and low for help. How do you run a fund and how do you do these things? I would have to fly to New York and meet with people there just to get some input and people were somewhat guarded. Take advantage of the education that's out there and the mentorship programs that are out there. I've seen people just fast-track and build in a couple of years when it took me a decade or two.
Darin: I've seen some people with some huge growth. If you've ever read the book, Napoleon Hill's book, what your mind can believe, you can achieve. That’s so true. Whether it's, "I can only buy a duplex," or, "I could buy a hundred units," or somebody else that believes that they can buy a thousand units in a year. They believed they could do it and they went out and made it happen. How did you grow up? As a child, did you know that you were going to be successful? Were you always a go-getter?
Kathy: I always knew I was different.
Darin: Different how? We're all different.
Kathy: I knew that I loved school.
Darin: Not too many people loved school.
Kathy: I really loved learning. I’ve learned three languages, I don't anymore. I didn't practice them enough, but I loved math and science. There weren't a lot of women in math and science fields at that time.
How Women of Influence Become Role Models
Kathy: I really loved school, but I would learn things quickly. Therefore, I would get really bored when other people weren't learning it as quickly. I was a massive troublemaker in school. If the science teacher left, I was the one taking the hose and just spraying down the whole class. Anyway, I was a bit of a wild child. When I was 17, I just felt like I needed to see the world and I went and traveled all of Europe at 17.
Darin: Did you do the hostel thing? Backpacking?
Kathy: Hitchhiking, all of it. That showed me a bigger world that just expanded my horizons. Then when I went into that newsroom, I came back from Europe and was invited to the newsroom. I thought that was where I could see women of influence. At the time, there wasn't a lot of that.
Darin: That was important to you, to see other role models that have done something that is fascinating.
Kathy: There was Oprah and Lady Di. At the time, just weren't a lot of female role models. If you asked any woman, it would be Oprah because she was it. I thought, this newsroom, that's how I can have influence. That's how Oprah did it. I think that was exciting for me, that there was an opportunity for women in the news arena.
Darin: Then you started to create this vision for yourself that you can do it. I don't know this to be true, because we haven't talked before, but I would imagine that you, having that vision that you could be on TV, you could be one of those news people running around to fires and different things.
Entering Real Estate from a Place of Desperation
Darin: Did you have that belief that once you moved into the real estate world, that, I did it over there, now I could do it over here?
Kathy: Not really. With real estate, it was more of desperation. I was coming at it from a place of, I've got to figure this out. Even in the broadcast world, there wasn't an understanding of investing per se. You could make a big salary, but people weren't really talking about investment unless it was in the stock market. Of course, that could go up or down and that was something I just didn't understand.
I'd go to the financial planning meetings and I just couldn't wrap my head around it. It just felt like gambling to me, even though my sister's husband's twin brother is the biggest angel investor in the world. Literally, we were sitting in my parent's living room when he came over and said, "I've got this investment. You guys could be first in. It's going to make searching things on the internet faster." We're looking at each other.
Kathy: Yes. We could have been the first investors. Talk about oops, we just didn't get it. We didn't understand it. My mom did. That was probably also a foundational thing for me as my mom had an incredible sense of investing. But at that time, women were not given much power in that regard. She came from a generation where women weren't even allowed to be on the checkbook. It was Mrs. Douglas Morrison, her name wasn't on the checkbook.
From Powerless to Women of Influence
Kathy: At that time, women were pretty powerless financially. I don't want to say all women, but a lot of women. My mom was the one who elbowed my dad and said, "Let's just buy a little." I feel bad for him.
Darin: I feel bad for him. Now he's like, "Wow, thank you."
Kathy: Because of her, they bought some and it went up so much, they sold it.
Darin: That's the hard part. I'm interested in angel investing, and when we get offline, I'll ask you about your friend, but it's something that can go up so fast. I've read books about venture firms that kick themselves that they got out too early. Even the venture firms, who are supposed to be in the know, it's hard to hold on after you've multiplied your return so much.
Kathy: It's hard to time investments. Any of us could have said, "Why did I do that?" Or, "Why didn't I buy or sell then?" Just like me. I was very bullish on single family homes during the pandemic, but I didn't know how multifamily would do. Remember, the pools were shut down and everything was shut down. I just thought, boy, people want to have a house to live in with a yard. We put our money there, which turned out to be great as well. But I look at the returns first-time syndicators was making over the last two years thinking, that's not fair.
Darin: It wasn't like that when you got on. But anyways, probably a lot harder to raise money where there's a lot of money going into these deals now.
The Single Family Market Is Exploding
Kathy: It was always easy for me to raise money. It always has been. But once you've syndicated for a while, at least for me, I'm just more cautious. I just don't want to make a mistake. If I'm not sure about something, I just don't do it. That's how I felt in 2020. It's like, I'm just not sure where this is headed. I know that the single family housing market is exploding. We're just going to do that. But we did great there too. It's just there's always that FOMO.
Darin: Sometimes you get it right, and sometimes you don't. But the good syndicators figure it out. They re-pivot. Let's try to stay on multifamily. Think of a learning lesson in the multifamily world that could help a syndicator out there that may be going through something similar.
Kathy: I talked about this on Joe Fairless's show years ago. It's an embarrassing thing. But again, it was years ago when I was just starting. We purchased a 92 unit in Anderson, Indiana, and Anderson is not a booming town by any means. Indianapolis was growing. But the reason we fell for this project is there were plans for the city to put in a lake there that would be a reservoir for Indianapolis.
This apartment would be waterfront if they did that. That was a cool little extra. It was also next to a growing university. There were things that just made sense. The problem is it was in a very old building. I'm just embarrassed to even say it out loud, but I said it on Joe Fairless's podcast, I'll say it here. My asset manager, my acquisition guy didn't go through every single unit on purchase.
A Lesson Learned
Kathy: He went through most of them, but this is one of the most important things to do is you've got to know the building inside and out. He went through most of the units, but the broker basically ran out of time. The broker's like, "I'll send you pictures of the rest," or whatever. I don't know what happened, but all I know is that those last units weren't looked at and those were a real big problem and hadn't been renovated. It was not truthful, but it was our mistake.
Darin: That’s interesting. I've been on a lot of different due diligence days and there are some times where they just don't let you in.
Kathy: That's what this situation was.
Darin: The tenant maybe is like, "No, I'm sleeping." "I'm getting up." "I just got back from work," whatever, and you just can't get in. What do you do in that circumstance?
Kathy: I know for us, I would say generally you're probably going to be fine. Just in our case, it was probably intentional on the side of the seller to not show those units.
Darin: Because you would've priced it differently. Somebody that I interviewed recently said that during COVID, they had a situation where there were certain people that would say, "I've got COVID," or, "I'm not opening the door," or whatever. Interesting, the thing that they did. I put it in the back of my head for future deals, any of the units that they did not get to go into, they had the seller put funds into Escrow. Then they had 60 days from the time of purchase to go into that unit and check it after purchase.
What's on the Other Side of the Door
Darin: If everything was all right, then they released the Escrow. But that's a smart way of trying to protect that because you don't know what's on the other side of the door. That's a possible solution for that.
Kathy: That's smart. These ended up having mold and the city came in and they required all kinds of things that we had to replace. So many things.
Darin: What you budgeted for a rehab unit was blown out of the water for those units. That's a great example. You said it's embarrassing, but it's something for people to learn from. Thank you for sharing that. What's your next big stretch goal now? You've done so much, how do you push yourself to get to the next level?
Kathy: I have some really exciting things that are coming my way. I don't know how much I can say, but it's three other women who are powerhouses in real estate. They want to do potentially a show together. We're in talks about that. I can't say much more about that. I'm very excited.
Darin: TV show?
Kathy: Yes. That's exciting. We're talking in the works on that one and then I'm just starting another syndication firm's growth developments. I don't want to say take advantage, but that were the words that were going to come out of my mouth.
We're preparing for what we think will be a lot of opportunities in six months or so. I do believe that some people weren't prepared for these rising interest rates and they're in bridge loans on multifamily. They're going to be in big trouble and they're going to have to do some fire sales.
Women of Influence Don't Take Advantage of Others
Kathy: Again, nobody wants to take advantage of someone else's pain. I have been in that situation, so I feel like karma's on my side now.
Darin: It also could be a financial gain for you and for your investors, but it's problem-solving because it could help, even though the syndicator is in trouble. It could help them to be able to quickly swap somebody else in. Maybe their investors lose their equity, and you get in on a much lower basis, but that syndicator doesn't have a foreclosed property on their hands. They can't do another deal ever because their reputation is ruined.
It's a weird little problem-solving, but that happens every day. People do that on the single family side. I've never invested in the single family side, but people do that every day. Somebody's about to have their house foreclosed on and then an investor comes in and says, "I'll buy the house from you."
Kathy: So that you avoid foreclosure and maybe walk with something. I really appreciate that you reframed it that way. That's the kind of deals we were doing in 2010, with this one developer particularly, in Portland who had 27 townhomes that were nearly complete. Waterfront in Portland was 70% complete, but his construction loan bank failed. It was of no fault of his own. The bank failed, and the construction loan disappeared. He couldn't finish the project. It went to the FDIC. There were over 20 million into it. We were able to buy the whole thing for 3 million. That was my first syndication. When you say, "Can I raise money?" It was like, that was super easy to raise money for that.
A Good Deal
Kathy: It was obviously a good deal. But we did keep the developer in, we called a consultant because the bank wouldn't have allowed him to be a part of the deal. He was basically doing a short sale, but we kept him on as a consultant and were able to pay him and give him a little portion of the profit. It benefited us because he had all the permits. He had pulled the permits, he knew the project, he had all the team and everything and it wasn't really his fault that it all fell apart. We were able to still pay him for his expertise and give him a piece of the profit.
Darin: You built a win, win, win. A win for you guys, a win for the developer, and a win for your investors. That's the way it should be. What do you like to do outside of work? I heard you say surfing. I think I've seen you guys with some surfing pictures. Is that one of your outside interests?
Kathy: I love surfing. We've got a great little spot that's down the road and we love to hike and mountain bike and rock climb. We stay active.
Darin: Have you done any of the parks? My wife and I are going to Glacier in August. She's like, "You got to get in shape to do some of these long hikes." I'm like, "All right, let's go." Have you been there?
Kathy: I haven't been there, but I need to, because it's close to one of our projects. I just need to get out there and do it.
Darin: I look forward to it. How do people reach out to you and get to know you better? You have a lot of different avenues, point the listeners in the right direction.
Kathy: The RealWealth Show is my podcast. I also have Real Estate News for Investors. That's a five to seven-minute daily little tip on what's going on. And realwealth.com is our website. You can join for free. That's mostly focused on one-to-four units. My growdevelopments.com website is not up and running yet, but will be probably in a couple of weeks. That will be my new syndication company.
Darin: If somebody goes to realwealth.com and signs up there, do you port them over to growdevelopments.com? They'll see both of your opportunities.
Kathy: if you go to realwealth.com, you'll get access to all of that. That's probably the simplest thing.
Darin: Go to realwealth.com, sign up, and get to know her. She's a player in the industry. She's been around a long time. She knows a lot of people and she's out to help a lot of people. I love seeing that. Kathy, I really appreciate you coming to the show. If I'm ever in California and you guys are open to teaching an old guy how to surf then, then I will look you guys up and if you're ever in Dallas, please look me up. Take care. Listeners, until next week, signing off.