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Cash Flow Champs

Cash Flow Champs Real Estate Podcast

Rich Fettke is the author of The Wise Investor: a modern parable about creating financial freedom and living your best life.
He is a licensed real estate broker, active investor, and co-founder of RealWealth, a real estate investment group that helps its 60,000+ members improve their financial intelligence, secure passive income, and obtain financial freedom. Rich’s work has been featured on TV, radio, and in print including USA Today, Entrepreneur Magazine, and The Wall Street Journal.

What You’re Going to Learn:

  • Rich’s inspiration behind helping people gain Financial Freedom
  • How Rich help people get started in the world of Single-Family Property Investing
  • How to Identify Emerging Markets
  • Rich’s Vision to Help Investors Find Good Properties
  • Expert Advice from Rich Fettke

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Show Highlights

Rich’s inspiration behind helping people gain Financial Freedom

Rich’s inspiration behind helping people gain Financial Freedom

Prashant Kumar- As we were discussing earlier, the purpose of this podcast is to inspire busy professionals to invest passively and take control of their financial lives. So, let’s dive into your new book, The Wise Investor. Rich, could you please tell us a little bit about it?

Rich Fettke- My publisher suggested that I hold up my book for the video viewers, which is called The Wise Investor. It’s a modern parable and a fictional story that incorporates real wealth lessons and practical knowledge to assist individuals in growing, achieving financial independence, and living their best life, as the subtitle implies. It’s a perfect match for the podcast’s message and purpose, which is why I was thrilled to be invited to participate. The book’s goal is to encourage readers to take action and make positive changes in their lives. It tells the story of a struggling 40-something family man who works so many hours that he has no time for his family or himself. However, after meeting a wise mentor who teaches him about investing, creating wealth, and financial freedom, he embarks on a five-year journey of self-discovery. Through the narrative, readers can learn all of the essential lessons about investing and financial freedom that we’ve learned over the years. My wife Kathy and I started our company in 2003, and we’ve aided over 70,000 people in achieving financial independence. As a result, the book incorporates their stories to reach a wider audience and alter their perception of wealth building.

Prashant Kumar- Great, Rich. I know we jumped straight into talking about your book, which sounds fascinating, and I’m definitely going to read it myself. However, before we delve deeper into that, I’d like to learn more about your unique background. You started in 2003 and have helped over 70,000 members gain financial freedom. Could you tell us more about what inspired you to enter this arena and your journey so far?

Well, to be honest, it was desperation that led me down this path. I was a business coach and a keynote speaker, and I had just signed a book deal with Simon and Schuster 20 years ago for my first book. At the time, everything seemed to be going great. I was 37 years old, and my wife Kathy and I had two young daughters. However, things took a drastic turn when I was diagnosed with melanoma, the most advanced form of skin cancer. While the melanoma was operable, a CT scan revealed four masses on my liver, and after several tests, an oncologist informed me that I had probably only six months to live. This was a shock to our entire family. Kathy was a stay-at-home mom at the time, and she didn’t know how she was going to make ends meet financially. Our daughters were ten and three years old, so it was a really tough time for us.

It was then that Kathy started seeking out mentors to figure out what she could do for an income. She had a small radio show in the San Francisco area that focused mostly on coaching and personal development, given that both she and I were coaches. However, she pivoted and began focusing on finances and creating wealth, and began interviewing mentors on the show who could help guide her in this area. As she learned more, she discovered real estate investing, which she believed could help make ends meet in the event that I passed away. I didn’t believe I was going to die, and luckily, it turned out that the melanoma had not spread to my liver after all. It was a false positive. Once I had a PET scan, it showed that I was cancer-free, which was a huge relief. However, this experience led us to discover real estate investing, which we began doing ourselves. We took out a cash-out refi from our primary residence and bought six single-family properties in the north of Dallas, Texas. People were amazed that we were able to invest in Texas while living in San Francisco, and began asking us for advice on how to do it themselves. That’s how we started what we thought would be a small group to help people invest, which eventually grew into Real Wealth Network, with over 70,000 members today. We’ve helped our members acquire over $1.2 billion in assets to date.

Prashant Kumar- Wow, what an inspiring journey and story. Although I hope that others don’t have to go through the same experience, it’s truly a blessing in disguise that you were able to overcome it. It’s amazing how having the right mindset can help you fight through difficult times. Working together as a family and team, you were able to come out of it stronger. It’s incredible to see how 20 years later, from 2003 to 2023, you’ve been able to help over 70,000 people and inspire them with your experience. This is truly an inspiring story.

How Rich help people get started in the world of Single-Family Property Investing

How Rich help people get started in the world of Single-Family Property Investing

Prashant Kumar- Could you share with us how you inspire others and help them achieve what you have achieved? Your story is truly inspiring, and I’m sure our listeners would like to know the steps you recommend for achieving financial freedom.

Rich Fettke- At Realwealth.com, our focus is primarily on single-family properties because that’s where our expertise lies. We believe in sticking to what we know and have seen that dabbling in other areas can often lead to poor results. While we do believe in the potential of multifamily properties, we know that becoming an expert in one asset class is the key to thriving in real estate investing.

Through our work, we help people invest in single-family properties in emerging markets across the United States. Many of our clients are busy professionals who are seeking hard assets as a way to diversify their investment portfolios and protect against inflation and economic downturns.

Our goal is to help people get started in real estate investing and build a portfolio of properties that can serve as a solid foundation for future growth. Many of our clients eventually graduate to larger investments such as multifamily properties or become passive investors in syndications or funds.

We are passionate about helping people achieve their financial goals through real estate investing and believe that staying focused and becoming an expert in your chosen asset class is the key to long-term success in this field.

Paul Senior- That’s truly amazing! Your book actually reminds me of a book I once read called “The Richest Man in Babylon.” I don’t know if you’ve read it before, but there seems to be some alignment between the two, and I think it’s a beautiful thing. So, kudos to your books! Let’s delve a bit deeper into what you do, as you mentioned earlier. You help people all across the country invest in single-family properties, and that’s what you specialize in. It’s working for you, and that’s awesome! I, too, started out in the single-family world before moving into multifamily, and I absolutely love that world as well. For many people, single-family seem to be an easier first step into investing. Could you elaborate a bit more on how you help your clients? Do you assist with structuring financing? Do you locate properties for them, or is it a turnkey operation where you prepare the property and turn it over to them? As an investor, could you provide us with more insight into how you help people get started?

Rich Fettke- Absolutely, I understand what you’re saying. It’s like the term “turnkey” has lost its value over time because people misuse it. They put a fresh coat of paint and new carpets and label it as turnkey, but in reality, it’s not even close to it. It requires a lot more work than just turning a key. That’s why we have curated a network of property teams and brokers across the country who have undergone our vetting process. We have two property team managers who personally visit the markets and inspect the properties for rehab or new builds to ensure they meet our high standards. We have an 80-point checklist for properties that they must pass, and we conduct background checks on both the operators and the property management. Our approach is more of a “done-for-you” type, where we simplify the process for our investors, providing them with a passive operation. Our tagline is “Real Estate Investing Simplified,” and we strive to make it as simple as possible, especially for those getting into their first investment property. We understand that people can be fearful due to past experiences or hearing about someone who lost money in real estate. Therefore, we hold their hand and guide them through the process while educating them. We offer free education and joining our network is also free. As a broker, we receive broker-to-broker referral fees from the property teams and providers. It’s a pretty simple process for us.

Prashant Kumar- It’s truly remarkable that you have established a system where you are compensated by the broker, and not the investor or a portion of the investor’s profit. Additionally, someone has already conducted the necessary groundwork to locate and vet the properties, and you have invested your time in ensuring that everything is lawful, enabling investors to purchase those assets and operate them independently. Is that the process once they have acquired the property?

Rich Fettke- Once investors buy the property, it becomes their ownership, and we are there to coach and support them. Our approach is very close to our hearts because of what Kathy went through while trying to learn and get started in real estate investing 20 years ago. It was a time before amazing books, podcasts, and resources like Bigger Pockets were available. Kathy’s podcast was one of the first, airing in 2003 before podcasting became a thing in 2005. I used to take her little CD from the radio station, burn it on my computer, turn it into an Mp3, and upload it to the new thing called podcasts. We have been in the game for a long time, and it has been amazing to see how real estate investing has evolved and how much support people have now compared to 20 years ago.

How to Identify Emerging Markets

How to Identify Emerging Markets

Prashant Kumar- What are the challenges you face during the early stages of this journey? Do you want to share some of that with our audience?

Rich Fettke- The biggest challenge is to find the right partners. There are many people who claim to be great and knowledgeable, and it can be hard to distinguish between those who are trustworthy and those who are not. We used to trust people blindly, assuming that because they had been in the business for a while or had impressive properties, they were the right fit for us. Unfortunately, this approach often backfired, and we or our investors would end up getting burned. As a result, we had to drop those referral sources and vow never to work with them again. This was a painful lesson, and it prompted us to create a rigorous vetting process that involves much more than just blindly trusting anyone who expresses interest in becoming a property provider at Real Wealth. Instead, we take our time, usually three to four months, to thoroughly evaluate and scrutinize potential partners before introducing them to our members. This process has helped us weed out people who lack integrity, who are only looking out for themselves, and who offer subpar products or services. Overall, the biggest lesson we learned is that trust must be earned and that it is worth taking the time to find the right partners who share our values and commitment to excellence.

Paul Senior- Rich, you work in emerging markets, which are markets that are experiencing significant growth and development. Could you explain to our audience what exactly an emerging market is and its benefits? Also, could you share how you go about identifying these markets?

Rich Fettke- Absolutely! An emerging market is a place where businesses and people are migrating and it’s experiencing growth, though it doesn’t necessarily have to be an appreciating market. We tend to focus on markets in the south, southeast, and southwest such as Florida, North Dallas, Ohio, Pennsylvania, Maryland, and the Carolinas. As the old saying goes, where the money flows, people go. So, we try to chase these trends, and Kathy Fettke, my wife, is an expert in market timing and emerging markets. She has been featured on CNN, MSNBC, and Fox News due to her expertise in analyzing data and selecting emerging markets across the US. After Kathy selects a market, we begin looking for experienced property teams and brokers in that area.

Paul Senior- Great! When it comes to these markets, everything moves at a fast pace. Appreciation is something that can be expected in these markets. Based on your experience, do your clients benefit from both appreciation and good cash flow in these markets? It seems like your clients may have a winning situation with both factors. I’m curious, do your clients tend to hold onto these properties for a long time as a long-term investment or do they take action with them right away? What actions are your investors typically taking with these properties? Are they considering long-term investments or are they looking to flip them quickly? 

Rich Fettke- Absolutely, it sounds like you and Kathy are more of the buy-and-hold type of investors, which can be a great strategy for long-term success. Typically, investors in this space will lock in 30-year fixed mortgages, putting down 20 or 25% and letting their tenants cover the mortgage payment and generate cash flow. The markets can vary quite a bit, with some areas like Tampa, Florida experiencing an incredible 43% appreciation gain over the past 18 months, while other markets like Ohio may see a more modest 6-7% appreciation rate but offer better cash flow. It really depends on the market, and investors will often hold onto their properties for the long term or use a 1031 exchange to move into a more expensive property or market with better potential returns. In some cases, investors may even move into multiple properties in different markets if their original property sees significant appreciation.

Rich's Vision to Help Investors Find Good Properties

Rich's Vision to Help Investors Find Good Properties

Prashant Kumar- It seems like your business model involves helping investors find viable and pre-vetted assets and guiding them through the buying process. These investors tend to be long-term, buy-and-hold investors who take care of their properties on their own. Your expertise lies in finding properties across emerging markets, and while you do receive broker fees, your philanthropic vision is to help investors across the country find good properties without struggling to do so. Investors can come to you and seek guidance on where to buy properties that will generate cash flow or returns over time. Is this an accurate synopsis of your business, Rich?

Rich Fettke- Absolutely, that’s exactly what we do. We earn a moderate referral fee for helping investors find viable assets, and over the years, we have facilitated over 6,000 property transactions. In 2010, we expanded our business to include the syndication of residential ground-up development projects. We partner with experienced developers with a track record of delivering on their promises and having completed multiple projects over the course of 30 or 40 years. Through this syndication model, we offer a preferred return to our investors, who then share in the profits once all the properties are sold at retail prices. While some developers may not deliver on their promises, we are committed to partnering with reputable developers who have a proven track record of success.

Prashant Kumar- So the second order of business pertains to syndication. Do investors expect preferred returns either from the day they invest in the deal or when the property begins functioning?

Rich Fettke- When the property begins functioning because we are building a property, unlike a multifamily complex where the cash flow is instant. We enter the picture when payouts can begin, so we have to wait until the preferred return comes in. Once the development is completed or at a stage where properties can be sold, and enough units are sold to reach profitability, the investors receive their preferred return as profits. When the entire project is finished and all properties are sold, we examine the total profits, which are typically divided in a 70-30 split.

Paul Senior- Do investors receive profits from the date of investment? Are profits accrued until the property becomes active and payments start coming in? What happens during the period between upfront investment during construction and the start of payments, such as from tenants or when the property is booked out?

Rich Fettke- Yes, investors start earning profits from the time they invest until the project is finished. This acts as an incentive to complete the project because there are interest payments on the preferred returns. Once the investors reach the point of receiving their return, which is annualized, the profit share takes place after the project is completed.

Paul Senior- It’s great to see how many people you’ve been able to serve over the past 20 years, Rich. You and your wife have been working tirelessly for a while now. With all the people you’ve helped, you must have some heartwarming stories. Could you share one of those stories with our audience? Is there a particular family you’ve assisted that has had a positive outcome? 

Rich Fettke- Absolutely, I have one story in mind. Kathy and I host the Real Wealth show where we interview couples and ask them to share their Real Wealth stories. These stories are about where they started, what they did, and where they are now. These stories have been so inspiring that I’ve included several of them in my book, The Wise Investor. One story that stands out to me is about a couple with five kids who started investing with us. The husband owns a chain of Domino’s Pizza franchises and was doing well financially, but wasn’t acquiring hard assets. He started buying investment properties with us around 2009 or 2010 and eventually reached the limit of 20 investor loans between him and his wife. Then, they started buying properties with their kids, putting them on the title and helping them get loans. Now, all of their kids own rental properties, and as a family, they own 38 or 39 properties. This family has created a legacy, starting with the husband’s decision to buy a few single-family properties, which has now resulted in his kids having generational wealth. It’s a heartwarming story that I love to share.

Paul Senior- That’s incredible.

Expert Advice from Rich Fettke

Expert Advice from Rich Fettke

Prashant Kumar- Rich, we’ve had several discussions regarding your business model. As I understand, your aim is twofold: to assist investors and to engage in syndication. As syndicators ourselves, I believe we’ve arrived at a juncture where we can conduct a rapid-fire Q&A session. Can you share with me a piece of advice that has truly transformed your life? Although I have already adopted some of your suggestions, I am eager to hear your thoughts on this matter.

Rich Fettke- I believe that the most significant piece of advice that has impacted my life is to be curious. It might sound simple, but it is incredibly powerful. During my year-and-a-half coach training, I learned how to ask powerful questions, which was useful when working with my clients but not as effective with my family and other individuals, especially during disagreements. However, I had a breakthrough when I realized that being curious always benefits me, and I believe it can benefit anyone else as well. For instance, in a business deal, asking questions and being curious about the project’s details can help you make an informed decision. Similarly, during a sales meeting, being curious about the customer’s goals and desires can be the game changer. By being genuinely curious, you can improve relationships, increase sales, and thrive in business.

Prashant Kumar- That’s excellent! I also gathered from your previous comments that being curious and vetting your partners is crucial. You spend a considerable amount of time ensuring that your partners are knowledgeable and capable by asking them numerous questions. In fact, you can never ask too many questions, right? On that note, do you have any personal habits that have contributed to your success, Rich?

Rich Fettke- I have many personal habits that have contributed to my success. I’m a huge believer in rituals, and I even have a friend who suggested calling them ‘Rich-uls.’ One ritual that has had a tremendous impact on me is strengthening my self-discipline and willpower. When we repeatedly do something that takes willpower, we change our brain’s physiology and strengthen our ability to do what’s best for us. In 2008, my friend challenged me to do 100 crunches a day, and we completed the challenge. Afterward, we continued, and I added burpees and push-ups to the routine. To this day, I do ten push-ups, ten burpees, and 100 crunches daily, and I have completed over 640,000 crunches, 52,000 push-ups, and 40,000 burpees. It only takes me 15 minutes, but it teaches me discipline and helps me keep the streak going. This ritual has improved my physical health and carried over into other areas of my life, such as learning new things and investing in real estate.

Prashant Kumar- I’m feeling absolutely ecstatic! It’s great to hear that you’re feeling enriched and positive too. These rituals that we’ve been discussing are incredibly important; they form an integral part of your life. It’s essential to prioritize your physical well-being, as this can have a direct impact on your mental health and mindset. By doing so, you can pave the way for success. It’s truly amazing to hear these valuable insights from you, and we’re deeply grateful for having you on our show today.

If our listeners would like to connect with you and seek your guidance, could you kindly share your contact information with us? How can they get in touch with you?

Rich Fettke- Thank you for asking. My book, “The Wise Investor,” is available wherever books are sold, including Amazon and Audible in audiobook format. Additionally, our company’s website is Realwealth.com.

Prashant Kumar- Great! So if they visit realwealth.com, they can easily connect with you on social media. I wanted to ask if you offer personal one-on-one coaching or any other resources that might interest our listeners.

Rich Fettke- At Realwealth, we provide one-on-one coaching through trained coaches. While I work with a maximum of three clients at a time, I typically focus on higher-level investors and business owners. Unfortunately, I am currently at capacity and cannot take on any additional clients. However, I would like to suggest something that could be valuable for your listeners. They can visit RealWealth.com/assessment to take the Real Wealth Assessment, which we created several years ago.

This assessment is a simple, 20-question survey that covers different areas of one’s life, including financial and personal well-being, as well as their wealth team. After answering these questions, they receive a Real Wealth score. Typically, those who have not taken action towards creating passive income or building a wealth team score around 50-60, while those who have taken action score around 70-80.

Our purpose at Real Wealth is to help people create real wealth, which we define as having both the money and freedom to live life on one’s own terms. Therefore, our goal is to have over 500 people take the Real Wealth Assessment and score over 80 by the end of 2024. We support and coach individuals to help them reach this score and achieve their goals. Our aim is to help people live a life of abundance, independence, and freedom.

Paul Senior- Great! That was valuable information. Thank you, Rich, for joining us on the Cash Flow Champs Real Estate podcast. We appreciate your time and the valuable insights you shared with our audience. Your expertise is truly inspiring, and we wish you all the best in your future endeavors.

Rich Fettke- You guys are doing good stuff. I really appreciate it. Thanks for having me.