A US market update with Kathy Fettke
About Kathy Fettke
- Kathy is the founder of the Real Wealth Network.
- She became popular after starting a radio show about how to raise money.
- Kathy is a frequent guest expert on CNN, CNBC and Fox News etc.
- Kathy is the author of the book “Retire rich with rentals”.
Nuts and Bolts
Kathy started looking into ways to raise money after her husband was diagnosed with terminal cancer. She had two young children and had just bought a large family home so she needed to find a way to pay the mortgage after the medical bills absorbed all of their savings. While her husband was away for the weekend she rented out all the available spaces in their house to renters and this money kept them afloat during the toughest times. The other asset Kathy had was a radio show and so she decided to turn this into a show about learning how to generate a passive income. This was initially something she did to teach herself, however the show has grown in a huge educational organization, giving free information to its members. The Real Wealth Network now has 24,000 members with approximately 4000 sign up’s last month.
State of the market
Kathy has been watching the market for many years and has become very good at analyzing trends and explaining markets to lay people, in this episode she describes the state of the US real estate market from a birds-eye perspective. Just like 10 years ago the market is growing with bubbles in certain areas. This means that it’s potentially a great time to sell in Australia and buy properties that cash-flow better in the US. Although the exchange rate isn’t as good as it was 5 years ago, an investor will be swapping high equity for high cash flow. However Kathy advises all investors – international or local – to proceed with caution, especially around bubble markets like those in LA, San Francisco and New York. These bubbles have been caused by quantitative easing and low interest rates and are going to burst when the baby-boomer generation takes their money out of the stock market for retirement and the millennial generation can’t replace it. Kathy advises investing in property that is not linked to the stock market and instead finding places near manufacturing jobs instead, as these will be unaffected by a market crash.
Kathy advises that the best way to stay in the game during a recession is just to keep to the fundamentals of real estate investing. These are the basic facts that support high cash flow and good investing, for example properties with high CAP rates. Always try to purchase these properties, and if you can’t find a property with a high CAP rate then invest in an area with a high demand for housing. Another fundamental is the job situation in your potential market; always research employment levels in the area you wish to invest in and Kathy recommends looking for manufacturing jobs rather than stock market jobs which will be affected by a recession. Try to research if there will be further job creation in the area, for example are any factories or large employers moving into the area. Kathy invests where the money is, for example in the past there was a need for more multifamily properties so this was the investment plan, however now there are inventory issues in her chosen markets so she’s focusing on building properties.
Looking into the future
In 2006 is was clear to Kathy that California was in a bubble that was close to bursting, however she couldn’t foresee the worldwide crash. Nowadays she can predict that there are no fundamentals in the stock market so when the interest rates inevitably rise there will be a crash. Her advice for investing in this time before the recession is to make every decision like its 2006. Don’t get any short term loans because if the liquidity disappears then you can’t refinance the property and don’t hold onto any properties that aren’t cash flowing at the moment. You can’t hold onto a property that you hope might appreciate in time because then you’ll be stuck with something that won’t sell. Base your portfolio on cash flow instead of equity, so don’t bother buying the big expensive properties, but instead stick to small rental properties that you can pay off quickly and take the rental money.
Contact – realwealthnetwork.com