Episode 33 – From Single Family Homes in US to a Retreat in Costa Rica
In today’s show, Pancham interview Kathy Fettke, Co-CEO of Real Wealth Network, Host of the Real Wealth Show and author of Retire Rich with Rentals.
Kathy shares with listeners some really interesting information about her investment in an 800-acre retreat in the beautiful country of Costa Rica.
As more and more people flock to large US cities, existing infrastructure is proving to be woefully inadequate. Because of this, high net-worth individuals are desperately looking for alternative lifestyle options. Barely a 4-hour flight from the United States, Costa Rica is well-placed to cater to this growing demand.
So, how can you invest in Kathy’s real estate development? Can you expect to earn good returns? Kathy gives us a peek into the incredible lifestyle that you can enjoy if you own a holiday home at this stunning location. We hope you enjoy this show.
Tune in for some excellent insights!
- 01:52 – Kathy’s background information
- 03:05 – Why did Kathy zero in on Costa Rica as an investment destination?
- 05:23 – How did Kathy manage to get the local community on board for their grounds up development?
- 05:57 – Kathy shares how the stunning locale and holistic, community living make Costa Rica an ideal retreat destination
- 07:13 – Are major US cities running facing a scarcity of essential resources?
- 08:03 – What is the price range for investment homes at the Costa Rica retreat?
- 09:00 – How can you invest in Kathy’s Costa Rica development?
- 09:22 – How a glamping set up is helping generate additional cash flow
- 11:28 – How did Kathy fund this property development?
- 13:45 – Is there demand for rental homes at the retreat?
- 17:28 – Taking the Leap Round
- 17:28 – When was the first time you invested outside of Wall Street?
- 19:30 – What fears did you have to overcome when you first invested outside Wall Street?
- 20:26 – What was one investment that did not go as expected?
- 21:48 – What is one piece of advice that you would give to people who are thinking of investing in the Main Street?
- 22:50 – Kathy shares her contact information
3 Key Points:
- How to invest in a Costa Rica retreat
- How high net-worth Americans are looking for a safe and alternative lifestyle in Costa Rica
- How to raise rental income by investing in a Costa Rica property
Get in Touch:
Welcome to the Gold Collar Investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.
Here’s your host Pancham Gupta.
Pancham: Thank you for joining me today and I really appreciate you for being here. I hope you’re enjoying the podcast and also learning at the same time. I have been going to many conferences up until late last week of February 2020, after which I have stopped because of the corona virus and many of these conferences are getting canceled. However, at my last conference in Denver, I learned quite a few new things and learned about brand new asset classes. One such asset class that I found very interesting was investing and developing in Costa Rica. Creating a community which is closer to nature. So it piqued my interest, and I decided to learn more about it. Luckily, at the conference, they had a podcast recording booth. I had reserved one slot for recording not knowing at the time who the guests would be. After listening about Costa Rica, I decided to ask Kathy Fettke to talk about her experience and ideas on the show just one hour before my recording time. So today’s show is going to be different even though they had the best of the equipment available to record. But since I recorded it live, you are going to feel that it was recorded live. This is my first live show and I hope that you enjoy my conversation with Kathy. A bit about Kathy first. Kathy is a co-CEO and co-founder of Real Wealth Network. Cathy specializes in teaching people how to build multi-million real estate portfolios through creative finance and planning. She is passionate about researching and then sharing the most important information about real estate market cycles and the economy. Author of number one bestseller, Retire Rich with Rentals, Kathy is a frequent guest expert on media such as CNN, CNBC, Fox News, NPR, and CBS Marketwatch. Kathy, welcome to the show. Thank you. Are you ready to fire up my listeners break out of Wall Street investment?
Kathy: I’m so ready.
Pancham: Great. Great. Well, thank you, Kathy. You have a great background. And you know, I would love my listeners to know a little bit about your background and then how you actually conceived the idea of actually going to Costa Rica, not in the United States going to a totally different country, developing there and going this route. Three business, you know the glamping…glamour plus camping together…. glamping business there.
Kathy: Well I love Costa Rica. First of all, my husband and I surf and one of the places I was able to learn was Costa Rica because in California…in Costa Rica you can build your own wave. But with that said, we are I’m always looking for emerging markets. I’m not so much of a value add investor where I’ve bought old buildings and fix them up. When it comes to apartments. It’s hard. Yeah. And I prefer less hard. We do. We like new builds, because you know what you got. And like I said, I love Costa Rica as a country. I like their government and their system there. And I might be more nervous in other countries in Central America, but I like Costa Rica, and it is protected by the US in some ways, right? The tax benefits are pretty impressive and incredible. Really, the main thing was, I met a developer big New York City developer who just started a family had this little baby and you know, didn’t want to raise this child in New York City. He wanted to raise her in nature, and started searching for a place where he could build a community where he could raise his daughter where she could grow her own food and not be exposed to you know, all the screen time that kids in the US have. And so he just started searching and he found this really unique property in Costa Rica 800 acres of land that had already been prepared for development and already had a lot of the entitlements in place. It’s very difficult….very, very difficult to develop in general but in another country is really hard.
Pancham: Yeah, exactly. It’s really hard.
Kathy: So he already had the entitlements very close to being there. And then there’s ways to expedite that and in Costa Rica, like there are here maybe a little easier, and he’s the one who actually got the vendor to find the land and got all the answers.
Pancham: So, he is the one who found the place.
Kathy: Yeah, he searched the world for the right place. And he found this 800 acres that then in Costa Rica, it’s very eco-friendly, right? So you can’t go there and just raise the trees because you just can’t go and cut down a bunch of trees for development in Costa Rica because they care about their environment. Well, this property that had already been done by someone else, so we did the opposite. We planted trees, and therefore the community really appreciated that and was kind of more willing to work with us. We were looking at getting back and the community we’re developing was going to be eco-friendly, eco-friendly homes. We are going to plant it like I said, 10,000 fruit trees and avocados and cacao to create enough food for those who live there. There’s enough water there’s well water. So there’s a lot of people who are kind of scared where the environment is going as they should be. They’re scared to raise their kids in a big city and have the influences there. So there’s kind of a trend in the Silicon Valley. You may have heard of called green schools. Have you heard of that?
Pancham: No, I have not.
Kathy: So a lot of high net worth Silicon Valley people in New York are actually raising their families on farms like this. And in nature and in this case, green schools, and then the executive flies back and forth. But you know, these days you can really work from anywhere, right? So our development has the highest speed internet in Costa Rica, so people can live their work there, but the executives that need to get back to Silicon Valley can fly back there’s an airstrip on the land.
Kathy: It’s just it’s just a really I just fell in love with the concept and you know, if I were raising my kids. I’m a grandma now. But if I were just starting out with my family, it really would probably be something I consider just a safe place for my kids to run around and eat the food that that you can pick it on your walk to school, you know.
Pancham: So to summarize on this development, it’s basically single family homes and entire ecosystem that a human needs, you know, around Like your food, water. All of that the nature is there to sustain itself. Yes. And by itself and no exterior influences needed to for it to sustain that…
Kathy: Exactly. And for a lot of people, there is fear that we’re going to run out of resources and this right food and water in California. We have water issues all the time, right? We’re doing developments in Northern California that we’ve had issues getting the water rights and Colorado’s got a big problem with that getting water rights.
Pancham: Right, right.
Kathy: So to have 800 acres of the most fertile land you can imagine with absolutely perfect climate with the most beautiful people we’ve really included the village in our community, and a lot of people just feel even if they don’t live there to know that they have that…maybe a second home that they could go to if all hell breaks loose and they need to go somewhere that they feel is safe.
Pancham: Okay, so they have their schools there too.
Kathy: We are establishing it.
Pancham: Oh, wow. Okay, so what was the business model here? Like how big would be the houses? Then what was the price point and…
Kathy: Yeah, so they range from micro homes that are on the more affordable range and then up to a million dollar homes that have just unbelievable views and pools and access to the 800 acres. So you know, the waterfalls and the streams and the beautiful landscaping that in the food, you know, as part of the HOA, you get a food basket every month of the food that’s grown there. And I don’t know if I mentioned before, but a five star chef from New York City that oversees all the cuisine so you don’t ever have to cook if you don’t want to. It’s kind of community living but you have your own your own home.
Pancham: Got it. So I have so many questions around this, like where is the project right now? And did you need leverage? Like did you buy all this land cash and develop everything using equity from the private investors? And where is it now? And are you accepting more equity or are you building more?
Kathy: We are not raising right now. We will be selling home soon. So if people are interested in that phase of it, that’s coming up. We do retreats. I think you’ve mentioned this glamping that we have there. So this property is not where most tourists go in Costa Rica so it wouldn’t be something someone would think about right off the bat when they leave Costa Rica so we needed to get people there. And because you can fly onto the land, there’s private jets, just a few hundred dollars more to fly from San Jose airport to the property. But there’s really no place for people to stay that would have them experience what we’re creating. So my developer partner said, well, how about we just build you know, really fancy camps…very, very nice beds, you know, very comfortable beds, very high quality linens, but it is tents. It is called glamping. Public restrooms but very, very nice spa like and then the full restaurant where you can again, you can have food that was picked an hour before prepared by you know, five star chef. We wanted people to come and experience that and fall in love with the place .Take a little stroll and swim in the ponds, you know, under the waterfalls. So we created the glamping site for homebuyers, but in the process, you know, why not have a little cash flow, right? That’s the industry that we’re in.
Kathy: And when you invest in Wall Street, it’s not common that you get cash flow from that it’s generally speculative. So the whole business plan and with all of our projects is to make sure there’s cash flow coming in to cover expenses. So it’s like, hey, we got this glamping site, or homebuyers but it turns out there is a really active retreat business out there. And there are retreat leaders who make a lot of money and are willing to rent out our entire glamping site because we have a yoga studio there and the great home-grown organic foods and the cleanest water you’ll ever have, you know the cleanest air so it turns out that’s quite profitable to do retreats weddings we’ve got. Since I live in Southern California, I know some celebrities that really love the privacy of the place. They want to have their weddings there because no one would feel the same. They can fly right in. So that was kind of a surprise side business. Another, I guess surprises people don’t realize how quickly things grow in Costa Rica. So we have so many products and do not know what to do it. So now we’re exporting and we’re, you know…I was never planning on doing it and it’s more food than we can use as an entity.
Pancham: I wanted to circle back to the question. Did you syndicate for the deal?
Kathy: Yes, you did ask that. And I didn’t answer it. With all of our development projects we raised the money to acquire the land to finish the entitlements to do the horizontal and finish out the first phase. I’m not in a position where I want to be stressed out about lenders not breathing down my neck. We are in the longest expansion we’ve had in history. That doesn’t mean there’s a recession around the corner. I’m not trying to scare anybody you just never know. So what we know is that developers really got hurt because of their financing when you can’t sell and you’ve got this huge debt service that has to be serviced, but you’re not selling homes. The bank takes your property.
Kathy: Now 10 years ago, that’s how we started syndicating in the real wealth network. We were picking up subdivisions for pennies on the dollar because banks have to foreclose, they’re required. Yeah, if it goes into default, and we pick these up for, like I said, at $3 million to pick up a $20 million development or something. So we didn’t want to be on the other side of that. So we’re very cautious about taking any financing. I would tell anyone, if you’re investing in a development deal, just be very wary of the financing that’s in place if there is. So in our case, they were building in Reno and we raised all the money to it. It was not little. It was $18 million. But our investors are in Silicon Valley. So they’ve sometimes got money they don’t know what to do with it. They want to put it into hard assets like real estate. So for all of our projects, except one in Park City, we raise it all ourselves, and it’s a pretty high return. So there has to be a fat profit at the end. Makes sense? So many people bring me development deals that they want us to look at. And they will only work with financing. And a while, maybe 10 years ago, I might have done it. I won’t do that today.
Pancham: Got it. Got it. So are you at break-even? Like, have you returned capital from the Costa Rica project yet?
Kathy: Some. We are done with phase one.
Pancham: Okay, got it.
Kathy: We are now ready to subdivide and sell the lots.
Pancham: And so when you do that, you would probably be looking for people who have the same philosophies, the teaching, maybe have a second home in a place where they can go and kind of, you know, relax and all that. So is it like, are you selling ready, built homes? Or is it like land ready to be built or you’re selling homes as well as a package.
Kathy: It’s really going to be up to the investor. We have a list of people who would like to live there but can’t afford to buy the home. So there are opportunities for investors to come in and buy those homes and rent them and in that case, They sort of have that property that they, you know, they might feel secure just knowing that they’ve invested out of the US and they have that backup plan, or maybe when they retire, they live in it. But in the meantime, they’ll rent it out. There are a lot of families who have expressed to us that it’s their dream to raise their children there, but they just don’t have the means to acquire the property because there isn’t very good financing. If you’re going to buy you have to pay cash, right? So for some people, paying a couple hundred thousand for a house is not difficult, and for others it is. So that will be a pleasant opportunity for investors. Another would be maybe they just buy the lot now and build it later. Or they buy a house and move there. You know, I don’t expect there’ll be as much demand initially. But we’re starting to see it more and more. Like I said, it’s become a bit of a trend for really high net worth people in Silicon Valley. They just want their kids out of, you know, some of the pressures that they’re under these days with in school where kids are really stressed out.
Pancham: Yes, that’s true. All right. I guess you have all of this information available anywhere. Like if people are interested in looking at your project…
Kathy: So if you just want a really cool place to visit or have an event on a retreat, you can go to kinkara.com. And it’s very reasonable and inclusive and all that. Like I said, we can arrange the flight in and all the activities you know, if you want to zip line or if you want to spend a day on the beach that can be arranged for you. So that’s Kinkara. That’s our glamping site. If you’re interested in potentially owning home or, or some farmland or being a part of that, it’s Costa Rica.
Pancham: So we’ll be back after this message. If you are an accredited investor, and have been thinking about putting your money to work for you, then I have good news for you. I have created an investor club which I call The Gold Collar Investor Club. I will be putting together investing opportunities exclusively for the group. These are the opportunities where I have done the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on thegoldcollarinvestor.com/club. I repeat thegoldcollarinvestor.com/club. I will reach out to schedule a 30-minute phone conversation to discuss your investing goals. Once you sign up, this can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some passive income. And in case you are wondering, what is an accredited investor? Accredited investor is someone who has earned more than $200,000 as filing single or more than $300,000 filing jointly for last two years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million, excluding your personal home. It includes your stocks, 401K’s, IRAs, cars, etc. Just not the equity in your personal home. If this is you, I would highly encourage you to sign up. So let’s move on to our next section of our show, which I call Taking The Leap round. Okay, I ask these four questions to every guest on my show. And my first question is, when was the first time you invested outside of Wall Street?
Kathy: I don’t know that it was the first time…Probably the first time was our home where we did the…Oh, they have a word for it these days and house hacking. Yeah, we bought a house far too big for us. But we were able to turn into a four-plex. Not legally. But we rented out the unit. Yeah. There’s like a little office that we turned into studio and we were able to buy this house in Lafayette right outside of San Francisco. Way more than we could afford, but I was a mortgage broker at the time and I was able to do my own loan and afford that house or buy the house. But because we rented out three different spaces that can pretty separate as a four-plex. It almost cost us nothing to live there. In that time. The house went up about $100,000 every year, so it was well worth it. I don’t know if that’s investing out of Wall Street. But that was kind of my first foray into it. Yeah, just understanding rental income and the power of it. You know, these people were paying us to live in this beautiful property. It was paying our expenses. And then we made 100,000 a year. It was crazy. So then I have started the real well show. I was one of the first podcasters I originally had a radio show in San Francisco and I was desperate to understand more. What are other people doing? How do you do more of this? I want more passive income because one is good. More must be better, right? It’s just started interviewing people and I interviewed Robert Kiyosaki. I was very lucky. And he taught me that California was in a bubble at the time it was 2005. And then Texas was not. It was the opposite of a bubble. It was 26% undervalued, but the jobs and the population growth was the highest in the country. So I thought, well, it’s good enough for Kiyosaki. It’s good enough for me. I jumped on a plane, I studied Dallas, and I came back with five properties. And I had liquidated my IRA to do that. I didn’t understand self-directed IRA. So that’s what I’ve done it differently.
Pancham: So great. Thank you for answering that. My second question is, what fears did you have to overcome when you first invested outside of maybe in this case, you bought your first home? And did you have to overcome any fears?
Kathy: I got to tell you, I wish I had more fear. I am one of those people that jumps in and figures it out. I think it’s good to have fear. I didn’t have it. My husband has more fears. You know, I just I’m one of those people that learns by experience. So my husband has more fear and he’s more of an analyst. I did really well on those Texas properties we ended up buying nine and then they ended up quadrupling in value. I mean it was it was an incredible thing. But I dove into other ones I didn’t do as much research. But what I discovered is, oftentimes couples are opposites. You have one who’s ready to jump in and the other who’s a little more fearful and analytical. When you can really learn to work with each other instead of against each other, then it becomes that it’s really magic.
Pancham: Right. Great. Thank you. So can you share with us one investment that did not go as expected?
Kathy: Yeah. So in that time, when I said I dove into things, it was a booming time it was 2005 2006. So rich, and I bought a couple of properties in Tennessee. I was at that time I had my radio show I was teaching I had, you know, our real wealth network groups and put again, I didn’t always take it didn’t do what I was telling other people to do. One of the things I always tell people to do and I was a mortgage broker at the time, so I really didn’t know better. I said never get into a short term loan. Never. Not one the balloons I got into I bought three houses, got construction loans, instead of getting a construction to perm, where that construction loan would automatically turn into her own mind and saying, hey, after the property’s done, I had to refinance. Well, at that time, as soon as the three properties were finished, the market just collapsed. There was no liquidity. I had perfect credit, but I had too many loans. And that’s when Fannie and Freddie cut the max to 10. So I was literally unable to get financing. There was nothing. So we had to hand those properties back to the bank. We lost all our money, and it was embarrassing, and it was that one little like, I didn’t read the documents well enough. I thought I actually got construction to perm. So it was just and I knew better.
Pancham: Yeah, you know, like I said, these are seminars.
Kathy: Yes. Yeah.
Pancham: That’s right. All right. Great. Thank you for sharing. The last question is what is one piece of advice would you give to people who are thinking of investing in the Main Street that is outside of Wall Street?
Kathy: If you are a busy person in other words, if you are successful business person and you have a career. Don’t think that you can be an investor on the side and really do a good job. Because it does take time and yes, and energy and focus. So if you’re going to flip a house or something, do it partner with someone who’s done it a million times. And because you don’t have the time and expertise, you’re going to invest into someone else’s syndication, make sure that they’ve done it before successfully so that you can truly be a passive investor not end up having to take over a property or something like that. Don’t treat it lightly. I see too many people just trust anyone. Yes. Anyone who says they have experience and I’ll tell you what, nine out of 10 don’t. So you’ve got to make sure there is a track record and then there’s proof of that track record.
Pancham: Great. Great, great advice. Thank you, Kathy, for sharing that. So how can listeners reach you if they want to learn more about you and what you do?
I am pretty easy to find these days. Real wealth network is our website. We have tremendous amount of education there and it’s free. We have monthly events and in San Francisco and LA and sometimes on the east coast. Also free. We’re at my podcast which is the Real Wealth Show and also Real Estate News. And that’s a lot of information there. I have been doing it for 15 years now. And I wrote a book called Retire Rich with Rentals. So if you want to understand how to how to acquire assets, mostly single family, we help a lot of people start with one to four units before they go big just to break through a lot of the fears and just to understand the basics, so Retire Rich With Rentals. We’ll get the checklist to make sure you don’t miss a step and a step that could really be devastating.
Pancham: Great. Thank you for your time today. Kathy, really, very niche asset class Costa Rica like glamping. I would check it out if I’m going on vacation.
Kathy: It’s really not that’s a very much a side business. We’re really into single family rentals. Yeah, no single family development. But that was a fun project that I really felt like I just love the concept. Yeah. Thank you. All right, thank you.
Pancham: I hope that you guys enjoyed what Kathy had to share about this pristine facility in Costa Rica. I feel going there once to check it out. And maybe after we have all the travel restrictions lifted, and we go back to normal, I’ll make a vacation out of it. And highly recommend checking it out at least online. And that’s it for today. I really appreciate you for joining me and thanks for listening. If you have questions, email me at be at p@thegold collarinvestor.com or leave me a voicemail on the website. This is Pancham signing off. Until next time, take care.
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If you love what you’ve heard and you want more of Pancham Gupta visit us at www.thegoldcollarinvestor.com and follow us on Facebook at The Gold Collar Investor. The information on this podcast are opinions. As always, please consult your own financial team before investing.