I Survived Real Estate Series 2022 – John Schaub | Part 1

 

 

John Schaub has prospered during three recessions, four tax law changes and interest rates ranging from 6-16% in his 35 years as a real estate investor. His 2016 best-selling book Building Wealth One House at a Time, 2nd edition, assisted more than 100,000 real estate enthusiasts on their way to successful invest­ing.

John recommends buying better, well-located houses rather than cheaper houses and other management-intensive properties.  Better houses are more profitable and far less trouble. He advocates paying off debt, owning properties free and clear, and renting only to long term, high quality tenants. John buys, sells and manages his own properties, and enjoys providing quality housing at fair prices for working families in his community.

He teaches one seminar each year where students learn how to identify the best investment property in their town, how to buy it at below-market prices, and how to negotiate terms that guarantee a profit.

John, a Florida native, is a proud graduate of the University of Florida, where he earned his B.A. from the College of Business Administration in 1970. He is an accomplished boat captain (power and sail), fisherman, skier (snow and water) and an instrument-rated pilot. John loves to travel, especially with his wife Valerie and their young adult children.

 

 

Episode Notes:

 

Narrator  This is The Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris. The Norris Group proudly presents our 15th annual award winning event I Survived Real Estate. Industry experts join Bruce Norris to discuss the evolving industry trends, real estate bubbles, inflation and opportunities emerging for real estate professionals. All proceeds from the event benefit Make-a-wish and St. Jude Children’s Research Hospital. See Isurvivedrealestate.com for event details information on all our generous sponsors and to connect with our speakers. We want to thank our Platinum partners, San Diego Creative Investors Association, uDirect IRA Services, White Feather investments, The Collective Genius, MVT Productions, and Realty411.

Bruce Norris  Hi thank you for joining us. My name is Bruce Norris and today we have a special guest John Schaub. John Schaub is a recent Rohny Award winner, and we don’t give those away lightly. John has prospered during three recessions, four tax law changes and interest rates ranging from he says 6 to 16% is to 2 to 16. And now we’re all the way back up there. And in his 35 years as a real estate investor, his 2016 best selling book Building Wealth One House At A Time, Second Edition assisted more than 100,000 Real Estate enthusiast on the way to successful investing. John recommends buying better well located rather than cheaper houses and other management intensive properties that are houses and more profitable for less trouble. He advocates by paying off debt, owning properties free and clear and renting only to long term high quality tenants. John buy sells and manages his own properties and enjoys providing high quality housing at fair prices for working families in his community. He teaches one seminar each year, where students learn how to identify the best investment properties in their town out of buy it below market price, and how to negotiate terms that guarantee a profit. John’s a Florida native, is a proud graduate of the University of Florida where he earned his BA from the College of Business Administration in 1970. He is an accomplished boat captain power and sail fishermen skier selling water and an instrument rated pilot. John loves to travel especially with his wife Valerie and their young adult children. John, welcome back to our show.

John Schaub  Thanks, Bruce. Glad to be here.

Bruce Norris  You know, it’s interesting. I asked Mike Cantu one time at a lunch. And I said what, what word is captured in your mind by certain real estate trainers. And I did that this morning when I thought of you. And I really think lifestyle is what comes to mind. And that’s a, that’s a really high compliment. Because I think you have figured out a process to where you ended up getting what you wanted. And then you actually realized you had it.

John Schaub  Yeah, you know, I think leading a balanced life is a challenge in any, if you’re running your own business, which I’ve done now for more than 40 years. But it’s the ultimate challenge, you know, you don’t want to just run your business and then miss out on the rest of life. So, fortunately I’ve had some pretty good role models in on both sides. You know, I’ve had some partners who are just business business business never did anything for fun. And then I had other partners who did a lot of things for fun, you know, and I’ve had some students good buddy who took off for a whole year moved his family to Greece for a year and he’s a young guy in his 40s, so, you know, if you see people do things like that, you say I could do that, you know, we just recently flew our plane up to Alaska and back and that was a lot of fun, real, real, real adventure. But you start thinking about things you want to do that are fun and you want to, you want to have that part of the life and balance with your business part.

Bruce Norris  Yeah, I wrote in the in the comments I was writing this morning it seems like you have mastered Enough is enough. And very few people do that.

John Schaub  Well yeah. And then you can get to enough is enough pretty fast. If you’ll if you’ll focus on it, you know, but I guess you have to have a handle on it wouldn’t because everybody has a different number. Everybody has a different lifestyle. But once you figure out what you want to do, you should do don’t want to spend all of your life just making money, you want to spend time your life enjoying that money.

Bruce Norris  I don’t know. But I find the other more common that the goalposts gets moved constantly. And I had a very interesting phone call and sort of with some urgency of where to place money. This is coming from a gentleman that has a net worth in excess of $100 million in his 90

John Schaub  Yeah.

Bruce Norris  And I’m just wow. Just but you know, it’s just a different if maybe that’s how he got where he where he is, but then I’m thinking I’m interviewing you. And I, that comment that I made, you know, when I heard your voice I that I picked you on a boat? That was was really a true statement. It wouldn’t surprise me. So how did you get started in real estate? We’ll go through just a little bit of your of your history, how you landed on the investing square?

John Schaub  Okay, well, I took courses in college. When I got out of college, I had my first job I had was selling real estate, I got my real estate license while I was in college, I sold a little apartment building was my first sale we made made about $5,000 commission, this was back in the early 70s. And decided, you know, that was pretty easy money. It wasn’t a lot of work to sell apartment building. So, we started selling I, I organized a brokerage office I had 13 salesmen at one time. But found I didn’t like that side of the business. Because you know, if you’ve ever had a bunch of people work for you, and I know you have, there’s a lot of babysitting that goes on, you know, it takes a lot of your time just managing people. And I could see my lifestyle going the wrong way. I didn’t want to do that. So, I started buying properties back in the early 70s. And I still own the for profit ever bought, I probably will keep it forever. But I found that buying different kinds of properties had different challenges. I had a motel and apartment buildings, I had duplexes, I had a restaurant, and a wine and cheese shop. So, all those things are different, you know, and some of them made money, some of them didn’t. But then I started fine tuning this operation. So I say how can I make the most money with without worrying all the time, you know, without working 24/7. And I have a good friend who’s a banker, so I want to work just like he does, you know, go to work at nine in the morning, go home at 4 and never work weekends. That’s my job. So, I started designing my, my investing around that idea, you know about by buying properties that would attract long term tenants, who would stay and sort of self manage, you know, nobody self manages 100% of the time. But you know, we just had to storm down here, you and I were talking about it. And I bet yeah, at least a half a dozen, maybe closer to a dozen of my tenants called me said, Don’t worry about a thing. We’ve got it all fixed up, we cleaned up the yard, we fix everything it was broken. You know, they they do take care of their own properties. And it’s a you wouldn’t get that in the apartment business, and certainly wouldn’t have it in a commercial business. So, if people would want you to come out and fix stuff right now. So, it’s been an interesting transition. But I’m really happy where I am today, which is, you know, a relatively small portfolio of single family houses, provide me plenty of money to live well. And, and, you know, keep up with inflation. And they’re not, they don’t take much of my time to manage, you know, literally, I’d work a couple hours a week, if that’s all I did manage those properties.

Bruce Norris  Well, that’s a good workweek right there.

John Schaub  Yeah.

Bruce Norris  So, I’m always, and you and I’ve talked before, so I knew some of this history but I’m always interested in the process of how you got to investing. So, you started, not everybody, not very many investors actually started as an agent. So, making that transition. I think it’s hard to get off of the first model, you’re shown at least it was for me. So, I didn’t do buy and hold and I did wasn’t a real estate agent. I just got shown the flipping business one night, and literally got a job the next day. And did that. And I thought that’s what you did. Obviously, Jack Fortin was on my case all the time. Why don’t you hold something? But it wasn’t the model I was shown it took me a while before I understood why that was really smart. But once you’re once you kind of get stuck on a model with see think, Oh, this is it. And part of the challenge getting away from flipping and holding was the immediate profit motive. So okay, I’m gonna get $300 A month or I can get 30 grand.

John Schaub  Right.

Bruce Norris  But then eventually you realize if I had kept like a bunch of those, I would have 30 grand every month on auto autopilot. Yeah, yeah, that’d be a lot better.

John Schaub  Delayed gratification is is we’ve got to get your head around that. But it’s good. It’s hard, especially when you’re young. You know, you’re you and I were both young when we started and you know, you want to Hit it, you want to do it now you don’t want to wait 20 years to start spending money. But what I found was you didn’t have to wait 20 years, you know, I went skiing for the first time in 1973, snow skiing, and I’m a Florida boy. So we don’t have any any snow in Florida. But my buddy taught me to come in on a trip, and I loved it. So I committed to ski every year, and I have every year since then, even if I didn’t have any money, I wasn’t going skiing. And it’s funny, you know, you can you can make that kind of thing happen. If you have a goals that you want to accomplish. Sometimes it doesn’t take a lot of money. You know, we didn’t we didn’t stay in the Ritz. We stayed at the Holiday Inn. We went down and have fun.

Bruce Norris  That’s cool.

John Schaub  Yeah.

Bruce Norris  You know, I think one of the things happens, when you’re in the flip business, you’re more likely to get a wholesale deal match with a lot not not such a great location.

John Schaub  Yeah.

Bruce Norris  And I think, I think that is part of why it never attracted me to say, well, I’ll just keep it as a rental. Because I’m looking around going, I don’t think 20% of the world would want to rent here.

John Schaub  Right. Right.

Bruce Norris  And so you just sell it. So, I’d never, it just, I didn’t make the transition until till later, which I’m glad I did. Obviously, it just made my life really boring. And that’s great.

John Schaub  Well, you know, one, the breakthrough I had here back in early 70s, I wrote around with a good friend of mine, who was sort of my mentor. And he showed me a number of properties that he used to own. And I asked him, Why didn’t you keep them? These are good properties, you know, they’re on a beach. They’re nice properties. And he said, well, because that won’t make a profit. And that worked on me. And I started thinking about that. Because, you know, if you sell the good properties, especially if you end up with ones that aren’t so good, so you want to hold your best properties forever. That’s been my strategy. You know, if I buy something that’s really good, and a good neighborhood that attracts great tenants, I just won’t sell it. You know, people try to buy them from me. I had a guy on here this week. He wanted to buy a house from me and I gave him a well, I thought it was a very high number. And he thought it said I’ll think about it. Well, I hope he doesn’t come back. I don’t want to sell. But you know, we sold a couple houses last year. It’s kind of funny. Check Considine. I don’t know if you ever knew him. But he had a class he taught and I took three times on on business structure and avoiding taxes and real estate investing and tax law. He was a CPA and a tax attorney. He always said equity is a part of the property to make you feel good until you sell it. And it’s amazing how fast that money disappears after you sell it, you know.

Bruce Norris  That is… yeah.

John Schaub  But why you sell that property? You got a lot more equity. You can say I got a million dollars, that house was worth a million dollars, but you sell it that million dollars disappears pretty fast.

Bruce Norris  Did you have a favorite mentor not connected to real estate? For me, I had, I had Jim Rohn, Jim Rohn had nothing to do with real estate, but he does impacted my business life for sure. Did you have, do you have anybody in that category?

John Schaub  I’m thinking I listened to all Jim’s, Jim Rohn tapes, I thought he was genius. You know, he really was a great teacher. And I did learn a lot from him. Well, you know, I’d have back to my grandmother, she taught me a lot. But you know, you watch what people do and how they live their lives and who’s happy and who’s not happy. And you try to find somebody who you know, maybe has the same basic skill set that you have who’s really happy and study what they’re doing and how they do it. But, but most everybody I’ve hung around is at some connection to real estate. More in all my life, we talk real estate night and day down here. So, I, other than some family members, I really can’t come up with somebody who had a lot of impact on the real estate guys. And they have different impact you know, some of them were doing things I didn’t want to do. And I learned that I did not want to do it by watching how they had to live. And other other people were, you know, very passive and they were just kind of collecting coupon. I said, That’s the sign I want to be on you know, I want to be on a passive side not be the side where you you have 10 phone calls every morning, you have to answer and go to work.

Bruce Norris  The title of one of the one of your books, Building Wealth One House at a Time. It’s interesting because I always thought about quantity and what that title tells me it seems like you could you could accomplish that part time.

John Schaub  Absolutely. In most of my students, you know, have some kind of employment other than just real estate, but not many people were full time real estate. So, they are working. You know some of my favorite folks they have in a lifetime worked for Delta Airlines and they bought one house and they bought one more house and they finally see that you teach yourself how to do these things. You read the book, but then you have to go out and do it. Build a self confidence to know that you can do it all over and over and over again. And you start seeing the reward to see the cash flow that comes from these properties. And so they were both able to quit their jobs after a few years, you know, not not one or two, but probably half a dozen years and go full time into investing because they, they hadn’t developed the skill set to do that. So there’s a, there’s a training period here, you know, you had a skill set, because you were, you were flipping property. So, you knew a lot about negotiation, and you understood real estate. So transitioning into investing was a fairly simple thing. But somebody who knows nothing about investing in a, you know, they’re a dentist or, you know, have some other job that they have to do, even though they’re a genius at what they do, they have to understand, they don’t know much about real estate, and they have to go. And that’s why building wealth, one house at a time makes sense for these people. Because sometimes, some people go out and buy 20 houses, and that can be a disaster. If you don’t know how to manage or you pay too much, or you buy the wrong kind in the market, you can go broke pretty fast, but buying one at a time is not gonna put you out of business. So you can start anytime during the market, you can start right now or you can start during the Great Depression or right at the top of the market and you won’t get hurt if you just bought one at a time.

Bruce Norris  It makes sense. Now, what’s a little unusual is your favor off favorite paying off houses? And I don’t think that’s common advice. And so why did you land on that square?

John Schaub  I like cashflow, you know that nothing has cash flow like a free and clear house. So, you go together, you go one way or the other. And I have good friends who most of them don’t have a big family, but they you know, they refinance their houses every chance they get because they can pull that money out tax free. And their plan is to die with, you know, 110% loans on every one of those houses. It’s just a different way of looking at things. My life is simple. You know, if you have a bunch of loans, you have something you have to do, you have to keep track of the loan, you’d have to be keeping those houses insured. I mean, you know, life is much more complicated, and you have more obligations with a highly leveraged portfolio. And, and I don’t think you sleep as well at nothing makes me sleep better than a free and clear house. I know, I know that house will always be there, you know, unless, unless I do something incredibly stupid. That house is bulletproof. So no.

Bruce Norris  I just say, you know, you guys really had an influence on me on that. Because I was surrounded with people was definitely the leverage mentality. And we had, we had a successful year in 2005. And my wife and I talked about, okay, well, we were going to do some 1031 exchanging and all that. And she’s, she said this sentence to me, ‘couldn’t we just pay everything off and relax?’ And I was so counter what my head was, but I really gave that some thought. And from that day forward, I haven’t owed anything. And it has been, just like what you said, you go to sleep at night, and you just okay, there’s a part of your life that you don’t really have to worry about. And that feels good. It really did.

John Schaub  I think most people can relate to that most people can, you can start first of all, you can do the math, you can say if I own five free and clear houses that made me $2,000 a month each I know $10,000 a month, would that be enough? And you start you start putting together a plan to get where you want to be as far as number of houses free and clear houses. And the nice thing about the house businesses, even though the numbers are going to change dramatically over the next 30 years, like they have over the last 30 years. The houses keep up with those numbers changing, you know, they they’re they’re an inflation hedge. So, is if chicken goes from $3 a bound to $7 a pound houses will go up two, and you’ll still be able to afford chicken.

Bruce Norris  Well, that’s what’s interesting, not only renting houses, but you know, when one of the things that I had the privilege when I was doing a lot of the reports as I had access to, Cal Poly Pomona had done a report for contractors for since the 60s. And there was, there’s a wall literally where they have the early copies of one a month like so if you go into the vault, you have one copy of May 1974, that type of thing. I was the only person ever led into the vault, other than the guy that owned the whole thing. And I went through some of those reports during the 70s and was the coolest thing they they had broken down the cost of the same house for a decade of the 70s. So they quoted from the builder perspective, what was the plumber? Cost? What was the electrician? What was the labor unit? Or and I have all these charts and I really realized wow. When I own a house I own a basket of commodities I own a basket of labor. So, when all that goes up as for new houses, my walls go up in value, and there was a chart that I produced. This is true in California. It’s happened four times where used inventory sells for more than new per square foot.

John Schaub  Sure.

Bruce Norris  And because of the demand, so it is really a hedge on inflation because of the, it’s the commodity base. So, that was exciting for me to put a practical finishing touch on that. Okay, well, that’s why I want to hold this stuff.

John Schaub  Yeah.

Bruce Norris  And I don’t have to recreate the wheel and I think that’s the other thing. It’s very efficient once you have that in place. Okay, well, you have some choices. You don’t have to go “Okay. Gosh, I gotta go flip and other five houses to pay for whatever.” So, good strategy.

John Schaub  Thank you. Glad you like it.

Narrator  We’d also like to thank our gold sponsors, Chase Leland Photography, Inland Valley Association of Realtors, Keystone CPA, Inc, LA South REIA, Leivas Tax Wealth Management, NorCal REIA, NSDREI, Pasadena FIBI, Tony Alvarez, White House Catering, Wilson Investments, Windermere Tower Realty. See Isurvivedrealestate.com for event details, information on all our generous supporters and to connect with our speakers.For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.

Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.

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