Suncoast Business Forum; John Schaub

Oh. So. The following is a special presentation of w. we do you. Tampa St. Petersburg Sarasota. There's no one exactly like you. No one has the same financial goals or cares about the same people. That's why Raymond James financial advisors have the independence to offer on line as to the price that's right. And that's why we pioneered the idea of financial planning. You might say we're just as unique as you are. Raymond James and the Virtual Solutions from independent advisors. Have you ever seen those in for marshals on television with someone says that they can show you how to make a fortune buying and selling real estate with little or no money. Who are those guys anyway and does that stuff really work. Well the fact of the matter is many of the strategies and techniques that you hear about on TV were pioneered by a Sarasota real

estate investor who's been successfully buying and selling properties and teaching others how to do it for more than 30 years. And keeps a pretty low profile. But you're going to get to meet him next on the Suncoast business forum. Is this a good time to be investing in real estate. Well according to Sarasota real estate investor John Shaab it's always the right time to invest in real estate. It's just a matter of knowing what to buy and how to negotiate the deal and then what to do with it once you own it. Over the past 30 years he's bought and sold hundreds of properties in good markets and bad. And he's taught thousands of folks how to do it successfully. John welcome to the Suncoast platform. You're here. Let me ask you when you started teaching people how to

buy and sell real estate all those years ago did you realize that someday there'd be all these other people out there promoting the same basic concept. Getting a lot of people interested in buying and selling real estate. Now I really didn't. When I first started teaching in the early 70s there are just one or two classes being offered most are more traditional I took all the CCI and classes were taught by realtors back then but a CC I'm a certified commercial investment member of the board of realtors. But most classes were on that level they had they worn out how to courses on how to invest so we pretty well pioneered the business and I've encouraged people to teach and encourage people to write but I'm pretty pretty amazed by the number of people who are doing that now. Now over the past 30 years since you started investing and teaching have your basic strategies changed very much. Interestingly enough not much not much and we still buy value we try to buy things that we know have that you were buying things for about while below replacement cost today. And then we hold long term we've way cycles we hold and if we do sell we sell when the market's up not when it's down. Now you make real estate investments here in Florida. You teach people from all

over the United States but most of what you own is right here in the West Coast Florida actually why is that. My home probably in 10 states and I learned by buying property in different states that is out of town management was a lot more difficult in the LOS and when you go to sell you don't have really good information when you go to buy you don't have as good of information so it is much more important to buy something that you know value is on and buy it in your own town due to that advantage. And now you focused on all kinds of real estate over the years what type of real estate do you find most. I teach people to buy houses and housing and housing is probably the best investment for most people who just want to own some property three or four properties of the commercial business the office building business the trailer park business all these make money but they're all specialties and they require a lot more capital they have more risk they require you to be a better manager in real estate if you're not a good manager you're not going make much money no matter what you're involved in. So the best place to cut your teeth is in a residential side and the houses won't all track better tennis all track good long term tenants which are easier to manage.

Now you grew up on the west coast of Florida am I right. Yes tell us about your family and your youth and growing up in Sarasota. I was born in Mound Park Hospital in St. Pete and moved to Sarasota when I was six years old and have lived there ever since. I want a University of Florida came back to Sarasota 1070 and I worked there for a first for a builder then the developer and then I started my own show in 1973. There has been a great place to be in the real estate business. I have three kids they've all grown up in Sarasota and like me growing up in Florida you know we're producing more native Floridians which is a good thing I think. But it is a great place to grow up still is today. You know on the if you like outdoor stuff and I love the sale of a facial at a fly I loved a lot of things outside. So Ford's a great place. But your folks are from Florida as well tell us about your your parents and grown up. Yeah mom and dad are both from from the Midwest my dad moved to Miami when he was a bald years old 1926 and and then they my and my grandfather were from Brian's Parma store then came to Tampa and we're from Moss brothers in Tampa and my dad's entire career was with moss brothers and as well as his two brothers. So I thought I'd go in a retailing business. But as it turned out

my dad discouraged me because retail and business changed so much in their you know 60s and 70s it became a seven day a week business so he encouraged me to go on real estate because he's seen all the real estate deals over the years and so it has got to be opportunity there so I figured it out. You spend any time at all in retail in college in my college years I worked for Sears a couple times but nothing serious. Now you say you went to a University of Florida is that where you were exposed to real estate in first time. Well I went to MC see Mantik Munich Ali for two years and I transferred went to Florida for two years and while I was going to school I actually worked for a guy in a real estate business and learned a little bit about it. I managed an apartment building up in Gainesville and I sold that building and that's where I learned a flood of money off of that first commission to learn how to fly an airplane so I've been fell in love with airplanes and this inspired me to work ever since. So you actually got involved in selling a piece of commercial real estate while you're still in college. Yes. From Gainesville. How'd that happen.

While I was managing a building is an apartment building and a fellow showed up one day who wanted to buy it so I got his name and number and talked to him and put him together with the owner and the only other. Did you take any real estate courses while you and I didn't take all the courses they had up against Bill I started teaching classes right after Gainesville for a guy named Bert Rogers who we had on a real estate school here in in the state because I took his course today my broker's license I was I was the youngest broker in a state for about 12 minutes because you had to be 21 back then to get a Rover's license and somebody followed right behind me. I got my license the day after 21. So you've managed apartment building while you still a student got involved in selling it. Did you stay in Gainesville and get involved in real estate. No I moved after I graduated from Gainesville and I moved back to Sarasota worked in Englewood for awhile opened my own brokerage office in 73. Didn't didn't care much for the brokerage business I did it for a year or two but I found out I was better off buying and managing property of my own account. So that's what I've stuck with ever since. What was it that got you to move from the apartment building the commercial properties into into residential.

Well it is now actually you know most great and great ideas are accidents and I was buying apartments I was buying duplexes at a motel at a restaurant a lot of a lot of buildings and they all were different they all require different kinds of management and then my ex and I bought a house in 1973 by accident by accident not on purpose and then I bought a couple more and I've found that my tenants and houses stayed longer and were less trouble. My apartment building tenants were moved every three or four months to house and this was a couple years. So I said maybe there's of maybe years of thought here and so I started accumulating more houses and then I played around with it I found a better house as a direct and even better tenants. So instead of my own rundown house I bought better houses in better neighborhoods and they attracted the best tenants of my tennis is day 25 years. So those are great tenets Those are great investments. Do you still have any of those houses that you bought long ago. I do still have the first album I bought 1973. So the mortgage you know I like to pay him off. Well talk about paying off mortgages. What were some of the lessons you learned about real estate when you first started buying and and managing what were the some of the cornerstone principles

that you then built on. Well the location of her body notices I'm bored and I figured out pretty early on as to land that's going up not the building buildings wear out. You see I'm tearing down buildings all over town. So you're buying land you're in a land business and if you get the land to produce some income while you why own it there's It was a wonderful thing. Most people especially the House business will tend to buy an over improved house if you look at the house they don't look at a lot. I started off a lot sales so I know some lots are better now there are some wot sell faster another so I always look at a lot and forget about a house until I check out the neighbors check out the street and if I like the lot and then I look at the house so that was the first most important point to make. So what does he look for in a great lot. Location and you know the street to school the neighbors neighbors are really important. You know you don't to be in a neighborhood that has a lot of turnover you don't have the the neighborhood has a lot of tenets if you're buying in the neighborhood it has tenants you want to tennis to be deuced displaced by owners who are fixing houses up so you look for trends in neighborhoods and you want to make sure you don't buy one that's running down hill you want to buy one is

improving and you make a mistake if you know you're not everyone's a homerun at everyone's perfect. The nice thing about real estate if it doesn't happen doesn't change real fast you know it it's more with a lot slower in the stock market. Except lately. Well you tell them if you want to compare my financial stocks with my real estate I'll show you which ones move fast as the last three months. Now in the in the in the mid seventies this great sport that we had real estate which you got in on began to falter and the real estate market got kind of cold for a while what lessons did you learn from that and how did you adjust your strategy. Well in early 80s I bought a lot of real estate because we are just coming off this big run up in the 70s and I thought I had it all figured out and I bought too much. I still have most of the property but I learned that by in a hurry when things slow down is not great strategy and I've been writing newsletters for years and I've been telling people that I started two years ago CNN first of all get out of the market I told them that in 2004 and then in about a year and half ago I said don't buy too much too fast we're going to have a long opportunity to buy here you don't have to load up your first six

months you can you can take the next two years to buy because deals will get better and better and they are getting better and better right now. What is it about the deal that attracts you what do you what is some of the elements you look for other than a great location neighbor and what are the what are the terms of that or the financing terms that are very important to you. We buy properties for different races sometimes we buy properties to resell and sometimes we buy properties to hold for 20 or 30 years. So if I'm going to buy something for 20 or 30 years the trend in the neighborhood is really important to me and the financing terms are more important than the price because if I were to take the house I've owned for 30 years it doesn't make much difference today if I paid 30000 or 40000 a form 30 years ago that they were never worth a lot more than that today. On the other hand the payment was very important for me for the first 10 or 15 years because I couldn't afford a payment I wouldn't own those houses today. I'm going to buy and sell a house maybe a smaller We bought one house this week and we bought it for about a half of what it was worth two years ago. We want it for less than half of the mortgage balances from a lender who just want to get rid of it now so when I'm

buying a house to resell I'm looking for price and I'm looking for a seller typically a lender who just will will sell at a very low price to get rid of something today. So finding a motivated sellers important to you that your absolute sell is more important to property especially if you're looking for financing I mean there's a million houses for sale. There's only some of those people to help you with the financing so that as a key if you're going to keep it for a long time. In the mid-1970s when the real state was 77 down you actually began teaching folks what led you to begin teaching and what was it that people didn't understand about buying and selling real estate. Well I started teaching for Bert Rogers I started teaching the course that people take to get a salesman's license and that land I'd invest the first public speaking I've ever done and I was very good to start with but I got better at it you know the more you do the burial and people started laughing and people started calling me up for advice and so I was having fun with it. And then another broker in town invited me to speak to a group and the guy went from there but a buddy of mine here in Tampa his name was Jack Miller and I started teaching together in the 70s and we stopped teaching together in the early 80s but we're still friends

and we built this business of teaching people about how to invest in houses and there was nobody else doing that them. And it is still a really good thing to do. Are you surprised at some of the people we now see on TV TV are former students you know I'm a surprise or for former students you know I'm sometimes surprised at what they say. Are there things that you see being said on TV that you wish people weren't saying. Oh absolutely absolutely I am not in favor of running up your debt to levels you can't repay. I'm in favor of buying something and painted it off and when I see people advocating using credit cards to buy real estate or say an interest rates are important or take out a three year loan or refinance your house my views or real estate I don't think any of that's good advice. I'm I'm I'm very conservative. I mean I'm Amada a risk taker when it comes to investing in real estate is exciting enough for a lifeline an airplane is exciting enough without taking extra chances. So you know you have to be thoughtful about it when you're taking a big risk when you buy something at a low downpayment you have to be a good manager. And if you didn't get a good price on good terms you

probably won't keep it. Now is it realistic. Is it realistic to think that the average individual who really takes time study buying and selling real estate can have an independent lifestyle they can they can find financial wealth by doing some of these techniques. Well you know wealth is very subjective but I'll tell you my dad story you know he's not he won he stole a lot of people he came to me when he was in the 60s and said I'm going to need more money at retirement that I have come in from my retail operation what can we do. I said well you know I've been doing this for a while now. I think I can help you buy some real estate so I helped him buy three houses which he still owns today and that's better to me than a lot of other investments he could have made because when he dies it will still be three houses there and I have two sisters who are ruined over the house which is nice. But the other hand he gets about $3000 a month income from those three houses which at my new one comes in handy. You know the best money he would have had if he had made some kind of investment and he bought all three of those have a very high leverage at that time. But now you know with a pay off in 20 years and actually paid off in about 15 years where we've got to wrestle with it and he's a good income for the last 15 years of the life.

E mentioned leverage which means financing How important is financing and how difficult is it to get financing to buy real estate today. Well I'll say something that most people won't believe that I've never gone to a bank to borrow money to buy a real estate. Never. I always borrow money either from investors or from sellers and so it's difficult to go to a bank and get a loan unless you have good credit. Unless you have a down payment unless you're making a downpayment but you can still buy from people who just want to get rid of something with what's called owner financing. So you find an owner who's got a house they did don't want anymore even a lender who has a house that they don't want they'll make a deal they should make to get rid of that house. And that's why I write books and teach classes to show people how to do that. Isn't it hard to find sellers like that. It's not hard to find sellers but it's hard to make a deal that's going to be really good for you. And that those sellers will accept and it's got to be good for both people are going to work. So that's where the finesse comes in and you have to figure out how to put together an offer that you can afford and you can make work and that they will accept. Are you finding a lot of opportunities these days with a lot of

opportunities a day because there are so many properties for sale. There are so many lenders in trouble. There are so many sellers who are upside down. Of course not every foreclosures an opportunity and you don't want to be just chasing everything as it were closure but if you don't buy a house today one identify a neighborhood that you want to own a property in for the next 10 or 15 years and then start watching the neighborhood look for opportunity in the neighborhood. So you just don't attend the property sell on the courthouse steps necessarily. You need to do a lot more due diligence. Well if you if you just go to the courthouse steps to buy something unless you've done your research you probably will make a mistake and you can make a very large mistake there you can you can always get yourself to pay cash for something that you you know that you may be blindsided more years out of first mortgages or with or maybe other liens against property so that's a very dangerous place for a beginner to start. Well talking about mistakes what is some of the the key mistakes that people should avoid and the second part of that question is Have you ever made any mistakes. Well yes I made a lot of mistakes and you know there's one of my favorite football or basketball coaches says that the team that makes most mistakes is most likely to win. So you've got to be in the game you've got to be

honest John Wooden by the way so you've got to be out there you know trying things or you never learn anything you learn from your mistakes but I did my class title is making it big on little deals. The my whole strategy is revolves around not making any big mistakes you know making small mistakes and make a small mistake you probably hold on you know if you play a little bit too much for a house or be a little bit too much of an interest rate or your payments are a little bit too high you might survive that. But the big mistakes people make or personally guarantee to pay back debt they can afford to repay and now they lose a property or they file bankruptcy and that is a long term effect on their credit. Here now deal making excites you is that part of the thrill of doing what it is you know helping people run of the house or family yesterday who just moved to town I really enjoy dead because of a nice young family I'm happy to have those I can and I'm happy to have this new residence in our town is terrific thing. I love I've sold dozens and maybe hundreds of people their first house and financial form and I'm happy to do that because I get them started that led me to my work at Habitat years ago because I was I was doing something like habitat that I was doing for people that made more money and then

I discovered habitat I was able to do same type of work with people who make just a very little bit of money and then that's that's very satisfying but I like my place and I get excited about making a good deal we've made two good deals in the last 10 days and that's exciting stuff. You know you're making you're making good money. You mentioned habitat you're talking about Habitat for Humanity. Yes. How long you've been involved with Habitat and what level. My First of all that was 1985 I've been on the board since 1986 our local board so I was 22 years I served on both the international board and their U.S. board seven years and six years so I've been really involved and have and I really like what habitat. And more recently I'm involved with a group called the polar Center for Housing Millard Fuller who started habitat to start a new organization. Very excited about what he's doing he's working side by side with Habitat and working with lower income people. How much of your time do you dedicate to that and why is it important to you. Well I started off when I when I ran the show out of my office for audit which I did for a number of years I was probably spending close to half of my time doing Habitat work. But it was important to me.

I had my business operation under control where you know everything was model pilot over there that everything else is going well in life so it was important for me to get involved in the community and and assault you know if you're changing children's lives you're taking kids who don't live in decent housing. You're putting them in decent housing and that changes their lives forever because they have better grades and better health and they go on to become very productive citizens and I think that's what we're here for. Now this is you got involved on an international level not just the national level. Yes I was an international board for seven years and I work overseas I work in Philippines I work and I say work I volunteered you know by working to avoid someone else Salvadoran and this fall to build a house. But it's fun stuff you know I love to travel and working with a nonprofit when you travel gives you a chance to really meet some people who live there and do some good while you're there. So it's a lot more fun than just getting on a bus tour someplace and coming home. But you seem to be very involved in philanthropy both locally and outside of this area. Why is philanthropy and community involvement so important to you.

Well you know when you have a lot when when you're given a lot none of us really deserve what we get. Fortunately you know that I've really had a wonderful life and made a lot of money and great family and I feel obligated to give back or really do my wake up in the morning I say what should I do today. And the answer typically is a list go up find something that improves the world. Well tell us about your wife Valerie because I'm sure she's involved in this too. Absolutely. We've been married since 1980 have three great kids of all three went to University of Florida two still up there now as an attorney she went to Florida law. But we've been partners in business ever ever since pretty much day one she worked for a large law firm when I first met her but then she you know she and I decided to get a business together back in the 80s. And so we do a lot of things together but she's a wonderful partner and. You know without her I would be where I am today. Well tell us about the world of teaching and writing and consulting with people out there in the public when it comes to real estate because you've been doing it probably longer than most and you're still active on a regular basis of writing and speaking while you're calling yourself by teaching others how to do it.

And I've had a number really successful students go out and teach classes and teach the right thing and that's exciting to me when they do that I'm always trying to clone myself I'm always trying to teach other people what I think is the right way to invest and and then I put the arm on my just at a little conference out and Last Vegas in May and I invited Millard forward without her of habitat to come speak at this conference. And we put the arm on a whole bunch of people and then a lot of wrote checks because you know what I want to help you make a lot of money I expect you to do the right thing with it. So that's my main motivation is that they help people to be the best they can be and then get involved in our community. What you're teaching people how to do it the right way. There are probably some folks who who whether they learn the lesson right or not from others or just got too excited about buying real estate but the real estate market clearly got overstimulated at what were some of the reasons that this current market imbalance in real estate came about and were there too many people just too excited about speculating in real estate is that part of it. Sure. You're speculators who paid too much assuming it was going to continue to go up because I've

never seen a cycle before. Lenders who loan oh same speculators money that just amaze me. I mean they would take somebody who would buy a piece of property for a million dollars one day and sell it for two million dollars and next day alone a new guy two million bucks to buy with us so what do you think that I mean that it didn't go up a million dollars in one day so why would you make that loan so bankers are doing things I've never seen them do before. And then all blaming just the bankers but you know the bankers are the professionals in this deal. They're giving away money they're responsible for what why were they making loans like that. So people were able to borrow money they shouldn't have borrowed and now everybody's not everybody but a lot of these investors a lot of bankers are paying the price for that. So in this current environment do you see opportunities for individual investors in real estate. Sure this is a great time to get started again. First of all interest rates are still low. These are remarkably low interest rates long term rates are still as low as I've ever seen them. I mean that you have to understand from 1973 when I started investing till about three years ago we never sell rates as low I would I was used to buy MRI money at 8 percent 10 percent as high as 14 percent in the 80s and we did it

with borrowed money 14 percent and made money. So now these low rates if people can find some quality properties they can buy below market prices. It is really the opportunity of a lifetime. But right now it's kind of hard to get money from banks for real estate that's the catch 22 isn't it. It is and that's why there's more opportunity there's less liquidity in the market it's harder to buy. So you have to be a little more clever today to buy something that than you did two years ago when you weigh along your money. But there is still money out there we refinanced probably close on the last week. And then those six nil water prevented a straight 30 year fixed rate loan. That's terrific term those are still really good terms which you have to have good credit you have to own some real estate or have a downpayment on some real estate but I'll tell you there's no shortage of money out there. I have investors call me all the time looking for deals. There's a lot of money chasing these deals so if you can find a good deal you can either sell it to an investor or you can bring an investor in as a partner and buy the property. Are there a lot of you saying there are a lot of it how would the average individual find investors. People know you because you have a track record or you have a reputation but how would someone who's trying to do this

without all of us. Well those two things are pretty important I mean if I come to you and ask you for money and I have no track record no reputation problem at all getting money from you so you have to develop a track record first of all you have to prove that you can buy something and you can manage it if that's what you're trying to sell. If I'm going to you and say if you put up the money I'll buy this house will manage it for 20 years and they will sell it or manage it till it doubles and they will sell it so I can convince you all do that and do a good job of it then you probably put up the money you have to have the skills you have to buy something below the market so step one is go out get a contract on something for less than what it's really worth as a martyr. Now I come to you with a $200000 house I have a contract to buy it for 100. It would get pretty excited to give us a great deal and that would be a heck of a deal. But those deals are available it is market. Do you think the opportunity still existence in Florida even though the markets it's soft right now do you anticipate. Because you've seen a few cycles over the years that this market will recover and I think so I checked the weather it looks like it's going to snow up north this when or if it snows up north this winter and I have to

buy heating fuel for a lot of money I think a lot of those folks will come south people are running to yes they're from New Hampshire. I think people will continue to move south as a store a wonderful place to live. I think the west coast of Florida has some advantages over the East Coast now because we're just a bit less crowded and people are going to quality of life a little bit better over here so I think the west coast of Florida will come back before a lot of other markets will come back. I'm very optimistic. Well John I want to thank you for being our guest covered a lot of ground. If you'd like to learn more about the Suncoast business form or view previous programs you go to our website at W edu dot org. Thanks for joining us. The Suncoast business for. You. Oh.

Real estate in Florida sure goes through a boom and bust cycle. Is this a good time to invest in real estate. According to investor John it's always the right. If you know what to look for and what to do when you find it. Over the past 30 years he's taught thousands of people how to buy sell real estate. John shop share some of his most successful real estate strategies. Next Suncoast business park.