Data Driven Real Estate Podcast #40 – Finding Your Niche in Real Estate Investing with John Schaub #DDRE40
John Schaub has prospered during seven recessions, numerous tax law changes, and interest rates ranging from under 3% to 16% in his 40+ years as a real estate investor. His 2005 best-selling book, Building Wealth One House at a Time, has helped 100,000+ real estate enthusiasts on their way to successful investing.
This week we discuss how John started in the business and why he landed on more expensive inventory at higher price points for rentals. We learn how he identifies his perfect deals and why self-management is important.
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Show Topics
00:00 The Data Driven Real Estate Podcast Welcomes John Schaub
00:31 When did John start in the real estate business
03:47 What changes were made to the latest edition to "Building Wealth One House At A time"
04:07 Buying more expensive houses in better neighborhoods for rentals
08:13 What attributes make up the perfect lot?
14:17 When is the best time to sell real estate?
17:42 What is a shared appreciation agreement?
19:30 Does John use public records to find deals?
22:55 Is debt a good idea for real estate investors at such low rates?
23:54 Is now a good time to buy real estate
29:07 Building relationships with tenants and tips on finding great ones
35:07 Is self-management critical for real estate investors?
37:03 What advice do you have for new investors just getting into the business?
50:02 John's charity work in housing
Show Transcript
Aaron Norris 0:05
Welcome back to the Data Driven Real Estate podcast, the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris along with Sean O'Toole of PropertyRadar and this is Episode 40. Today, we're really excited to have John Schaub. He's been in the business for over 40 years, he's been through seven recessions, interest rates that have ranged from under 3% to over 16%. And he is the author of the best-selling book Building Wealth One House at a Time. John, welcome to the show.
John Schaub 0:30
Thanks, Aaron.
Aaron Norris 0:31
How did you get into this game of real estate?
John Schaub 0:33
When I was very young, you know, I had things like paper routes and like niches and things, but then I hit some summer jobs. And I watched some people who were in the real estate business make a lot of money, and it looked easy, too. So, that's back when I was in high school. And that's why I took a lot of courses in college. I got my license while I was in college, and I started actually selling houses. Then boy, had my license, just, just the house itself, not the real estate, but just the contract to build the house. And then I just fell into a couple deals right out of, right out of college. I sold an apartment building models in school, yeah. I got a commission check. And I was making more money, you know, off of that. And all my friends who went to law school made their first year out of law school. So, I said, 'Let's stick with it'. And so, I stuck with it ever since. You know, there's been some good years and bad years, the first 10 years are there are, there's a lot of lessons learned. But you know, after that we had a lot more recession. The first couple recessions were exciting. The rest of them were fun. So, this is your first one coming up. Hold on.
Sean O'Toole 1:36
It'll be exciting. What did you study?
John Schaub 1:37
Super exciting.
Sean O'Toole 1:41
What do you study in school? Was it even real estate related?
John Schaub 1:43
I was a business major, management was my major. But I took every real estate course they had and University of Florida had a number of real estate courses. So, I was taking real estate courses. I took a lot of accounting courses. So, I did learn some things in school that helped me as I got out.
Sean O'Toole 1:59
Yeah.
John Schaub 1:59
We had a couple of, we had a couple of instructors who were big-time investors in the game, Gainesville, Florida where I went to school. And so, I was lucky enough to have some of them as Professor.
Sean O'Toole 2:10
Some mentors right off the bat.
John Schaub 2:12
Well, they knew the game and I was paying attention. So, that helped.
Sean O'Toole 2:17
Yeah, I think that's half the battle, sometimes just showing up and being, being in it and paying attention.
John Schaub 2:23
Yeah, absolutely.
Aaron Norris 2:25
I think, your book John is one of the ones I refer people to the most my, I don't know if you know this, the very first time I ever saw you speak was invited by Geraldine Barry, who ran the San Jose Real Estate Investor Club. She invited me up there. Miller, you and Peter Fortunato completely overwhelmed me that day, I had never been thrown so much information so quickly, I was so lost. But I think what I really enjoyed the most was seeing how different the three of you were in your approach to the business and wildly successful in your own ways. And I gravitated towards you and I got your book after that day. And it completely changed my life. I thought, being in this business growing up with my dad being a full time flipper, that if I wasn't doing 10, 10 every month, I was failing at life. And your formula in your book was very simple. It's, it's one house every year, you get 10. And you pay them all off and you can be done. It's really that simple. And after reading that book, I pulled the trigger, and I got there faster than that. But I just really appreciated your book. It's my number one book that I refer to people to get started because you make it very accessible. So, thank you.
John Schaub 3:36
Well, the second edition was published in 2016. So, it's a lot newer, and then there'll be a third edition come out someday, but I'm not sure what.
Aaron Norris 3:43
Oh, really? Okay.
John Schaub 3:45
I'm going to wait, I'm going to wait for the next recession to write the third one
Aaron Norris 3:48
I was, I just bought and downloaded the one from 2016. What was the major changes that you made in the latest edition?
John Schaub 3:55
Well, between 2006 and 2016, we had 10 pretty exciting years. So, that is much more about cycles and you know, I'll be prepared and but a lot of us are saying, you know, I say 75% of what you're saying.
Aaron Norris 4:08
You focus on a very specific niche in the real estate space when it comes to holding as well. Can you talk a little bit about what you focus on?
John Schaub 4:15
I started in the land business and so, unlike most people who buy houses, I spend more time studying the lot that the house sits on and the house itself. I'm convinced that over the long run the land is what's making me the most money it goes up in value. So, if I have a good lot in a good area, a good subdivision, you know the right shape, looks the right, the right way, has good neighbors, I'll just make more money because of that. The house is secondary to me, the house is going down in value actually, most of them anyway. So, I'm just looking for a house that I can maintain with a reasonable cost in a neighborhood with really good lots. And over the years, I've just ramped up not in, not in houses, you know, people say you're buying a more expensive house, I said, not really, I'm buying a more expensive lot, I'm buying the same house on a more expensive lot as I ramp up my, my portfolio, and they have fewer and fewer properties. So, that's been a major change for me. And, and that's what I try to get people to think about, you know, if you want to buy the highest quality of lot that you can afford. And of course, the cash flow has to work out when you're first starting, you've got to be able to make some kind of sense out of the cash flow, you know, you have a good job, you're making a lot of money and feed it but you know, if you're like me, I started without a job, without any cash flow coming in. So, I had to make every property I buy breakeven, at least it may make some money.
Sean O'Toole 5:33
I like, I like your take on the lot, you know, everybody says location, location, location, but that misses some pieces of it, you know, you know, I was doing some analysis of lots and you know, like, some lots have five other neighbors around them. Others have, you know, two streets, one neighbor and maybe open space, right. And there's pretty big differences even within a subdivision that I don't think a lot of people pay attention to. But it makes a really big difference in quality of life.
John Schaub 6:03
It makes a big difference in the type of tenant you get. And then when you go to sell it, how much money you're going to get. So, I mean, it's a, it's a, it's a way to fine-tune the program, and you start off just buying anything that somebody will finance for you. But after you've mastered that part, then you start fine-tuning this and buying better quality properties, which means better quality lots. Appraisers drive me crazy, because they pay no attention to a lot. They just measures square foot of the house and they do their math and they're done which is just, and, and bigger way off sometimes, a couple houses back the house I bought was because the people next door appraise their house and same appraiser, appraise this house and he just based on the square foot of the house, or the house next door was 2200 square foot, house I bought was 1000 square foot, I mean a much better deal, when you just multiplied the number times 1000 instead of 2200. And actually, though, I bought it for less than a lot value. So, it's, it's interesting.
Aaron Norris 6:58
After all these years, have you landed on sort of your ideal house?
John Schaub 7:03
Well, the ideal house never breaks and attracts a long-term tenant, but there's, you know, everyone's different, everyone's different, but I've got a lot of houses that I really liked that I've owned for 15, 20 some 40 years now. And you know, it is the house and if you're smart enough to buy a house that is pretty well designed and well built to start with and your maintenance costs to be lower. The really key I guess it's the neighborhood in the lots so, you know, if the lot goes up in value, the house falls down and you still make money. So, but you know, you just, it becomes a management thing after a while, you know, if you, if you're not comfortable managing the property and the tenants that live in those properties, then you'll probably get out of the game. It's just too much work. But I'm fortunate enough to, to have a tenants I really relate to they like me, or they send me Christmas cards and pay the rent on time and life is easy. And of course I have a lot fewer tenants than most people do. You know, I hear people say, 'Well, I buy 100 houses a year' and I always say 'Why?' you don't need a 100 houses a year, you don't need 100 houses all together, you know, just get 10 or 15 you've got more money you can ever spend, you know, unless you want to Learjets. One Learjet, you can do a 15 houses.
Sean O'Toole 8:13
Let's break down a lot a little bit. You know, so what, you know, kind of, you know, obviously data driven real estate here like so what specific things, like is it how close it is to schools and hospitals like break down like the attributes that you look for when you're looking for that, ideal lot?
John Schaub 8:33
Yeah, well, I am, before I bought my first house, I was selling lots in a subdivision and I actually bought the last 16 lots now so and what I learned by doing that, and I did a couple other subdivisions after that was some lot sold really fast. And some lots were left over in the end you almost had to give them away. Those are the lots nobody wanted. Well, I think you just see that difference when you're looking at a lot you and, if you can just say this is a lot they had to give away. That's the one you don't want to buy because nobody else is going to like it. And many times those are corner lots, they don't have a backyard or they're on busy corner or a busy street or somebody has headlights come right in your window every time they drive by so it's just common sense stuff. But all the things you said, Sean are important. You know, I've been close to schools, close to shopping, close to churches, close to things people want to do that, that makes the house a lot easier to rent, and it'll make it easier to sell something.
Sean O'Toole 9:26
Yeah.
John Schaub 9:27
It's just common sense more than rocket science. Now, topography has something to do with it too. You know, I've seen lots that are down the hole, they fill up with water every time it rains, you want to make sure that you use some common sense. And my dad, you know, we live in Florida where it rains a lot. We have 16 inches of rain a year. And one thing dad told me early on, he said, just make, buy on a hill, you know, by on the highest ground you can find. And even then a flat place like Florida, there's still high spots and low spots. Yeah don't buy...
Sean O'Toole 9:57
What about size? Do you like, is there a point where it's kind of too big, I remember, you know, we grew up we had a one acre lot. And we basically lived on less than half of the lot. And the back half was just dirt. Never, nothing ever happened with it. Like, I don't even know why we owned it. Is there, is there any difference on size or any preferences there?
John Schaub 10:21
I tend to buy in fairly standard subdivision size lots you know, then that changes from place to place. But I love to start ... and my office is right in the middle of a big subdivision that a friend of mine developed back in the 60s, guy I know in a long time. And these lots are all 80 by 120. And so, that's a nice size lot in my town. It's not too big, it's not too small. The new lots, you know, where your dad moved, Aaron, are smaller, you know, they're, they're tighter, they look more like Orange County, California. They're not exactly zero lot line, but are really high density. And some people love that. There's, so there's not a right and wrong. And the nice thing about the house business, you can mix it up a little bit, you can have some of each, but I avoid a big lots. You know, I don't have anything as overboard acre, I don't have any one-acre lots or five-acre lots. Tenants will like them very few tenants like them anyway. Tenants is a like originally in landscaping business may have 12 trucks. So, those are not what we want.
Sean O'Toole 11:15
Park stuff all over it. Yeah, or horse property or something. They've got something they want to use it for.
John Schaub 11:20
Yeah, yeah. So, if I, no, again, not rocket science, but grab a normal lot, the neighbors are actually more important, and then get, don't be on busy streets. You know what, I bought a couple houses that I thought were in the path of development, you know, 40 years ago and are still on a path of development. You know, they're, they're still almost there. And so, for 40 years, somebody has suffered with bad tenants because of that, a good tenant that will live on a busy street. Doesn't make any sense.
Sean O'Toole 11:48
Right, right. Is the ADU thing isn't the thing in Florida yet, right? You guys aren't building secondary units? No. You know, because lot size starts to matter a lot there. If you've got enough room for a second unit, suddenly you get a duplex out of a single family. That's not a thing in Florida at this time, right?
John Schaub 12:07
Well, in our area, there were, there were hundreds and hundreds of houses built and they were zoned for a second unit, apartment more than a house. Not two houses not really a duplex but a single-family house plus a, like a mother-in-law unit. But...
Sean O'Toole 12:20
Okay.
John Schaub 12:20
There's a lot of those. Now there's a lot of duplexes in this down. So, that you can go any way, either way you want. I don't have any of either of those. I have no duplexes. I have no second unit. I just have houses. And yeah, I just make....
Sean O'Toole 12:36
Finding the lots with the zoning and adding the extra unit.
John Schaub 12:39
Yeah, all that makes sense. I mean, you know, if you get an extra lot when you buy a house, it makes sense. But there's other little things you can do to fine tune again, there's just a, it depends on your area a little bit what's going on in your area.
Sean O'Toole 12:52
Yeah, good.
Aaron Norris 12:53
Reviewing your book last night for, preparing for today. I was, I was laughing because it seemed like you were very well prepared for the pandemic of what the current tenant is looking for because of strategically the inventory you go after. So, you're looking for a little bit of a higher quality but still working class kind of house and probably with a little bit more space as you're stuffing in pretty good demand.
John Schaub 13:15
Yeah, all mine are three to double car garages, you know, not I say all mine, there's a couple outliers, but not many. And those houses are stable. I have not missed a base rent. Everybody stayed. And we had, actually had two turnovers in the last two years. But that's kind of normal. So, yeah, it's worked. You know, we are, we are in the right place at the right time to start. I'm so happy I want any part of this. In the commercial business, you know, they don't it's funny, the commercial guys, the smart commercial people are gone make a killing in this deal. 'Cause they're buying out all the dumb commercial people. And yeah, that's just part of the cycle. where, you know, I'm not buying much, I've sold four houses in the last year or so. And we bought one. So, we're always looking, we're in the market all the time. And if something falls in my lap, I buy it, you know, but we're, we're kind of waiting for more opportunity here. I think when we end up, finish all the moratoriums, there's probably going to be more opportunity than there has been the last years ago.
Sean O'Toole 14:18
Yeah, what brings you to a sell decision? It sounds like you mostly buy and hold. So when do you decide to sell?
John Schaub 14:24
Well, I had a, I was waiting now some of my weaker houses and I like all my houses and I just like some more than others and typically that comes down to how long tenants are staying. And so, if you've had a house where you've had two or three tenants in the last five years, you're saying, maybe it's the house, and maybe it's not me, maybe it's the house, but my average tenants stays close to 10 years. So, once we've had more turnover on one, we anticipate more maintenance on ones, we're not happy with the way the neighborhood's going. You know, that's, that's what I'm looking for. But, you know, we've been in a boom time here for a while, last year was a surprise to all of us that have this kind of real estate boom during a pandemic time, which we've never experienced before. So, here we are, see what next year brings could be exciting again.
Sean O'Toole 15:08
Mike Cantu was the first to really get me thinking about trading my C-quality, C-quality, for B for A, right? And constantly moving up. And I found that's, that's true when I first started, like, I would go a long way I drive four hours. And then now I kind of want everything pretty close. And it would be, I buy real junk. And now I want really good quality. Like, I think that's just part of maturing as an investor,
John Schaub 15:35
Well, part of getting smarter. If you're doing the same thing you were 20 years ago, you didn't get any smarter you're just working on. So, yeah, the whole idea is to do it a little bit better every year and in my, my teach I teach people to make each deal a little bit better your last deal, a little, a little better property, a little better price, a little better downpayment, little better interest rate, something, make it a little bit better somehow.
Sean O'Toole 15:56
Yeah, good. I like that. I think also that you know, comes with success, right? As you're more successful, and you are in a better position, you can maybe accept a little lower return to write for better quality stuff.
John Schaub 16:10
Sure. But if you have a high net worth, then you're not as interested and you don't need the cash flow because you don't have other, other sources. You can just sell one house every two or three years and pick up a whole bunch of cash if you want to. So absolutely.
Aaron Norris 16:23
Our new deals sort of landing in your lap. Are you actively marketing? Are you just so well known in your market? Everyone just knows to call you?
John Schaub 16:30
Oh, I'm just such a nice guy, everybody, anytime they have a deal, they think is a really good deal. They call me with it. That's the way it works. No, no way, ever. Nobody has ever called me given me a deal. Unless they are getting the commission or less they'll bail it out or something. You know, it's, it's greed on both sides. Somebody is getting pain on both sides of the equation almost every time. I had, years ago, I had a broker called me and said, I just can't sell this house, you can have it if you want it. So, I picked that one up for free. And I still have it. I just picked up in the background. But that doesn't happen too often, you know, when there is, you know, when we have appreciation when we have low interest rates is really easy to sell a house brokers can't get inventory. So, nobody has stuck with a house right now. But it will happen again. I mean, there'll be times you know, we've seen it. You know, you said three recessions. I think I've been through seven recessions now. But there'll be another recession in my lifetime. And when that happens, I'm ready. You know, I, it's not that I wish bad luck to anybody else but we will find opportunities. And, and last time we just held a bunch of people. You know, we bailed people out. There, we're in big trouble there. But still have day equities. We're able to share profits with them. So, it was good for both sides.
Sean O'Toole 17:42
How did you, how did you? How did you do that in some sort of shared appreciation kind of agreement where you bought the house and then fixed it up and sold it and they shared in the outcome. Tell us a little more about that.
John Schaub 17:54
What is your appreciation as much as shared discount, you know, we would find somebody who's just stick around. I'm just making this up. Now, let's say somebody had a $500,000 loan they couldn't pay in the bank didn't want to foreclose and we could buy that $500,000 loan for 250, then we can go back to the people and say, 'Look, we got 250 in it, we'll share a difference between a 250 and a 500 with a you know, you pay us half of it, and stay in the house and work it out.' So, people were able to survive, you know, and a lot of these were business deals. They weren't just house deals, they were business deals, but they were able to survive and we helped them survive and we made a nice return and they were still in business you know, they, they didn't lose everything.
Sean O'Toole 18:36
Seems like a lot of small businesses are going to need that hear coming up. That's that's the that seemed small business and small business owners seem to be the ones that got hurt the worst. And this last go round.
John Schaub 18:46
Yeah, we did one deal with a with a local truck dealership that the bank would have had, on demand note with the bank, and the bank wouldn't extend their note, you know, banks got, got regulated, they got put out of business too many of them. And so, that trickled down to their businesses, which are good, you know, profitable functioning businesses, but they had notes that they couldn't pay until the whole thing came due. So, we're able to buy some of those notes at deep discounts and the enemies make deals with books. There'll be opportunities like that on the home side, generally you're you're helping somebody not, not have a foreclosure, you're figuring out some way to help them stay in that house, or buy the house and rent to him for 10 years. And you know, we're gonna give them some place to live that they can afford the change. So, now there are different things you can do.
Aaron Norris 19:30
Yeah, how are you actively marketing right now for deals then?
John Schaub 19:34
I'm not.
Aaron Norris 19:35
You're not okay.
John Schaub 19:37
I'm not, you know I am, I'm not looking to buy 20 more houses. I'm just, just kind of hanging out right now, because the market is so hot, I don't know what it's doing in your town . But you know, we're looking at 15 to 20% of your appreciation right now, we're looking at multiple offers, when everything that comes on the market is not really the good time to buy. We do have one house we're buying. But it was it was an outlier. It was just one of those wild deals, or somebody had it for a long time. But last time I taught the class, which was well over a year ago, we had one house visit empty 11 years that the students find, and the students in my class go out and knock on doors and find houses. And they found his house have been sitting empty for 11 years, that house is probably still there. Other than, how other houses like it people, people do stupid stuff. And I don't mean, they don't, don't do smart financial stuff sometimes, to let a house sit empty for years and years doesn't make any sense at all. Some people just can't get their act together and sell it.
Sean O'Toole 20:33
When did you start teaching and doing classes?
John Schaub 20:35
1975.
Sean O'Toole 20:37
Yeah, so quite a while now.
John Schaub 20:39
I was 12 years old. Actually, I was, I was 25 years old. And I was partnered up with a guy by name of Jack Miller, who exactly 20 years older than I was, he was 45. Jack and recently retired from the Air Force. He was into his wife, 42 or so and got a real estate business. And he and I met each other at a seminar here in Sarasota, somebody else in teaching. And we got talking to a coffee break. And he called me about a year later. So, you want to teach a class here? And I said, Sure. So, we started teaching. And you know, first couple years, we taught basically for free in small groups. But over time, we build up a reputation, and we had a lot of fun doing it. And we got where we are pulling bigger groups, and then we started charging money, and it all worked out. But I still charge the same price I did back in the 80s. I haven't raised my price since the 80s.
Aaron Norris 21:31
Yeah.
Sean O'Toole 21:31
Wow.
Aaron Norris 21:32
Your classes are very...
John Schaub 21:34
Our class is for $295. There's not many people doing a two person class for $295 anymore, especially Pete and I , you know. So, you know, we're, we don't teach for the money. We enjoy teaching. We like to make money and everything we do. But you know, we're not charging $1,000 or $5,000 or $20,000, or whatever, whatever the going rate...
Sean O'Toole 21:53
There's ones like $30,000. And it's just like, and there's nothing that you couldn't go read in a book in that $30,000 class. Yours are great, but it's just yeah, it's crazy. What, uhm, what some people spends. So, it's great to hear you're reasonable. How many students do you think you've had over the years?
John Schaub 22:10
Oh, well, last time, my guess that is more than $10,000. So, I don't know exactly what the number is. But it's more than $10,000.
Sean O'Toole 22:16
Yeah, lots of cards and notes. I know, I have lots of cards and notes from folks. And you know, you changed my life and the rest.
John Schaub 22:25
And that's why you do it. You get the idea. I talk to people all the time, with past students. We do a lot of fun things together, I go fishing, we're in Argentina, with some students. We're in Alaska four times with students. We've been to snow mass since 1982 every year with except this year, with a whole bunch of students and about plenty of the same people come every year for 30 years.
Sean O'Toole 22:44
Oh, wow.
John Schaub 22:44
So, it's a, it's a great group. The people who have made money together doing the same thing. They just like each other, it's a great group.
Sean O'Toole 22:53
Yeah, sure.
Aaron Norris 22:55
Um, a lot of your book talks about not really enjoying debt all that much on properties, is the low interest rate environment change your opinion on using debt and what you're buying right now?
John Schaub 23:07
Yeah, what I've told, you read my newsletters, I've been talking to people and my kids, everybody else. You know, if you're ever going to buy a house and borrow money, now's the time. Even if you're paying too much for the house in paying 400 for a house is worth 350 you can get 3% 30-year loan, which is unheard of almost anyplace in the world other United States by the way, my son was born Australia, there's no such thing as a long-term loan in Australia. They're all five-year loans variable interest rate. So, you know, most places don't have that advantage. And Warren Buffett said a couple years back he said, you know, if you could buy some fixed-rate, 30-year loan with a low interest rate, my sorry to screw that up, 'cause you know, the inflation prices are gonna keep going up. You know, if you're famous data saying for 30-years, it's really hard not to, you know, not to make a profit.
Sean O'Toole 23:54
Yeah, you know, there's a big thing right now with this kind of, it's stupid to own a home. Grant Cardone, Robert Kiyosaki, others are kind of saying, you know, you know, that's the home is terrible asset and the rest, and I'm like, boy, you know, I think with one caveat, you have to, you have to know where you want to live, right? For a long term, right? So if you think you might want to move into yours, nevermind. But if you love where you live, and you want to be there for a long time, fixing your rent for 30 years, is like imagine your same rent payment for the next 30 years, given what happened to your rent payment over the last five or 10 or two years. Like there's just no way you don't end up ahead. And so many people look at that the wrong way. I think. I agree on that.
John Schaub 24:45
Well, a lot of people you mentioned, and a lot of folks who are really not in the business are just great promoters, maybe you're not really good at making money other money themselves. So, I would say the people who are investors, people have been investing for 40 years, and we've kind of seen these margins, changes. And we would probably agree that, although it's not a great time, from a price standpoint to buy is a great time from an interesting point to buy, and interest rates have changed. They're up about a third year in the last couple of weeks. So, they're gonna keep going up, and Google will wake up at some point, it'll be eight or 10%. And then people say, I wish, I wish I got some of that 3% stuff. Because it's pretty big, you know, it's not just 3%, that's 100%.
Sean O'Toole 25:28
You know, when, I have friends and family, say, you should't I buy a house right now, and I say, you know, because it seems like prices are really high. And I said, 'Well, just imagine for a second, you bought a house at 2006 at the peak of the market, right? And you did so and you got a 30-year fixed loan, you didn't do the pay option ARM craziness, you got a real loan, 30-year fixed, and you can afford that payment, right. And since that time, you know, interest rates have gone from five to three. So, your rent has gotten cheaper mult- at multiple points, because you've been able to refinance, right? To a lower payment over that time. You know, you did great. You know, in 2006, all you had to do was hold on to the other. And if you could afford the payment, you kept your job, like, even buying at the very worst market that we've had in the last 20 years, 2006 you're still fine today.
John Schaub 26:23
True, true. And the houses that I sold, I mean, every person who bought a house from me, and one of them was a person who's going to live in the house, the other for your investors, they're all have positive cash flow. You know, they bought the house at a high price today and they went out and got a loan probably 4 or 5%. But they all have positive cash flow. Now, if you can buy a house with positive cash flow, a small down payment. Buy it, if it's a good area.
Sean O'Toole 26:49
Yeah, Yeah. With good luck, with good luck.
John Schaub 26:54
Better all is good.
Aaron Norris 26:56
Now, John, do you invest much out of state or do you like to stay local?
John Schaub 26:59
I have a plaque I can, I can take off, take it off the wall, I won't be able to put it back on the wall which is too much. But I can show you what I got for buying property in 10 states and making my first million dollars back in 70s. But that is a bad idea. You know, you lose control. I own property in Sacramento, I own a property, Denver, I own property all over the place, but all over the country. And, and, and I made money on some of those properties. And I had good partners, you know, what I would do is partner up with somebody, they would need the cash, I put up the cash and we do a 50/50 split going out. But most of time...
Sean O'Toole 27:36
Mostly your students?
John Schaub 27:37
Say again?
Sean O'Toole 27:38
So, these folks were your students that you partner with?
John Schaub 27:40
Yeah, there are people I knew that call me and for some reason I had to deal. Back then I was doing I was the President of the Florida Real Estate Exchangers, I was president of Sarasota Real Estate Exchangers, I would travel around the country going to these exchange meetings are more and more likely they weren't students as much as guys were brokers in the business and, and some of are students. I've never solicited students for business, but these are people who understood what I was doing. But anyway, the long story short, if I've never done any of that, I'd have a lot more money today. Because it cost me money. And I, now people think I'm crazy, because I have all my properties right here in my town in Sarasota, which may have a hurricane one day and may flood one day, the lands not going to wash away, you know, I own some things out on the beach, but most of my property is not on the beach, it's on the mainland. So, you know, it's not going to disappear, the lands not disappear. So, it's worth, it's worth the risk. So, if you live in a normal place with gonna average risk of natural disaster, and that's what I see our town is we haven't had a last working we have a 61. So, that doesn't happen very often. It's a safe place to invest. So, I invest here. I think that the control you gain and the efficiency you gain by managing your own properties, which makes you a lot more money because you're, you're not, you're paying for bad management. And and having good information when you buy and sell is very, very valuable to know there's worth lots of money every time you do so.
Sean O'Toole 29:08
Let's talk a little bit about your approach to tenants. I mean, it sounds like most of your tenants are 10 years plus is that, what is your average, average, he said it, he said 10 years?
John Schaub 29:17
The average is about 10 years. We have a little turnover. But no, I've got people that have been with me more than 30 years. So, we have a bunch of 20 year tennants. So, the average is probably about 10 years and this perfect number but if you can keep people two or three years in a house, you start making money. If you have turnover after one year, you're not making any money. Cost you money with the vacant days and fixing the house up and take your time. And I could manage all the houses that I manage myself, I manage all my own houses. If I had a bunch of turnover, you drive me crazy, if I had somebody moving out every, every two weeks, you know, and so, I don't. So, the combination is having a property they want to stay in, you've got to do start with the house. If you have a house in a good neighborhood and it's a decent house, people will want to stay there and then you make the price bracket to them. And then you select your people based on one of my first questions I asked most is how long do you want to stay? You know if they say six months? They're not on a shortlist. I'm looking for somebody wanted to stay several years. The answer to get you into one of my houses and go write this down is the rest of my life. Put that on the application I'm going to rent to you probably and I've had people write that on the application 'rest of my life and they've been, they're still there so I hope a little longer.
Sean O'Toole 30:30
One of the, one of the things that I heard that I thought was and I can't, I can't attribute this I don't remember who I heard it from but he said, I, his, I, always make a point of looking in their cars. And if their cars are a mess, I won't rent to them if their cars neat and clean inside then you know that, that pushes them up any other tips on finding great tenants?
John Schaub 30:53
Well, yeah, give, give, give the mom with three kids a break, because the inside of her car is going to be a disaster.
Sean O'Toole 30:59
Okay, fair enough. Yeah.
John Schaub 31:03
You know, check out where they live now, the nice thing about being local is, you know, don't take me a lot of time, all the houses I own with the exception of two or within ten minutes to my office where I'm sitting right now, my house is two minutes miles as you know. So, we're real close to a lot of stuff. I have a couple that are outliers, ones down on Longboat Key, which is 20 miles from here. I mean, the house is 20 miles from here. So, that takes me longer in one another waterfront house up in Venice . But most of them are right here. And so, I can go out and most people are moving from someplace close. You know, I don't have a lot of out of towners move into my houses, most of them already live in this town so, I can go see where they live now. And how they take care of the house they're in is probably more important to me than their car. Although, you know, the cars aren't a bad idea but if they're, you go by their house and it's just garbage everywhere that dog is off into and you know you listen for certain things. So, tenants go me and I asked him why they're moving so they'll like, 'My landlord will never fix everything, you know things are broken in the house. They will never fix it.' That's a sign in there that the house didn't break itself. Whatever was in that house was pretty rough on that house. They probably get on the shortlist do. You want to rent to somebody that's high maintenance. When I rent out, most of my people have kids you know, most of them have kids and dogs, and dogs and you know, the pets and the kids and a bunch of stuff that they have breaker that keeps them in the house longer. So, I'm happy for them to move in with all of their stuff.
Sean O'Toole 32:30
I'm always surprised by everybody that has no dogs, like, you know, I don't know, maybe just because I'm a dog person. And I like dog people. It's like, I don't know. Dog people are good people like that, that's the kind of people I want to have.
John Schaub 32:43
Their responsibility. And hopefully.
Sean O'Toole 32:47
They're taking care of somebody. Yeah.
John Schaub 32:49
Yeah, like having a kid. Absolutely, absolutely.
Aaron Norris 32:54
Cat people are off the list, huh?
Sean O'Toole 33:00
Oh, I'm not a cat person.
Aaron Norris 33:01
Are you doing the drive by the house or you sort to be like, 'Oh, hey, I just haven't been in the neighborhood.' You knock on the door and sort of peek inside. Like what...
John Schaub 33:09
I don't go knocking on the door, I'm used to drive by, you know, me or you go and do the work. It was probably this week's picture. And you can, you can see what the garden looks like. But uhm, I know the neighborhoods, I know where they're coming from. I use common sense. If somebody's coming out of a one-bedroom apartment. I'm like, I don't want to rent to them, because they don't have any stuff, you know. And typically, if you're coming out a one-bedroom apartment, and as soon as they move in, they're gonna be looking for a roommate. I just assumed they don't have a family they knew or some people, people that are somehow related, you know, and if they live in, living together for 10 years, that's fine. I'm happy for them with them. But I don't want somebody to go out and recruit two other people to live in a house that generally doesn't work out for real.
Aaron Norris 33:49
No.
Sean O'Toole 33:50
Yeah. That was my first rental. I was, I bought a house when I was 18. And, and, yeah, I ended up having to rent it out. And I did exactly that. And it was very bad.
John Schaub 34:05
I remember I had three young women rent from me for years. And then a couple years later, some guy showed up and they wanted to rent a house from me. I said, I said, How'd you find me? He said, 'Well, would you rent to our girlfriends?' I said, 'Oh, that's nice.' And I said 'Did they tell you what the deposit would be?' And they said no, I said 'there's a deposit special for you guys'. So, in my state, there's no limit on deposit. So, I gave him you know, a great big number of deposit. And I said, 'You mess up, you're gonna lose all that money'. Maybe they went someplace else. Because they knew they're going to mess up. They just knew that no, they weren't gonna keep me happy. But, you know, you, it's a business, you know, you can't let somebody move in just because they like your house. And that's that's the mistake of beginning landlords make, you know, and I made it, you know, you had an empty house, somebody wanted your house, I said, 'Sure'. Well, that's not a good idea, you have to qualify him somehow. And the more experience you have, the more stories you have, you can tell them, you know, like I did this once before didn't work out, then, then you do a better job of managing.
Aaron Norris 35:08
I made a lot of mistakes in the last decade, my first full cycle of being a landlord, I'm sort of, I'm deciding that I'm probably not the best landlord, because I'm busy doing other things. And you believe very much in self management, right?
John Schaub 35:22
I manage all my own properties. And I've had people manage for me, the only thing I've done, and this isn't lately, we started this doing 10, 12 years ago, but I have one, one person here in town that I leased properties to, he gives me a net, net amount, he pays it back to the insurance pays all the maintenance, he gets all the overage, so the numbers I get are lower, but are fairly close, you know, and a normal house, I end up with about 60% of the gross income, about, no taxes, insurance and maintenance, eat up the other 40%. Well, with this guy, I'm getting about 50% of the gross income. So, he's making about a 10% profit. And if he does a really good job of management and is lucky, his maintenance cost would be lower, you know, if he does all that work himself, he can keep that costs lower. I don't do any of my own maintenance work, you don't hire at all. It just I figured out a long time ago that first of all, I'm not real good at it. And if I'm over there painting a house, well, how much money am I making? Oh, that's just doesn't, doesn't fit in my, my cash flow plan. So, I can make more money doing something other than painting the house and trying to fix it or mow the grass, which I did all those things, you know, when I was kid, when I was first started out, I do everything. But if you can't make it work by hiring people to do those jobs, then there's not really an investment. Now, the exception to that is a management. I, you know, because I tried to delegate a management, very few people do a good enough job for me. I know they let the house sit empty too long, or they run into the wrong people, or they pay too much for maintenance. And my numbers, I just look at numbers, you know, real numbers should be someplace in my town, about 60% of the gross should be my net. And if they're not close to that number, they're not doing it right.
Aaron Norris 37:03
What are the opportunities that you're sharing with students right now, because we are on, on fire, everybody really wants real estate, what's the best way to chase opportunity right now?
John Schaub 37:13
Well, the opportunities that are still out there, there's a lot of money looking for a home. So, there's a lot of money sitting in the bank making .6% or 1% of you know, CDs or paying just about 1% right now looking for more cash flow. And there was an article I think in the journal yesterday talking about all the big buyers, you know, people buying groups of houses, think the example they use was one of the big Home Builders building whole subdivision and sold the whole subdivision to somebody. So, people are chasing yield. That's going to change when interest rates go up and people can put money in a bank and make 5%. Or people can buy a bond and make six or 7% or big guys notice something else and make a higher yield without the hassle of real estate. Remember, it is the illiquid, when you go, when you buy 150 houses, I mean, you can sell them the next day as long, unless you could find the next guy who wants to buy 150 houses. And that, that market certainly could change. So, some of the big players are going to end up with a bunch of property which they'll have to liquidate at some point and they'll list it and sell it. But they may not make as much as they think they're gonna make, because they're paying high prices today. And people were all excited because we're paying all cash. Well, that's because they have all this cash and there's a lot of cash sitting around earning less than 1% and that they can show them how to make 4% with it. They're pretty happy. You know, our, our, our average house makes, even at today's prices better than 4% cash flow, formula cash flow. So, that's why we're in the game right now.
Aaron Norris 38:47
Have you been following the iBuyers in the Tampa market sort of what they're doing and what they're not doing?
John Schaub 38:55
I don't have any personal experience by selling to them. But I do, like, I sold these houses I was solicited you know, and then the numbers that, the offers I'm getting from them are significantly under market. They were about 5% of the market. So, I'll sell in a hot market to somebody who isn't paying percent less than what was really worth.
Aaron Norris 39:15
What's funny is having rentals in both Florida and California their marketing is slightly different. So, I get the Florida marketing and it's a little bit more generic different colors. So, I love getting to see the different opportunities but they have changed what they're willing to offer. We interviewed a company called Zavvie on the show and they work with realtors that don't currently have an in-house sort of cash offer platform. And what they do is they combine all the different iBuyers, so they actually get to see the offers. And they did say that they're getting far less aggressive. You know, a few years ago here in the Inland Empire where I'm based, they're, basically, the offer price was almost full ask or market price. And then of course, they're taking the discount, but it was really aggressive. And I think that after the pandemic, they've changed a little bit. So, it's interesting to hear that they're off that much in your market. That's surprising because your market is so hot.
John Schaub 40:05
It is. And then the last one, we did just put in perspective, last property we sold this probably three months ago, so may have changed in the last three months. I don't have any first-hand experience after that.
Aaron Norris 40:15
You don't tell a lot. So, you hold it on?
John Schaub 40:17
I don't sell a lot I don't like paying taxes. The people say how do you avoid paying taxes? I say you don't sell, it just that simple. You hold on your assets that are going up in value. Yeah, you know, if you really need some money, borrow it, you can do that without paying taxes. So, there are different strategies. And, and to your point, you know, if you're if you're going to borrow money, not based on a bad day, you know, I talked to a student yesterday who was refinancing some of his houses. I think he's about 5%. Well, what a terrific anyway, but it was a good interest rate, and his portfolio loan to all houses. It all works it. Still a good time to borrow.
Aaron Norris 40:58
Yeah. So, you are, you're teaching coming up, right?
John Schaub 41:02
I am. Peter and I are teaching a one day class. I've got it all my screen share if that helps you or not?
Aaron Norris 41:11
It's not coming up on the screen, but I'm definitely I'll post a link in the show notes.
John Schaub 41:14
Okay. Yeah, it's a Saturday the 24th of April is a one day six hour zoom class starts at 11 o'clock in the morning for you California folks. And Pete and I stay on after we do six hours live we'll stay on I'll do a Q & A, you know to answer questions that people have after that for an hour or two. So, you'll, you'll get your money's worth, we enjoy doing it. You know, the focus is going to be on you know, what, what should you do here in the next six months to a year, as things change.
Aaron Norris 41:47
Now, you've talked about some interest rates, you really think interest rates are gonna increase quite a bit?
John Schaub 41:53
While they have already, I mean, if you look at you know, they've gone from about two and a half to three and a half, and then that's when you do the percentage just not a bad jump. I do believe though, they'll be higher, I think inflation is probably in our future. And I'm a lender, you know, I'm not making a lot of loans right now. Because I'm not going to make somebody a five year loan at 4%. I think I'd be getting money back, it's worth less than what I've given them today. So, we're waiting for rates to go up. And you know, our favorite thing to do is to buy a note in the discount anyway. So, what we're really looking for those kind of opportunities.
Aaron Norris 42:27
Note buying is that what you said?
John Schaub 42:29
Yeah, you know, buy, buy, buy, just you know we buy them at a discount, you know, we buy from lenders and made bad loans. Some were institutional, some are from private people, the people who made bad loans.
Aaron Norris 42:42
How do you how do you find those opportunities?
John Schaub 42:45
They're everywhere, when, when the cycle changes, you know, when when, like I say, when a when a foreclosure moratorium is off, and the eviction moratoriums go off. There's gonna be some opportunities, there's a lot of folks who haven't made payments. And then in that right now, there's people buying houses, we probably shouldn't be buying houses and the credit market is a little bit looser, and it was. So, there'll be opportunities, I can't tell you when it's going to be, I'm not a, I'm not a soothsayer. But I just know, because of seven, seven recessions over 40 years, and it will happen again, it just is, just part of the cycle.
Aaron Norris 43:25
And your still...
Sean O'Toole 43:26
We said it wouldn't happen before, at least April of this year. And it's we're definitely right on that. I'm less certain, though, about how much farther it is out still. I think Q4 is probably our best, you know, chances starting to see a bump in foreclosures of any meaningful sort.
John Schaub 43:36
Well, one thing we've learned is that the future is pretty unpredictable. We, you know, were, I was sitting in our, our ski group was together in February last year, so just a little over a year ago right now, and, and nobody was talking about pandemic, nobody. But we ran around a room and everybody said, something's going to happen. We don't know what it is, but something's going to happen. And here we are. So, it's really hard to figure out what's going to happen, that will cause the next recession, but it'll happen. They're just, it's just like the tide coming in and going out. You know, people get greedy. They buy too much. We're seeing builders right now making more profit per unit than they've ever made. And they keep raising that up, you know, so at some point, they won't be able to sell that product and I don't know if it will be good because the banks will quit lending or something else will go on, something will happen, come back in a year we'll talk about it.
Aaron Norris 44:43
Yes, we will. Yeah, land is on fire in Florida right now, it's pretty interesting to see the lot prices. The last show, we actually had somebody who specializes in land in Florida. And he was sharing about land that was being bought for $100,000. That then went under $10,000. And the biggest difference was, you know, the lending has never shown up to land on land, at those kinds of rates. But my sister lives in Texas, and she was telling me that she attended a land auction by one of the public builders, to where, what the builders are doing in the Texas market is just having people show up and they have an auction on the land, nothing to do with the sticks and bricks, like you want to live there, you're going to pay all cash for the land, and they run up those land prices like crazy. And then you end up placing an eight to $900,000 house on top of that. So, yeah, builders are having a lot of fun right now if they have developed lots.
John Schaub 45:35
Yeah.
Aaron Norris 45:36
Pretty crazy. Wow.
John Schaub 45:38
The big article on our paper last Sunday was about a guy named John Ringling, who was one of the first developers in this town, who went broke, during the land boom dug him out of the 20s and 30s. And then I've got a guy's last dollar bill up on my wall that an attorney gave me, he was one of the biggest developers in this town, he went broke at 65. So, this is something that comes and go, you know, just because it's working right now, doesn't mean it's gonna work a year or two from now. The house business has been fairly stable, you know, prices certainly have gone up and down, we had prices drop and happiness down. But I didn't lose my tenants and tenants hung around. So, it's just been a safer way to make money over the long term, then land speculation and commercial speculation and all the other things that you can do, which are a lot of fun when they work. But they're, you know, they're, they're the rescue. So, what we do is not very risky. I look for my excitement, things other than real estate.
Sean O'Toole 46:34
Did you take much of a hit on rents?
John Schaub 46:37
During the last downturn?
Sean O'Toole 46:39
Yeah.
John Schaub 46:39
We had about 80% of the people stayed in place with the same rent, we lost 10% of our people, they just disappeared on us. And the other 10% we brought, brought their rent. So, we end up, and the house we rented was at a lower rate. So, by 20% of the portfolio, we had reduced the rent to keep people in place, the other 80% stayed. And that's because they were, you know, my rents are not hot. We're on the low side of market, we stay on the low side of the market. We're not 30% below, but we're probably 10 to 15% below the market. So, people like us, and they know you know to move is no fun, unless they can find someplace cheaper to move. That's just as nice why move? So they stay in place, especially when you have recession, people don't like to move. I mean, they don't know if they're gonna have their job next week. No, they don't do anything exciting. They're hunkering down. Same thing with the pandemic, they're hunkered down.
Aaron Norris 47:31
Is this market getting you excited about things like land or commercial or any other asset class outside of single family?
John Schaub 47:39
I have pictures all over my office of bad deals I was in so that I just looked up at some of the pictures. Well, I have those thoughts and say, No, let's not do that, yeah.
Aaron Norris 47:48
Now, I've heard of a vision board. This is like an anti vision board? This is like a reminder?
John Schaub 47:53
Yeah, there's like things you shouldn't do again, we've done them once they didn't work last time. Don't do it again.
Aaron Norris 48:01
People I've dated, houses I don't like, and shouldn't ever own again.
John Schaub 48:06
Making money should be boring. I tell people this, you should not be excited, should be boring. It should be predictable. You should do things that are predictable, make a lot of my dango, do some exciting, you know, a lot, do take the ski, or just do something exciting, go flying or go sailing or you know, there's a lot that you can do for excitement that doesn't really cost much money. If you look for your segment in real estate, you go outside a $10 million note. I mean, you know it can be really exciting. And they keep you up at night for a long time. And you may be broke next week. So, don't do that.
Aaron Norris 48:36
That's fair enough. Do you have any favorite data sources, or data that you wish you had access to?
John Schaub 48:46
All the computers giving me data access that I never buy that you can sit right here and the problem is knowing which data is accurate? So, accurate data is the key, is the key question. And my primary source is public records. I again, I'm not doing a lot of volume. Now, if I buy one house a year, that's a big deal for me. So, it doesn't take me, you know I've got plenty of time to do the research on that, that one house and I may look at a dozen houses to buy that one. But I don't do a lot of data mining. No, I'm not in the business of mining data sending postcards out, that's not my game.
Aaron Norris 49:21
I think that's what's also great about this business is really just finding your special niche and owning it that, that's why it really resonated with your book. I don't have to be doing 50 deals a year to make it work for me. And I've really enjoyed it because of that. I can't tell you what a big difference that made for me and I really enjoy just being a landlord. It's fun. Before we end, I know...
John Schaub 49:43
If you do it right, you know, and then...
Aaron Norris 49:46
If you do it right what?
John Schaub 49:47
Go ahead.
Aaron Norris 49:48
I just wanted to...
John Schaub 49:49
I was going say, if you do it right. It's fun, and it's rewarding, you know, the people you're dealing business with, like you I don't have anybody I've ever bought a house from that doesn't like me, I don't have any tenats that don't like me, they all like me. Those, those are happy days, you know.
Aaron Norris 50:03
I know you do a fair amount of work with Habitat for Humanity, or you have. Are you still working with them?
John Schaub 50:10
Habitat, I got involved with Habitat when when it was really early years, and the founder of Habitat Millard Fuller was a good friend of mine, we became good friends. And I had him speak at conferences, did a lot of work with him for 25 years, I pulled away from Habitat, we started a new organization called The Fuller Center for Housing about 10, more 10 years ago now, which is doing what Habitat did when they first started, and that is helping, people who really can't get a house any other way. So, the Habitat is still a good organization, they've just changed permission a little bit. Fuller Center's doing more of the work that Habitat used to do. So, I'm still in the game, just with different players. And actually, most everybody in the Fuller Center used to be in Habitat. So, the same, same group, same group.
Aaron Norris 50:54
How is it going about sort of accomplishing that mission, mission in this kind of market?
John Schaub 51:02
It is a real challenge, because Habitat, likes to build new houses. And that kind of was their model, building new houses, unless you have somebody in your organization that can go out and make deals on land, it didn't work, you know, who paid retail for the land, it was really hard to make it work. Back when I was involved. You know, I was on the board, I had another good friend who's on the board who's a developer, we were putting together deals that land deals that made it affordable for Habitat to build, we found one piece that we were able to get a donation of two thirds of the property and the other third, we got a zero interest loan off. We had another piece we're similar situation where two owners one on them dies, we had to buy the estate out again, with the zero interest loans releases, sold lots, the other guy made a contribution, he donated his property. So, you make those kinds of deals, you can make it work. But if you go out write a check for land and pay prices that are getting bid up. It's hard to make it work. So, the Fuller Center is not doing as much new construction, we're doing a lot of repairs, a lot of repairs. And there's an awful lot of folks who have lived in a house for 30 or 40 years, who need some kind of help. And they really don't have the money to fix things up. So, you know, we've patched up roof windows and just a lot of patching. We don't totally rehab the house. We just keep it livable for these people.
Aaron Norris 52:20
Cool. All right.
John Schaub 52:21
It was good work.
Aaron Norris 52:22
I need to make sure I post that in the show notes so people can find out more information on that. But if they're trying to find out more information on upcoming events and your book, can you, where should they be going?
John Schaub 52:33
JohnSchaub.com.
Aaron Norris 52:36
That's S-C...
John Schaub 52:37
J-O-H-N S-C-H-A-U-B.com.
Aaron Norris 52:39
Very good. Yeah. And then Building Wealth One House at a Time, easy to find on Amazon. And all the links are on your website as well. That's all the questions I have, Sean any any other follow up?
Sean O'Toole 52:51
No, John, thanks so much for joining us here and sharing some of your journey and your approach. And, you know, most of our customers at a high volume folks doing 10 plus deals a year. But you know, I know we have listeners out there that the one year house approach makes a lot of sense. And you know, I think that that's what you're following Aaron and, and you know, I think it's great. And I hope people check you out, read your book and attend your class.
Aaron Norris 53:20
Or these massive flippers...
John Schaub 53:21
I keep telling people every year, I just, I would just tell him to keep one of those 10 houses, you know, keep the best one.
Sean O'Toole 53:27
Yeah, the guys are flipping ten. You know what? That's a really great point, right? Because I flipped 160. And I didn't keep one out of every 10, right. And I ended up doing more commercial or whatever. But boy, I think back about that if I'd kept one out of every 10. That would have been. I mean, I did. Oh my god! That would have been a whole another level. And I wish I had, so you're absolutely right. So, for our folks out there doing volume, keep one out of 10. You heard it here first.
Aaron Norris 53:59
All right, john, thank you so much.
Sean O'Toole 54:03
Thanks, john.
Aaron Norris 54:04
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