John Schaub: Insights From a Real Estate Guru on the Housing Market

by Dr. Mark Skousen, Advisory Panelist, Investment U
Monday, June 4, 2007: Issue #680

Since 1990, real estate has been a fabulous investment. But after an unprecedented bull market through 2004 – when houses often sold for more than the owner’s asking price, and builders could mark up new homes by 30%-40% above normal – it was time for a break.

The Fed raised rates 17 times, and, in the most overvalued markets, the boom turned into a bust.

We have already witnessed a significant increase in defaults and a collapse in mortgage REITs and homebuilder stocks. Earnings on mortgage banks and thrifts are off 30%-40%. Inventories are rising and prices of homes and condos are actually falling in California, Nevada and Florida.

Yet “real estate is local,” as the saying goes. And the fact is, in the long run, it’s still the best road to wealth in America Let’s look at what’s going on around the country, then I’ll share some insights from John Schaub, one of the most successful real-estate investors around.

Some Housing Markets Are Still Booming

Residential and commercial properties in major cities in New York, California, Florida, Texas, and other boom-towns have skyrocketed over the years, and made millionaires out of millions of people. And good opportunities still abound.

To be sure, the housing bust is far from universal.

In Utah, I recently met an investor who sold his home two years ago in expectation of a sharp selloff. He’s still waiting. Meanwhile, real estate prices rose 12% in the past year in Utah – the Rocky Mountains are still booming.In New York City, where I live, housing prices are climbing, too.So where are the best deals right now?John Schaub: The Real Estate Guru Who’s Never Been Bankrupt

But he wisely left off the list John W. Schaub, my favorite real estate guru. (I’ve been recommending his services for over 20 years in my newsletter, Forecasts & Strategies.) That’s because John Schaub is a multimillionaire who has never ever come close to writing a bad check. He’s bought and sold dozens of houses, all profitably.

Schaub teaches classes on buying distressed properties, and he thinks the next year or two will offer incredible bargains for those willing to search patiently for unique opportunities. He recommends looking at tax sales, discounted loans and bank foreclosures.

And he avoids high-risk, highly leveraged “nothing down” real estate deals like the plague

This conservative approach is the reason Schaub is still in business after 30 years.

Schaub Sees More Bargains Ahead

As a professional who has bought and sold hundreds of single-family rental homes, he is waiting to get back in. “You still can’t get positive cash flow on most rental properties at these prices,” he told me. “They need to come down another 20%-30%.”

Schaub noted that inventories of houses for sale are not increasing, and that’s a good sign. Builders are no longer building in previously hot areas. Homebuilder stocks and mortgage REITs have rallied in the past month. And the Fed has injected a lot of liquidity lately to keep the subprime-lending crisis from spreading. (M2 is growing at a 10% clip).

Another aspect of U.S. real estate overlooked by the bears is foreign demand. Because of the cheap dollar, foreigners are coming into the U.S. in droves and buying up real estate, especially in New York, Florida, and the West.

Is the worst over? Perhaps.

If you’re interested in owning rental properties, I urge you to pick up a copy of his bestseller, Building Wealth One House at a Time. He also offers a 6-hour audiotape course, “Buying Property from Owners and Lenders in Distress.”

Good investing,

Mark

Today’s Investment U Crib Sheet

• Most real estate gurus haven’t come close to achieving John Schaub’s level of success. Indeed, over all, their businesses have failed. Here’s why: No Money Down Real Estate Investing: Why Flipping Homes in Today’s Market Can Be Dangerous To Your Financial Health
  
• Real estate, of course, is one of four asset classes your portfolio should contain. Investment U’s Fast-Track Investor’s Guide, our complete “A-to-Z” handbook for profiting in stocks, bonds, real estate and precious metals, shows you how to pull your whole plan together.

• Buying Real Estate: This Century’s Greatest Investment
• Why Housing Prices Will Keep Dropping in Value
• The Housing Market: The Disappointment Of The Decade

Sign Up now and receive this Free report: Collect 122% in the Next 12 Months From Gold's Surge.

The Single Best Investment for 2009

Forget another stimulus package. Or retreating into "safe-havens" like cash and gold. All you need in 2009 is a small exposure to the "secret" White Cap Index.

It's up as much as 171% straight through Wall Street's meltdown. And one of the latest stocks to be added - an Internet-related venture capital company - is up over 100% since its inclusion into the Index.

Just weeks from now, we'll add another White Cap stock to this market-trouncing index. To get a sneak peek, click here for full details.

Comments

Check out our selection of daily Investment Research:

We Respect Your Privacy

---

What is Investment U?

Since 1999, Investment U has provided impartial, no-nonsense investment advice on how to build long-lasting wealth.

---

Recent Articles

Platinum Services

The Oxford Club is an exclusive, global network of investors, who collectively participate in the pursuit of prosperity and wealth. The Club is renowned for its market-beating, tried-and-true investment principles.

The White Cap Report exclusively identifies companies, White Caps, which - by being among the earliest to gain traction - have secured dominant positions within untapped, billion-dollar markets.

With an elite trading team at the helm, the Xcelerated Profits Report shows any investor how to "invest like a pro," using high-level, yet easy-to-execute strategies that "xcelerate" profits while minimizing risk.

---