How has the real estate industry changed? An interview with Tom Cain

In this edition of Tuesday Morning Coffee Murfreesboro TN  Realtor John Jones interviews fellow Star Power STAR Tom Cain of Cain and Company Real Estate in Champaign, IL. Topics include how the industry has changed and investing in rental property. We hope you enjoy this episode of Tuesday Morning Coffee.

Transcript

JOHN:  All right.  Hey, John Jones here with another edition of Tuesday Morning Coffee.  A real treat today.  I’ve got a great friend of mine, Tom Cain from Champaign, Illinois.  For any of you who don’t know where Champaign is, it’s where the University of Illinois is located.  And Tom came down—about how far was the drive?

TOM:  About six hours.

JOHN:  Six hours.  Tom and I go back to 2005.  That’s when we met each other at a Howard Brinton Star Power event, kind of a mastermind group.  And we hit it off day one.  He’s got just an unbelievable personality and just a really great guy and does a lot of real estate and has for a long time.  And so today, since I have Tom here and we’ve been sharing, I wanted to share him with you.  And I guess, Tom, the first question I will ask you because how long have you been in real estate?

TOM:  Well, I’ve been in it since 1989 is when I got in.

JOHN:  In ’89.  And what are the biggest changes?  What would you say is the one biggest change from ’89 to 2010 in our industry?  What would be that one biggest change that we’ve had?

TOM:  I’ll tell you, the biggest change I’ve seen is the Internet.  I think about it now and we’re probably up to close to 95% of all buyers start there.  They know the marketplace better than we know it before they ever contact us.  But now, we have a lead-generation machine that brings in about 400 leads to me and my team a month.  It’s funny because as soon as that lead comes in off the Internet, John, it’s on our phone.

JOHN:  Yeah.

TOM:  I’m calling that lead and here’s what I hear sometimes: “Who is this?”  I said, “This is Tom Cain with Cain & Company.”  “I’m still on your website.”  They’re still on my website.  And let me tell you, when you get to the person first, you’re probably going to be their realtor for the sale.  And that’s what we’re trying to do is bond right away with people.

I mean, what I tell many people who are coming off of the Internet outside of real estate, I want you to know that I have a network of people and services.  So if you need your car worked on, you need a dentist, you need a plumber—I’ve got them for you.  These are people I trust and that I’ve used for 20 years.

JOHN:  Well, when you think about the old days with the MLS books—

TOM:  Yep.

JOHN:  —and the two or three-week lag time before people would even start getting showings because the books weren’t out yet—

TOM:  Yeah.

JOHN:  —and we guarded those dadgum books with our life.  It’s kind of mindboggling when you think about how we thought back then, and today, literally, somebody can be looking at a home online and within minutes we know they’re looking and we’re talking to them.  When a new listing comes out, within minutes, they know about it.

TOMYes.  The systems are there.

JOHN:  It’s just like a totally different industry.  And we were all scared.  I don’t know if you remember.

TOM:  Right.  Yes.

JOHN:  When the Internet came out, I remember we were all so scared.

TOM:  Are they going to need us?

JOHN:  Are they going to need us?  We’re giving them all the information.  We used to have this foreign language called MLS.  And to me, it’s been the opposite.  It’s been a blessing.

TOM:  Yeah.  It has been.  Because you know what?  The truth of it is you can look all you want.  You’ve got to have the expertise.  I’ve lived in my market my whole life, and I’m sure you have too.  So when things happen, you know, there’s things they don’t know about they need to know about.

JOHN:  Right.

TOM:  You can’t get it from the Internet.  You’ve got to have an expert, and I think that’s where we show up and really work.

JOHN:  How is your market in Champaign?  Because Champaign is a unique town with a university and all, but it’s American, you know?  It’s Midwest.  It’s more mainstream than California and Florida and all this stuff we hear about in the news.  What’s going on in Champaign as far as the market?

TOM:  Well, two things I’ve got to tell you.  Number one, I’ve never locked my door in my life.

JOHN:  Wow.

TOM:  That’s the kind of town we live in.  Secondly, I’ve got to tell you, when people come from all over the place, they say, “Now, to get here to work, how long is it?”  I’m telling you, 15 minutes is the longest commute you’re going to have in our area compared to these poor people in Chicago.  But in the market in our area, it changed when all this hit us.  If you bought a house in 2005 until today, you have no appreciation.  But it hasn’t really so much gone down.

JOHN:  No.

TOM:  If you bought in 2004, you’re making money.

JOHN:  You’re in a great market.

TOM:  We’re in a great market.  We’re still in a great market, but I’ll tell you what we’re watching and we’re helping people invest their money now into foreclosure homes that we know are going to do well on the rental side and we have a rental company.  So we’re certain now to take people’s poor 401Ks that died.  We’re going to rejuvenate them now.

JOHN:  Have you done some purchases with people using their 401K or SEP money?

TOM:  Absolutely.

JOHN:  Who’s the company that helps you with that?  Is it Entrust or…?

TOM:  Entrust is one we use out of Chicago, and I’ll tell you the other piece of the pie is a lot of people have a lot of equity sitting in their house.

JOHN:  Right.

TOM:  So all we’re doing is a line of credit with them.  I’m going to give you a small example.  At the sheriff’s sale the other day, one sold for $29,000 and needed $10,000 worth of work.  And it will sell at 70.  You know, if you can make 20 or 30 grand—

JOHN:  And when he says sheriff’s sale, what that means is their foreclosure laws are different in Murfreesboro or Tennessee, he means buying one at the courthouse buying foreclosures.

TOM:  Yep.

JOHN:  Yeah, we helped a lot of investors in the last year with flip properties, with some good rental properties because I think people are tired of looking at their 401K.  Even though real estate’s been up a little bit, it didn’t get cut in half in 10 years like your 401K did.

TOM:  No, and I’ll tell you I own 20 rental properties, me and my wife, and last year, as the market died and your interest rate on your savings account is next to nothing, my rents rent up.

JOHN:  Yeah.

TOM:  My rents went up because if people can’t buy right now, guess what they’ve got to do.  They’ve got to rent.

JOHN:  It’s a good hedge against…

TOM:  Everybody should own at least one or two.  Everybody.  Because that’s where the money 10, 15 years from now when that thing’s paid off, oh my gosh.

JOHN:  We will close on this.  To me, especially with people with kids and they’re thinking about college education and all that.  To me, I think when they’re little, when the kids are little, buy one or two properties for each kid you have.

TOM:  Yes.

JOHN:  And that will be that college education in 15 years because it will be paid off and you’ll have something either you can sell and pay for their education or a monthly income coming in where you can pay for their education.  Or take out a line of credit against the home to pay for the education.

TOM:  My first $80,000 house, I put 10% down.  That’s 8 grand.  I’m close to having it paid off.  That thing’s going to be worth almost 120.

JOHN:  How long ago was that?

TOM:  That was 13 years ago.

JOHN:  Thirteen years ago, you paid 80 grand.

TOM:  Yep.

JOHN:  And your initial investment was $8,000.

TOM:  Yes.

JOHN:  And today, it’s worth….?

TOM:  A hundred and 20.

JOHN:  A hundred and 20.  And how much do you think you’ve thrown into it over the years?

TOM:  You know I had to redo probably about 10 grand maybe.

JOHN:  So you got an $18,000 investment.

TOM:  Yes.

JOHN:  And something in 13 years is worth 120.  Guys, I don’t know.  The ROI on that is out the roof.

TOM:  Yep.

JOHN:  Think about it.  Rental property.  It’s awesome.  We love you, Tom.

TOM:  All right, baby.  Thanks for having me.

JOHN:  All right, buddy.  See y’all next week.