“How much does it cost?” These words roll so naturally out of our mouths when presented with an opportunity to buy something. But is “how much does it cost” really the right first question? In most cases, no. Why? Because we don’t yet know enough about the thing we are potentially purchasing, to evaluate it if it’s really a good VALUE. In this episode, Jeff discusses the difference between price and value, and explains why as real estate entrepreneurs, we need to be far more focused on value than price, or else we will miss many entrepreneurial opportunities to make massive financial headway.
Hey, I’m selling my car. Do you want to buy it? If I asked you that question, how would you respond to a lot of people would respond by asking, How much does it cost? That is sort of a normal kind of human question to ask, but it’s not a great question to ask because it speaks to the price, but it doesn’t speak to the value. And in this episode, we’re going to talk about the difference between price and value, why it’s so important to not confuse those, and how they can affect an impact for the better your real estate investing and entrepreneurial activity. So Let’s cue up the theme. So we’ll jump right in. Welcome to racking up rentals, a show about how regular people, those of us without huge war chests of capital or insider connections, can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting WE BUY HOUSES signs, we’re just looking for quote, motivated sellers to make lowball offers to. You see, we are people oriented dealmakers, we sit down directly with sellers to work out Win Win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the thoughtful real estate entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media, this show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio. Hey, thank you for joining me for another episode of racking up rentals. Show Notes for this episode can be found at thoughtful our e.com/e 161 Please do us a big favor by hitting that subscribe or follow button and your podcast app it really helps other people to find this show on the platforms because the platforms know you are listening onward with today’s episode. So as I mentioned in the introduction, we have this sort of knee jerk reaction as humans to ask a question, well, how much does it cost? But you know, what’s really funny is we tend to ask, and by funny, I mean, troubling, actually, we tend to ask the question, how much does it cost? Before we even know a, what it is? Or B? What value it might provide us? Right? So we literally say how much does it cost? But we don’t even know what it is? So in my example, in the intro, I said I’m selling my car, would you like to buy it? All you know is it’s a car, if I say I’m selling my car? Would you like to buy it? And the next question is, how much does it cost? You’re going to be lacking the context for is this a one year old Ferrari? Or is this a 25 year old Ford Escort? You might want to know between those before you ask about the price, because the price by itself will be absolutely meaningless without the context of that. And then secondly, is what value might that thing provide to you? Right? Think about buying a tool like a table saw? Well, how much does the table saw cost is definitely one question. But then another question might be, how many jobs can I get where I build fences for other people, because I now have this saw that I couldn’t do before that would speak more to the value that the saw as a tool would provide. And you could really only assess the price of the tool the saw in relation to how much value it actually might provide you. So as I mentioned, you know, this is just a human normal kind of comp, common thing for us to do we want to ask, How much does it cost, it doesn’t make anybody bad or doesn’t make them dumb. We’ve all done it. We do it on a daily basis. But when it comes to making big decisions, and I would argue decisions about real estate or real estate education, these are big decisions. These are big money decisions, they’re decisions with big money, potential implications and results. In in situations where the stakes are high like that. We don’t want to fall into this trap because it really is a trap. We don’t want to fall into the trap of being focused on price. Instead of value we need to remain focused on value. So let’s just take a second to define the difference between price and value. I’m gonna give you my definitions. These are not dictionary definitions, but my definitions. Price is how much you have to trade in order to get it right. So the price of that table saw for instance, might be how many dollars you have to trade in order to get that saw But price could also be measured in terms of something else like Effort, Right? The price of a gold medal at a marathon is the hundreds of hours of training that go into that. So price is how much you have to trade, something you already have, how much you have to trade in order to get this new thing. But value on the other hand, is how much do you get back in exchange for what you did? Actually Trade? Right. So if you bought this table, son, I don’t know how much tables has cost. But let’s say you traded $1,500 For this table saw, how much value did you get back in exchange? For what you traded that $1,500? What did you get back for the $1,500? That is value, right? So the price is that you had to trade $1,500 to get it but the value is what do you get back. And maybe what you get back is the ability to build this house you’re building in half the time because you can cut faster now. Or, as I mentioned before, you can build five times as many fences because you have a tool that’s far more efficient. Now. So that’s the difference between price and value. And I’m here to tell you that as a real estate entrepreneur, if you want to make financial headway, which I’m pretty sure you do, if you’re listening to this, and you’re interested in real estate, if you want to make financial headway, we need to get a lot of value. Regardless of price, you need to focus on getting a lot of value, if you want to make financial headway doesn’t matter what the price is, what matters is a you’re getting more than you are really buying, you’re getting more back than you are trading for that property. And that is the gist of making massive financial headway. Now value can be received or it can be created, right? You can receive value like you know, if you give a coach some money for a training program or coaching program, you get value out of that you receive value back from the coach. But you can also create value. You know, if you see a house, where you see there’s a clear opportunity to add an extra bathroom and finish a basement, for instance, you are now creating value. So you saw value in an opportunity. And then you capture that value through your own actions. But sometimes you can just simply receive value either way is great. But you have to be focused on value and not price on her to see either of those things. So if somebody says to you, Hey, do you want to buy my house? And if you were to respond and say, Well, how much is it? That is the wrong question. So what is the right question? The right question is simply tell me about it. I’d love to hear more about it. Because that answer Tell me about it helps you understand what you might be buying,
right? Do you want to buy it is lacking context for what it is. So if you ask not tell me about it. Now you’re gonna get that context, once you have the context, then whatever price that they might be assigning to the property you’re asking for. Now, you can hold that in relative terms, right? Because you could buy a $2 million house and have it be one heck of a great deal. If it’s really worth $4 million, or has the potential for you to easily make it worth $4 million dollars, just as you could buy a house for $100,000. And feel like he got a good deal because you can easily make it worth $200,000 price is irrelevant. It’s the value we’re seeking. Now, I want to note, it’s really, really helpful. To have acquisition criteria, it’s really helpful to have a Buy Box, perhaps you might say, that really defines what you buy. And that’s totally fine. You might have a Buy Box and acquisition criteria that dictate the you buy houses in the 202 $150,000 range in your market, that’s totally fine. That’s gives you tremendous focus. But it doesn’t mean that what you’re saying is you can’t make a lot of money buying a $500,000 house in the same market. Because it could be a great value, you’re just choosing to focus on the 200 to $250,000 houses. And that’s great gives you lots and lots of focus. But we’re not confusing price and value here. We’re not saying just because it’s $500,000 doesn’t mean there can’t there can’t be value there. So it’s really important that we keep those things clear in our mind. So what is like the number one turbocharger of value. If you want to get the most value out of something, I would argue that the way to get the most value out of it is by having vision yourself having a big vision, your vision for something, your vision for how you will maximize what you are buying, you know, in the case of a property, if you want to maximize the value that you are creating in the property, you need to have a vision for how you can transform it from what it is into what you know it could be, and do it in the best way and do it in the most efficient way. And really create something that is sort of the highest and best use of that particular property. Or in the case of buying something like education, you have to have a vision for how you’re going to take what you’ve learned, and really apply it in a way that’s going to get you a massive, massive return on that particular investment. So the best way to make sure that you are getting the most value. So not only are you not hung up on price, you’re focused on value, but you want to maximize value, the number one thing you can do is have a vision, have a vision for what you can do with this thing you are buying in a way that’s going to maximize the benefit that it can give to you. So I titled this episode, the danger of confusing price and value. So let’s conclude by just recapping what is the danger of this confusion. I would say that the danger of this confusion is that if you’re focused on price instead of value, you will end up missing incredible opportunities, opportunities where you can make a lot of financial headway. But this opportunity was sort of in disguise because the lens that you are looking at everything through a price based lens. If you are looking at duplexes that are in the 300 to $400,000 range, only, then you are probably missing an opportunity for something that looks like a duplex that’s $600,000. Because you are not looking at it through the lens of what could this be? In what situation what circumstances could 600,000 actually be one heck of a great deal for this duplex, maybe you do something different with the property, maybe it’s got additional development potential. So you could add two or four more units to it. If you are looking at things only through price and thinking that price is all that matters, you will end up walking right by lots of great opportunity and not even know you just walked by and missed it. So my friends, what I encourage you to do is every time you are evaluating anything, heck, it could be a sandwich for lunch, it could be buying a car, it could be buying a house, it could be considering joining a program that I run like the deals workshop, whatever it is you’re considering buying. Know what the price is, of course, but don’t focus on the price. Focus on the value you will get what will you get back for what you trade? For that thing you are thinking about buying? What will you get back? And how will you take responsibility for maximizing this thing that you are buying to get ultimate value. And I believe strongly that if you really change your lens and really learn to focus on value, and not price, you will learn how to make a lot more financial headway in less time through your real estate investing endeavors and frankly, in other things in your life, even not related to real estate. That’s it for another episode of racking up rental. So again shownotes for this can be found at thoughtful rt e.com/e 161. Please do us a big favor by hitting the subscribe or follow button in your podcast app and rate and review the show I see all the ratings and reviews and I’m so grateful. If you think I’m doing a good job. I’d love a five star rating. Do you know that we have a Facebook group as well for thoughtful real estate entrepreneurs? We do it’s called rental portfolio wealth builders find us on Facebook, look it up or simply type group dot thoughtful rt.com into your browser and you’ll be redirected right to that page. If you liked this episode as well take a screenshot of that on your phone. Post that screenshot to Instagram and you can tag us we’re at thoughtful real estate. So I will see you in the next episode. Until then this is Jeff from the thoughtful real estate entrepreneur signing off. Thanks for listening to racking up rentals where we build long term wealth by being a win win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.