For context there are 7.4 Billion people in the world.

That’s a lot of people and each one of them has a different viewpoint on value.

As you might expect, $100 to someone living in an impoverished country means something drastically different than $100 to a typical American (in some case life and death different).

But what’s not so obvious, is the massive difference in value of two people that might be living right next door to each other.

This disparity gets even more pronounced when you look beyond the intrinsic value people put on cash money and start looking at the value placed on objects, time, food, emotions, status, etc.

Everyone’s individual experiences (good or bad) plays a huge part in how they value something.

The less someone recognizes how vastly different the value is that two people place on the same thing, the more difficult real estate investing will seem.

For example, if everyone in the world looked at an ugly house through the same value lens-  with the same experience, knowledge, resources, needs, etc – why would that house ever sell for one dollar less than the exact value everyone in the world perceived it to be worth?

But the fact is, no two people put the exact same value on a house (or just about anything).

This is evidenced by back to back appraisals at stunningly different values.  This happens all the time by supposedly professionally trained people at providing the exact value of a home.

So if two pros can’t come to a consensus on what a property is worth, what are the chances two average Joe’s can?

Probably pretty slim.

Furthermore, the more drastic the two individual’s life experiences vary, probably the bigger the gap in perceived value.

So how does this make investing in real estate much easier than you thought.

The sole job of a real estate investor is figuring out what the exact same piece of real estate is worth to different people and providing them with what they value most.

For example, a working professional who lives in California and inherits a house in Chicago from his hoarder cat lady aunt, might not place much value on the home when he considers the dead cats in the house, the time it would take to fly cross country to clean up and deal with the hassle of selling the house, and the limited connections he has in the area to deal with this problem.

So he might be willing to sell the house in as-is condition for $50,000 cash since that is $50k more than he had before, and he didn’t have to go through the pain of dealing with the situation.

An investor who has a good contractor connection could potentially pay $50k for that house, then pay $30k to have it cleaned out and updated.

Then, they could rent that property to someone who values all the things that renting a house provides – ie flexibility, new experiences, not having to do maintenance, etc.

In doing so, the investor makes a few hundred dollars per month cash flow going forward, all for figuring out how to provide each person in the transaction with the value they were looking for.

You could even take it one step further and replicate this process several times over.

After buying 10-20 of these types of houses and stabilizing them, a different investor who manages large amounts of money might value this portfolio of homes much higher than what you, the original investor, has paid for each one.

You might have put $80k into each, but a larger investor sees value in buying them at $120k each.

The investor is still making a decent cash flow and is willing to pay a little more rather than going through the work of rehabbing and stabilizing each home individually, for the benefit of buying a stabilized portfolio.

This is because they need to put a lot of money to work, and can afford a slightly lower cash on cash return, due to the benefit that comes with buying 20 properties that are performing well.

Now if you did that on 20 homes, you just created $800,000 worth of profit when you sold your portfolio (20 Homes x $40k equity in each) in addition to the cash flow you made each month you rented the homes.

This happens all the time, and it is purely done by figuring out the value different people place on the exact same house, and communicating it in a way that made sense to each person.

That’s the entire job of a real estate investor.

In the next few articles I’ll give a some examples of exactly how this occurred on a few deals I recently completed.

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