In this episode, we talk about price discovery; what it is and how to do it.
Okay, here's the game. If I guess this thing is right, you have to give me $1. All right, Okay. I am willing to bet that if you are a startup founder or an entrepreneur, then sometime within your life you've thought about investing in real estate, you looked at investing in real estate, whether that's actually buying real estate for rental purposes or to actually flip it. And if you've gone far enough down the rabbit hole, which I imagine you have, then you've looked at flipping homes. And if you've looked at flipping homes then after you found a couple of homes, the next question is, how much will it cost for me to fix this up?
So hopefully you're actually hiring an expert and not trying to do this yourself because you're gonna get Diesel. And if you don't know what that is, go check out my episode on getting Diesel. But hopefully, you're hiring someone else. But the next question that comes up is how do you know you're not getting ripped off? How do you know that the price that you're paying is the right price and the quality that you're getting is the right quality?
Okay, so to figure this out, what you need to do is price discovery. So price discovery is getting as many data points on price as possible. And this sounds super obvious. But trust me, this is a question that I'm sure many people have had. And you probably had this question too. And now that I just say this and it's super obvious. So be it, most things are super obvious and it just kind of goes over our heads but when we do price, discover as many data points as possible. So to get as many data points as possible, you get as many quotes as possible.
So you reach out to as many contractors as you can, maybe 563 is probably good enough but you're going the more contractors that you can reach out to, the better idea you can have on prices for different things. One of the key things, however, is that contractors will likely try to do value-based pricing and if you want to know value-based pricing is I have a podcast on that as well but contractors will likely try to do value-based pricing. So it's really difficult to see how they're coming up with their costs like how they're doing they're costing. So what you would want to do in this case is get an itemized quote. So you see exactly how much you're paying for what part, what aspect then after this here's where it gets a little tricky is there are some contractors that will just price very low just to get your business.
So in that sense sometimes it really is a little difficult to be able to figure that out but to solve this issue you just get more data. So if contractors are pricing their contracts really low and then you know they start doing work and then they hit you up with higher bills. Well, the way to figure out what has happened is when you talk to a contractor asked if you can speak to some of their former clients, and then when you speak to their former clients find out if they stayed on budget and then if they have then you know that that's the right price and you're just collecting this data based on this data, you know what the average is. And then from here, you can kind of infer what the price could be. At least you have a better idea than just going at it blind. So I hope that helps this Robin Copernicus. Boom, Bam. I'm out.
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