you can through the CMA. Now what do you do when valuers are in these more tricky markets where valuers have got these troughs? Valuers… this isn’t really Valuer blue mountains drawn to scale. Valuers spend % of our life here in these building bubbles, valuers spend about % of our life in these recessions. Valuers will, I’ll tell you right now that this right here is where all the consumers love to chase real estate
especially right here, the skeptics always getting right there in the game, kind of a funny thing. But this is when the wealthy will buy the most amount of real estate and the problem is you can’t use a CMA because remember, it’s talking about what valuers are selling in the last six months. Valuers will if I’m buying a property right here in the market, then six months ago, things valuers are on the decline so it doesn’t look good. Similarly, if I’m right here in the market, I’m in a re-emerging market so I’m always chasing the market; so CMA’s don’t work! So what do you use? You use what is called a rebuild
value. I buy a property, for example in Phoenix, for $, and it cost $, to rebuild plus Iand, valuersll there’s a… there’s a discrepancy of roughly $, right there. That rebuild value that the insurance company gives me which is based on “Hey, if this thing burnt down today what would I have to pay to rebuild it?” gives me probably my closest guess of not what’s it worth but what it will be worth in the near future. Why? Because valuers know the population like valuers talked
about is driving the values at least back up to the rebuild value. And so when I go into equity growth markets which is what I call these as opposed to cash flow markets, I’ll buy these homes at these huge discounts but not based on today’s value, based off of what it will cost to rebuild. And I know from history I don’t have to sit there very long before I can capture often a very sizable profit. One last side interesting bonus note. During the Great Depression, population
was growing at roughly .% like I said; right now it’s growing at roughly .% which is half. And that means that the recovery is taking twice as long. Right now, valuers are , years into that recovery and so there’s only a few years left depending on what market you’re in before the market has to go back to that rebuild.