Much of what Oren describes gets a bad rap in today’s world. The terms “alpha” or “in control” are subliminally thought of as violent or harsh, but in Oren’s context, they are completely accurate. In part one of this two-part episode, Oren gives you everything you need to take control of your deal, get negotiations done on the terms you want, and put opponents in the position for you both to succeed, instead of merely butting heads.
But this advice isn’t just for the board room. These key principles work in every conversation you’ll ever have, whether you’re raising millions to close on an apartment complex investment or merely trying to get your kid to eat their vegetables. The way you pitch, frame, and control a conversation directly correlates to its outcome. And in real estate investing, this isn’t a skill you’ll want to be without.
This is the BiggerPockets Podcast show 663.
Write this down, raise the stakes. If somebody believes there is low stakes at this pitch, at this meeting, at this interaction, it is going to end like this, “Hey, this looks great. Love this. Love what you guys presented, something we’re really interested in looking at. Send me the deck. I’ll talk to my committee, my partner, my wife. We’ll take a look at it. If we have any additional questions, we’ll get back to you in the next week.” That requires no training. All buyers, all investors say that unless there are stakes. So raise the stakes.
What’s going on, everyone? It’s David Greene, your host of the BiggerPockets Real Estate Podcast, here today with my co-host, Rob Abasolo with a fantastic show, and I really mean that. Today, Rob and I interview or Oren Klaff, the author of one of my favorite books you’ve heard me speak about often, Pitch Anything. Oren is probably, I would consider him to be the world renowned expert in teaching the concept of frame control and how to hold people’s attention so you can get them to see things from your perspective and invest in your deals.
He’s hired by the big guns to come in and raise money for very big projects and he was gracious enough to share his time with us today sharing very high level concepts that you usually won’t hear anywhere unless you pay tens of thousands of dollars to take courses to teach you stuff. This is the stuff high-powered business people will go sign up for and you’re getting it today for free.
Our show with Oren, I’m just going to give you disclaimer, we hit the ground running and he’s like a Tasmanian devil of value. So in these two episodes, Rob and I are actually going to stop it a few different times throughout the show to explain how the concept that Oren is describing would relate specifically to our industry of real estate investing, as well as give you some color commentary on how this might apply in your own business. Rob, what were some of your favorite parts of the show?
Well, Dave, there were a lot. There were a lot of favorite moments in this because he was speaking to my soul, I think. I’ve been really going down the investor journey and working with investors. I mean, I think probably in the last year alone we’ve had at least a hundred Zoom calls with different people and we’ve really figured out who we are, who we want to be as real estate entrepreneurs and investors. So I really reflected a lot just in this episode because he really put a little knife in all my wounds and was like, “Yup. You were doing it wrong the whole time,” and I’m like, “Yeah, yeah, I was, I was,” but it’s really nice in retrospect to be like, “Okay. Well, here’s the silver lining. I learned it the hard way so that everybody at home can learn it the easy way.”
That’s the role that you and I are in. We’re the vanguards that go ahead and make a whole bunch of mistakes, everything gets messy and ugly, you lose money, you lose employees, you go through pain and frustration, and then after you finally go through all that and you figure out the answer, our battered and torn bodies come back and say, “Okay, guys. I went out there and I figured out that’s where the tigers are. Don’t go there.” We’re all scraped up and clot. Our clothes are falling off, and we’re like, “This is the way that you can go and you can avoid all that pain,” and that’s a privilege we have of sharing that with everybody who listens.
That is today’s retroactive quick, quick, quick, quick tip. Well, this is particularly topical for me because I threw out my back this week. So I’m just in shambles. I hit 32 and the old body’s just breaking down limb by limb, but it’s okay, I’m going to push through. I’m a survivor.
Rob, you’re back in the gym, so everybody should know that Rob has taken his role as the co-host of the podcast seriously, and he’s now training for the BiggerPockets Olympics.
That’s right. Well, I was. I was at back in the gym. I joined and I am out. I canceled my membership today and I said, “I don’t know when I’ll be back.”
“I don’t know when I’ll be back.” Yeah, so pray for Rob’s back. He’s going to the chiropractor today to get that work done. I have, actually, I’ll say it public, I have scoliosis. I’ve had it my whole life and it’s horrible. My back goes out all the time. My shoulders get messed up very, very easily and my neck. So jujitsu frequently will throw me into problems playing sports, lifting weights. It’s always something that can tweak it. So back problems suck. You’ll be on my mind, Rob. I hope you get through that.
Thank you. Well, you’ll always be my broliosis.
Appreciate that. When you guys see Rob at BP Con, make sure that you either give him a free massage or at least a high five and hope that his back gets better. All right. There you have it, folks. Without any further ado, we’re going to bring in Oren. Buckle your seatbelt and get ready for a wild ride.
Oren Klaff, welcome to the BiggerPockets Podcast. I’m thrilled to finally have you here.
Yeah. You might not be so thrilled 30 minutes from now, but for the moment, Hail fellow, well met.
Thank you very much. Now, if you’ve been listening to this podcast, you’ve no doubt heard me mention the book Pitch Anything as one of my all time favorite books. I often recite this when people say, “Hey, David, what’s a book that I should read? What book do you recommend?” I’ve read this book four times. I love pretty much everything about it. It’s helpful in so many ways. It could have been probably three or four different books because of the concepts that are in there. Oren, do you mind giving from your perspective the gist of the purpose of the book, what type of information is in the book and who it was meant to help?
Yeah. So I mean this book was mainly written to help losers struggling through life. Well, no, that was me. That was me at one point, struggling through life. So the book was cathartic in terms of it was meant to help my prior self get to where I am faster. These are the things that I lived through, going into meetings and supplicating to the buyer, waiting for business to happen, sending emails, “Hey, just checking in,” doing a pitch and then saying, “So what do you think, guys? Are you interested? Can I answer any questions?” taking the beta position. Once I learned what an alpha and a beta is, for me, it was like I went to the wardrobe to get a shirt to go to my job at an investment bank, go up an elevator, go to my tiny office overlooking a freeway, and answering to the managing directors and getting them coffee if they wanted coffee.
I went home, went to hang my shirt in the wardrobe, open up, and Narnia was back there, and I’m like, “Holy! There’s an entire universe in my universe that is a different reality from what I’m living.” Then I didn’t ask any questions and I’m like, “There’s lions and dragons and spaceships and all kinds of wonderful stuff,” and I just dove into the wardrobe and living in a different world, all from understanding what a beta position is, what a supplicant is.
So long answer to a short question, but it wasn’t till later when I really started understanding some of the biomechanics of this stuff. When you were in the beta position and you are … When somebody else feels powerful over you, there is a physiological response in them in which they do the following three things. They view you as transactional, “How much can I get from you without investing anything?”
Second is they view you as only at a surface level. They don’t care about your family. They’re not interested that you surf or play racketball or a squash champion. They don’t care that you have a value system or ethics. They just view you at a surface level, and that rolls into the third and most significant thing in the way people view you is that they take risks around you they would not take around their peers. Well, that means they would take phone calls, check their phone, ask you for incredibly insensitive gives, try and reduce pricing, try and get you to give away what you have. So that’s what people who feel powerful do physiologically.
So the book is intended to show you how to stop that from happening, from putting yourself in the beta position. You walk in a room and I walk in a room. I don’t know you from a block of ice. Everything unfolds from there. If you’re in the beta position is because you put yourself there, and by default, by putting yourself in the beta position, you’re putting the other person in the alpha position or the power position, and even if they’ve never done a deal before in their life, they become a master deal maker from being in the power position, seeing you as transactional, seeing you at a surface level, and taking huge risks.
If anybody here is old enough, you guys obviously have seen Trading Places, the final scene with Mortimer and whatever, where they say, “Hey, you won the bet.” They’ve ruined people’s lives. They exert incredible emotional distress on people and it’s all for the bet over a dollar. That’s what happens when you take the beta position is that people will bet your life away for a dollar, and that’s what this book is intended to do or not just the book, but this is why I don’t just do deals today and I invest time writing and I invest time on these kinds of podcasts because of the millions of people that I’ve touched.
Awesome, man. Okay. So lots to unpack here. I want to get into this. First, I want to say I very much love the concept of the book, and I feel like my life is I’m a walking, talking example of the idea of Pitch Anything. I don’t know if anyone really at home knows this, but before I was a content creator, I was in advertising. I was a senior copywriter at an agency for about 10 years, and it was just very funny because you were served a brief and you create ideas that answer the brief and they were never the good ideas, right? I would come up with these really crazy, out there, wacky ideas and I would say, “Okay. I’m going to give them five ideas that answer their problem. I’m going to bring a wacky one just to let them know that I’m creative,” and it always seemed like the wacky ideas or the funny or the out there ones were the ones that always went through, were the ones that would pique the interest of my creative directors.
After leaving advertising towards the end of that, I was in improv, and improv is the art of pitching anything to your scene partner no matter how dumb it is, and allowing them … Basically, you’re becoming very vulnerable because you’re going to throw a wacky idea out and you are just crossing your fingers that they’re going to pick it up and run with it.
So there’s certainly this power dynamic that comes from that, from the advertising pitching in a boardroom of directors, they’re the alpha, you’re the beta. Same thing in improv where you are the beta and your partner can be the alpha. I’m curious in the actual book here when you talk about this relationship, is the desired outcome to do away with the alpha and the beta roles or is the desired outcome to become the alpha role within the relationship?
Yeah. So this is a great question. I mean, the alpha and beta roles exist. There is, in my worldview, there is no egalitarian flat win-win. We’re all looking for the same outcome even in a win-win in which you say, “Hey, we’ve approached this for both sides,” it is impossible to really reconcile a perfect deal. The alpha and beta exist. One person will, by definition, get a better deal than the other. I think most people have in their, I haven’t really done a scientific investigation but experientially from having been in billions of dollars of transactions, people have a notion you don’t get anything you don’t ask for in business. Once they feel empowered and have had some success for doing that, people are automatically going to grab the alpha role.
Here’s what you have to understand. There is an alpha and beta. However, most people who occupy the alpha don’t know how to handle that role professionally, fairly, with parity, with integrity, with transparency, with honesty. So if you believe that if you were in charge of this deal, if you were actually making the pricing points, and you were making the closing conditions, and you were making the equity-to-debt ratios and the debt service, and you were deciding on which part of the deal, in your guys’ terms of art, which part of the deal was interest only, what the balloon was, what interest rate was fair against the fed open interest rate window, if you were deciding all of that from the alpha position, would the deal be likely to be done fairly, honestly, transparently with parity for everybody involved, and survive the test of time so then people look back on it and say, “That was a well constructed deal”? Because if you feel that that’s true, you should take the alpha position because the other guy is going to take that position and ruin the deal.
All right. This is a great point. Now, Oren is speaking in terms that are known to his industry as an alpha, beta. We wanted to take a quick minute because these can be confusing terms because the phrases alpha and beta are often used in different terms like an alpha male describing a certain kind of guy. That’s not what we’re talking about here. What we’re talking about when we talk about alpha position is the person that has the most leverage in the situation. That could be the person with the most experience, the person that has the deal and their contract and they’re trying to bring investors into their deal or it could be the person that has the money that someone’s trying to pitch to, which would put them in the alpha position.
Now, what Oren’s saying is when you’re in the alpha role, it is your responsibility to put a deal together that works for everyone. If the person who’s in the alpha role isn’t doing that, they’re making a one-sided deal, the deal’s not going to get done. This is why you should strive to be in the alpha role because when you’re the one that has the experience, the knowledge, the way to put a deal together, that’s a win-win. If you’re not in the alpha role, you’re not able to do that successfully. Rob, did you have anything you want to throw in there?
Yeah. What he just described was legitimately just my investor journey for the last two years. My partner and I, the way we structure it is, obviously, I have the content, I teach people how to do this, and people send me inquiries to invest with me. Then my partner, my COO, he basically will go and he’ll meet with the investors. There is a bit of an interesting power dynamic because you just never really know walking into the conversation who is the “alpha”, right? A lot of the times you would think it’s us because we’re the experts here, but then there is, like he was saying, the empowerment that comes from successful investors and they’re like, “Hey, I’ve done this. I’ve made the money doing this, and I’m giving you my money and thus you have to do what I say.”
So over the past year, our entire process of how we work within investors has completely changed. I think getting started it was all about, “Oh, sure. You want this? Okay. Great. Yeah. You want to pref here? Great. Oh, you don’t want a 50/50 split? You want 60 and we get 40?” Just over time, I saw how bogged down my partner was just fulfilling every single request. So when people would say, “Oh, well, when you work with investors, do you usually do this?” and we would always say, “It depends,” and it’s because we were willing to bend over backwards because we were getting our bearings on how to work with investors, but now, I’ve really had to be a lot more stringent with people walking through the door for the exact reason that Oren was talking about, where we are in this for the win-win, right? My reputation is at stake here.
If I mess a deal up, that is on me for my career, and thus it behooves me to put together the best deal that’s going to be worth it for me to put my time into this and that will make my investor a good return. So we do have people that try to negotiate all the time and I always tell my business partner, “The moment you allow negotiations to open, they think it’s pawn stars and they’re like, ‘Tell you what, I’ll give you 40%, I get 60, and I get a 15% pref.” I remember one time my partner gave that investor a 15 pref and I was like, “We’re not going to do this. I’m sorry. I know that you negotiated it. I know that we’re at the finish line, but that is not worth it for us.”
We get nothing out of this. We get a small equity share in this property, but we’re giving up all cash flows to this pref that’s impossible for us to win, and if it’s impossible for us to win, it’s impossible for us to be motivated to keep this deal alive. So yeah, I don’t know, it’s just really interesting to hear it from him. You’ll always be all pro because that’s what it sounds like. It’s like if you’re going to be in the “alpha” position, you got to make sure that it’s a win-win for everybody and it checks the boxes and there’s no negotiation on that, I think, personally.
This is super applicable to our industry of real estate because we’re always working on a deal where two sides are negotiating against each other, a buyer and a seller, and then you’re working on a partnership where two people are looking to get into a deal. Sometimes they’re in equal position and then other times when it’s a syndication or something, you’ve got one person setting the terms and the other person deciding if they want to be a part of it. So this is very helpful information because it will come up constantly in your career. It comes up in the world of real estate. I always tell agents who say, “Hey, I want a better commission split,” and I got so tired of hearing that I said, “Okay, fine. You can have it. You name your split. What do you want?”
“Can I have 80/20? You can have 90/10?”
“Yeah, you can have it all. Okay. You got it, but you need to know when you walk out this door, when that client comes, I’m going to give it to the person that’s on a better split for the company. So you won the battle where you got 90% of the commission, but you lost the war because you’re not going to get any of the leads.”
You have to be thinking about both sides at all times. Oren is just someone who has spent so much time mastering this and being in these environments that he’s come up with this way of looking at it where you do have an alpha and a beta, and we want you as the BiggerPockets listeners to be in the alpha position.
I want to go back to something so critical that you mentioned, improv. So I lived on Sunset Boulevard in Beverly Hills in West Hollywood for years. I think when I was 44 or something, I went, I’ve signed up for improv. So I show up in the class and it’s a bunch of 22-year-old actors and actoresses, whatever the right, mainly waiters and waitresses in the class.
So I walk in and they’re like, “Oh, hey, you’re looking for the DUI class to get your license back? That’s down the hallway. This is improv.”
I’m like, “No, no, I’m here for the improv class.”
They’re like, “What is this 44-year-old dude in a suit doing in improv?”
It’s the ability to create novelty is I think what is amazing about improv. So in context, novelty, right? As the years progressed, what I realized is the way I execute novelty, it raises the stakes. This is not just another meeting with another dude that you are at the end of the meeting going to say, “Hey, yeah. That’s super interesting. We really want to invest in this area. We like your presentation. I need to talk to the committee. Send us the deck. We’ll review it. If we have any questions, we’ll get back to you in a couple weeks.”
So with the ability to deliver novelty and differentiation, you can also raise the stakes and saying, “That’s not happening here. This meeting is not only to your benefit, it’s to my benefit as well.”
If you have improv chops, then you have the ability to say, “David, listen. Great that you have these questions. Great. I could invest some time in being with you today, and as much as you need to evaluate our investment, the whole period, the going in cap rate, the going out cap rate, the debt-to-equity ratio, the debt service coverage, the underwriting on the asset, the competition, make sure environmental is done, that the underwriting matches the appraisal where difference from the appraisals document, you got to evaluate all that stuff, but as much as you’re evaluating us, our track record and the asset, we also need to leave some time for me to evaluate you.”
That is raising. So that’s what improv is gives you the ability to say things that are novel to the environment you’re in with seriousness and raise the stakes. So I think you can agree that the goal of improv for an audience is constantly raising the stakes, right? Each addition to the scene has to hold somebody’s attention longer, make them laugh harder, build to something, build momentum. No audience wants to stay in stasis, in the same emotional state that you’ve created.
So if you know how to raise the stakes, then you’re driving towards a decision, and I’ll say, “Hey,” and I can give you some things that obtain frame control immediately, right? Certainly, if anybody listening to this has some time to go spend inside of improv, then you have the ability to say things that you know you should say, but you’re just not sure how to get them out of your mouth, and improv gives you that ability.
Yeah. I mean, when you summarize it, effectively, what a lot of improv comes … The number one golden rule of improv is what we call yes-and. If your scene partner pitches you something, you say, “Yes, and this other thing that makes it crazier, funnier, wittier, more off the cuff,” and you keep yes-anding each other until you get to a moment where you agree that you’re on this concept and you run with it.
The number one downfall of most improv scenes is no-but, right? If you say, “No, but this …” you’ve now denied your partner, and now you’re deescalating the situation in a lot of ways. So I think that makes sense and there are some pretty useful applications of that even in real estate because, for me, in the whole Airbnb world, we’re all about creativity and creating unique experiences. When I’m concepting a new experience or new listing with my partner, we are trying to yes-and each other to say, “How are we getting to the best product?” versus saying, “No, no, but this, the logistics here are terrible,” and shooting ourselves in the foot. So I do think that this is why I really thrive with a lot of my partners because we’re very complimentary in making sure that we’re basically escalating every single deal that we have on the table.
Well, I think, yeah, if you’re listening to this and you want to write something down, “Hey, these idiots have been occupying my time for 15 minutes now. I’m not sure I’ve learned anything,” write this down, raise the stakes. If somebody believes there is low stakes at this pitch, at this meeting, at this interaction, it is going to end like this, “Hey, this looks great. Love this. Love what you guys presented, something we’re really interested in looking at. Send me the deck. I’ll talk to my committee, my partner, my wife. We’ll take a look at it. If we have any additional questions, we’ll get back to you in the next week.” That requires no training. All buyers, all investors say that unless there are stakes. So raise the stakes.
One thing, I just want to revert to improv. This is not a sales pitch for Second City in Chicago or that you should move to Los Angeles but you should and you should also go to Second City in Chicago, but one thing it gave me is the ability to reframe people’s own behavior and lens on themself in a outrageous way. I have to deal, and I’ll just give you an example of what I mean by that, and this is something that you could take home with you and if you use this, if you’re doing transactions, this is something you’ll make a couple million dollars with that we’re going to go over in the next 30 seconds.
I talk to billionaires. I talk to guys who manage billion dollar funds. I talk to hundred millionaires. I talk to private equity groups. I wouldn’t say all day long, but at least every day that I come to work. Invariably, a billionaire is busy and, for me, I’m in the beta position going in for that meeting. Very high view of themselves, low to middle view of me, and they always come late, always. Never have them come on time. Every once in a while you have somebody super punctual, but they always come late.
So I’ll say, “Hey, David. Great. You’re here for the 108 call? Hey, David, are you here for the 108 call?” So everybody managing a billion dollar fund, it immediately gives them a lens to view their own behavior. I’ve had billionaires start off calls, apologize, “I’m so sorry. We had a three billion dollar shipment stuck in the port of Los Angeles. They needed my final sign off. The DocuSign wouldn’t load. This is food for the food bank of California to save the lives of small children. I’m so sorry that I created this thing,” because they know the value of time, whether you’re important or not. They know that their ability to show up and do what they say is just a marker of quality in business and they didn’t get to running a billion dollar fund by showing up to meetings whenever they want.
So that is immediately, they’re starting off the meeting apologizing to me for their behavior. Now, we are becoming peers, and now they can see me as a person, as somebody with high values, and somebody who is not a beta and supplicant for them to order around and tell me to do whatever they want.
So there are indications to people that you are a peer, even if they’re a billionaire, if they’re a billion dollar fund, they have to understand that you are not a commodity, that what you have cannot be bought anywhere, and they cannot impress their values on you, and your value system is as important or more important than theirs, and when they behave awkwardly, weirdly, out of phase with our culture, you are there to scratch your head and go, “Hmm, don’t quite get what’s going on here. I like you. You guys are super credible. You’ve done some amazing stuff and you’re our dream client, but also, I don’t understand what I’m seeing. Can you help me square this circle?”
I think something that’s fascinating about what you’re describing, because what you’re saying is you know coming in you’re in a beta position. That’s a very simple thing that you did that changed the dynamic of the relationship that maybe didn’t put you completely in alpha but, like you said, put you in peers. I just want to highlight very briefly, the point of this is because you need to get your point across. It’s not to fuel your ego, it’s not to feel-
A million percent. Someone will not listen to you. You cannot pitch and you cannot close from the beta position. Until they perceive you as a peer, you’re not closing that deal at anything near numbers that would be fair to you. Nobody closes a parity deal with lots of margin in it with somebody they believe they have power over. So until you’re perceived as somebody who is busy, has momentum in their own business, is not needy in any way for this transaction, and is offering a opportunity for a partner as peers, they will continue to negotiate and chip away your deal until they feel like they’re in the super majority position.
It’s important we highlight that because the phrases alpha and beta have as stigmatism to them where you often hear, “I’m an alpha male,” right? It’s not about the way you come across. It’s in this specific relationship and you’re bouncing around them all day long. There’s a position of first position, which is alpha or beta, which would just be second.
So another word that has a lot of stigmatism with it is control. I am looking for control. Why? Because I am a better governor of the outcome for you than you are. You will negotiate too aggressively. You will negotiate a deal that won’t hold together all the way through legal, and you’ll negotiate a high friction deal. In the same deal between you and I, it’s better for me to have control because I’m going to craft a deal that can be stress tested, that will last through legal, that will get to the other side, that can withstand an argument, that can go through friction and still be a deal.
So I want deal control because I’ll put together a deal of quality that everybody will in the end be happy with the outcome. You will put together a controlling deal that benefits you, puts me at risk and my legal, my partners. I’m not going to perform because at the end of the day, even if you get one over on me a year from now, I learned that my desk service coverage is incredibly high, I’m going to look for litigation, I’m going to blow out of the deal, I’m going to file bankruptcy in the SPV, whatever it is. So I want deal control because I’m going to do a better job with control than you will, not you, David, of course
We see this a lot in the relationship between real estate agents and their clients, particularly when you’re selling a home. So I would notice this if I would go in and I let them stay in the alpha position, they’d say, “Okay. Well, I want to pay you a 4% commission and you’re going to work around my schedule and we’re going to list my house for way more than it’s worth,” and they thought they won. What happen is I would see repeatedly they get a terrible experience. No one buys their house. No one’s motivated to work hard for them because they chipped away the commission. They out-negotiated their own agent, which usually means their agent sucks and isn’t going to fight hard to get them money. When you let your client win, they lose.
This is where your book came in so helpful because I realized I need to be comfortable taking the control because I am the freaking expert. They’re not. I sell houses all the time. They don’t. If I give them the control, it’s giving the control of an eight-year-old what they’re going to have for dinner. I’m sure they’d like it, they’re not going to make good decisions so it’s going to lead to everyone being upset.
This is why the concepts in your books, which, frankly, I think they can make people a little uncomfortable because you are learning how to be in a position of control, but if you are the fiduciary, if you’re the expert, if you can see the angles better, you got to have it. So this comes into play a lot for real estate investors that are trying to raise money for their deals, that are trying to acquire properties from a seller who doesn’t know what their property’s worth, all kinds of scenarios that it makes your job so much easier when you understand the dynamics that are actually happening within the relationship.
I also think that there’s a large contingency of people that want to move forward in a particular endeavor of life. They want to buy properties. They want to build wealth. They want to get a better job. They want to ask for a raise, and all they could say is, “I just don’t feel confident. I just don’t have confidence to do it,” and they don’t understand they’re living in that beta position every day and, physiologically, it changes how you feel.
So this is very interesting to me because, again, he’s really harping on a lot of the pain points that I’ve had. When you think about investing, you have your buy box. You have the criteria that you look at when you’re buying a property. For me, I invest in four different places when it comes to short-term rentals. I invest by national parks, state parks, vacation destinations, and eclectic towns. That’s my buy box, if you will, for short-term rentals.
I never depart from that because my strategies work there, but as we started to come into this journey with investors, I started to realize that there’s an investor box too, if you will, where basically, you have to set the parameters of how you work with investors and when you’re willing to walk away. A lot of people think that because money is being offered to you, you have to take it. When you’re starting out, I understand that notion and you probably should, but when your experienced and when you’ve cut your teeth in the industry a bit, you got to stick to your guns, truly.
So for now, when we’re working with investors, it’s very clear. We take this kind of split. If there’s a pref, this is what it is. We call the shots on the design. We call the shots on the location. We handle everything. When we have an investor that wants to come in and basically be another cook in the kitchen, it’s a no for us. So now, we have this criteria, and as much as we want to work with people that are really nice and that respect us for what we’ve done, it’s just not worth it for us because the more that we give to an investor, the more that’s always taken away from us, not necessarily just in equity but in time. Really, that’s what it all comes down to is he just talked about it for a little while ago how important time is. So if you’re burning all your time trying to make a deal work, it’s probably not worth it, Dave.
That’s a great point, and it also opens the door to another great point, which is that many people that will be hearing this are going to be experiencing a little bit of uncomfort, maybe discomfort, possibly some cognitive dissonance because control is a tricky thing. When you’re in a position of control, it should come with responsibility. So you’ve always heard that Spider-Man phrase, “With great power comes great responsibility.”
A lot of people don’t want responsibility, so they inherently just don’t like control. Others have been in a situation where someone had control over them and it resulted in pain. So a common defense mechanism is to say just avoid a situation where anybody has control over anyone else. Then there’s other people who just need to be in control all the time, and that can be bad too because sometimes they shouldn’t be in the position of control.
The person that should be is the one that has the experience, that has the knowledge, that can put a deal together that works for everyone. If you want to get ahead in life, if you want to build wealth through real estate, you’re going to have to, at some point, get comfortable with the fact that you need to own the control you have. When you are the buyer in a transaction and there’s no other buyers that you’re competing with, you have leverage over that seller, and using it will allow you to save more of your capital and get a better deal so that you’re incentivized to buy more property.
When you’re selling a property and there’s eight interested buyers, you have control, you have leverage, and you can put a deal together that makes more sense for you so that you’re incentivized to want to do this again. The same is true if you’re the person that finds a deal and puts it under contract and you’re bringing in investors. They’re depending on you as the person with the control to put a deal together that will make them money.
When a mistake is made by someone in control, it can be catastrophic. If a mistake is made by someone who doesn’t have control, the limitations are there that it can’t get that bad. It’s what I’d like to encourage people to do as they’re listening to this is to ask themselves tough questions. Are you okay acknowledging that there is an alpha and a beta in situations like this and it’s in your best interest to seek to be the alpha? If you’re not ready to be in the alpha position, what knowledge, what information, what can you do to improve your position so that you do a better job when you’re in the alpha position? When it comes to real estate, you can make a lot of money in this industry, but it’s not going to happen if you don’t have the control.
So there’s discomfort that can come from that, but it doesn’t have to be that way. When you know that you make good decisions that make everyone money, you put win-win solutions together, you take properties that are not being managed well and you put them in their highest and best use, you should have a form of confidence that comes with that. Rob, have you had an experience like that in your life where you recognized, “I need to be comfortable in this position of power that I never had before”?
100%. You got to think about it, right? It’s what he’s saying. You want a win-win scenario here, right? That’s the outcome. This might seem like a win-win scenario, David, but it’s not. Investor says, “Hey, Rob. I’m going to give you money. Go buy the house. Here’s the splits.” I take a bad deal but, hey, I get a free “house”, right? Then at that point, once we’ve closed the deal, we run it, we perform, we perform well, but then I say, “I never want to work with that person again because the negotiation was terrible. Now, I’m going to go find another investor, brief them, pitch them on another property, and work with them, and find the better deal.” That to me is not a good scenario because at that point, I’m looking for strategic partners that will invest with me not just for one deal but for several deals.
So you really have to try to put together a deal that’s a win-win like Oren’s saying for the exact reason that, look, it’s either I’m going to get a crazy good deal and the investor, and thus the investor might do it, but they’ll never invest with me again or the investor gets the crazy good deal, and I get the bad deal, but I go through with it, but then I never invest with that investor again. Both of those are lose-lose scenarios to me.
So I think you’re really trying to prevent any friction in the future by just setting the stage that it’s like, “Hey, I’ve underwritten conservatively, just so that you know, so that we are winning across the board and we’re getting this thing to the finish line together.”
Would you mind sharing the story in your book, I’m former law enforcement, so I love it, of what it’s like when you’re interacting with the cop who’s pulling you over? I just thought that that was brilliant when you’re describing what emotions the cop is feeling versus the person being pulled over.
Yeah. So I mean, I would love for people to read the book and have that for the first time, but maybe I can give you the opposite story of that. So right there is what I would call a college kid’s poster sports car, apex sports car. I could walk over and touch it. Happy to turn the camera if you want to see it. So I have a friend who is a police officer in the California State Police. On Christmas, we met up in Orange County, and he got in the car and was driving it up the freeway. It was Christmas and it was fun, and he was coming up 140 miles an hour behind a car, and people would look and see some jerk in a super hyper sports car behind them.
So they were freaking out, and he was pointing them to pull over. So they were getting pulled over by a state trooper on Christmas in a hyper car. We were having fun with it. Obviously, I don’t want to mention the guy’s name, but the emotion … People pulled over immediately, and just the emotional chaos of being mad at someone for driving up behind you in a jerk sports car, and that’s why I’m not naming which car it is, and then they’re a state trooper, it’s a massive overwhelm.
I said, “Joe, hey, let’s just stop doing it.” He’s six-foot-three in all his gear and fully showing himself to people. I go, “Let’s stop doing it.” This is massive emotional overwhelm for people in which they can … They were shaking. You can just see them visibly disturbed and stopped being funny really quickly.
So I’m not sure if that helps, but in terms of frame control, and getting this alpha position, and controlling people, and getting them to see things from your perspective, you’ve got to put them in some emotional state in which they are in a situation that they’re unaccustomed, they want something, they’re excited about something, and they’re in an emotional state in which they’re unaccustomed to being in.
I’ll give you an example that’s not in the book, which I think you’re looking for, but I do want people to read that and experience it for the first time. So I was in a meeting with a venture capital investor for a genetics company. There were 10 of us in the room, and they brought their expert into the meeting, their genetics expert. She was incredibly aggressive about the company’s IP, about the company’s technology, about the company’s ability, questioning the company’s claims.
I said, “Susan, this is all fantastic. We can break all, but the questions you’re asking all require 45 minutes to two hours to answer, and we’re here for another 30 minutes. None of your questions are answerable. You’re looking at one of the best genetics companies in Southern California. You guys are 70% on the way to ask to making the investment, and you’re asking the unanswerable questions. So one, why don’t we set some breakout sessions? You can sit with the scientists and get solid answer to your questions. Two, you stop frazzling everybody in this meeting wanting to help you in a situation in which it’s not possible to do so. Third, is there any way you think you could help this deal move forward or do you only want it to move backwards?”
So that is a complete reframe, and I’ll give you an example. She completely became emotionally destabilized. Nobody talks to her like that, but I didn’t confront her that she’s wrong or these things, but I did say, “What is your values?” So if you want to move somebody emotionally, you show them that their values are out of phase with what I would call the moral center. Values are where you can get somebody emotional without trying to be right or wrong.
So the way you call somebody’s values into play is you say, “First of all, there’s two steps to this,” and everybody should be doing this, anyway. “Take the moral center always. Show up on …” You know in the Navy they say, “Hey, if you show up early, you’re on time. If you’re on time, you’re late, and if you show up you’re late, don’t even come to the meeting.” Obey the rules of business, which are timeliness.
“Second, work hard.” Business is about work. Whenever you’re working hard, you occupy the moral center, right? Who is out of phase in America with values? People who show up unprepared, don’t work hard, and want things for free. Anytime somebody shows up, they want a big win, they want a deal to really happen, they’re hoping to get something for themselves, but they haven’t worked hard, they’re not timely, and they haven’t prepared. You can just say, “I’m confused. You want these big win. You want something that’s incredible and hard to get, but some of the things you’re doing don’t make sense.”
This is how you summarize that, “We cannot work harder on your deal than you will. We don’t have the upside. We don’t have the benefit. We have other things to do. We will do what we say, but we cannot work harder on your house, on your asset, on your deal than you will.”
So one is you always want to show up doing the work, preparing, and timely. That lets you have the moral center. From the moral center, you can share your values. Once your values occupy the strongest position, everything they do can be compared to you, not the other way around, and that is true frame control. You can read the book and you can go through the examples and everything like that, but if you want to hear it from me directly, true frame control in which other people have to react to what you’re doing is when you have the best set of values in the deal, and then you control everything no matter how many billions of dollars they’re bringing to the table because you are not needy.
One of the core values is I will show up on time, I will work hard, we’ll bring everything we’re supposed to be, we’ll prepare, we’ll invest ourselves, but we will not work harder than you will on your deal. We will invest a certain amount of time in order to try and get to a transaction. If we can’t visibly see you contributing to our transaction happening, we’re out.
Another set that goes into the value is, “We like this deal. We like you, David. We love what’s going on here. We’ll probably overinvest in this, but it has to fit in our business model. You can ask us to do almost everything, but we won’t be bad business people. So it has to be fair to us. It has to be a timeline that makes sense for our business, and the agreements have to happen on a pace that every other real estate deal happens on because we are busy,” and that’s where I’ve arrived at. “We are busy.”
Acting needy frames you as the beta, frames the other person as the alpha, puts them in the power position, and then they’re going to start to exert control and weird behavior on top of you, and you’re just going to constantly have to be reactive to the things that they’re doing and seeing.
How do I know if I’m the beta? I’m reacting to what they’re doing insane. If they’re reacting to me, then I’m the alpha and they’re the beta. There are not two alphas, there are not two betas. This is the function of human interaction.
So to finish that thought, I many times will go in and say, “Hey, David. I love you. I love everything you’re doing. I want you in this deal. To me, there’s no one else.” I would even say, “I need you in this deal,” right? So why would Oren Klaff who said never be needy in multiple printed journals and books say those things? Because I have the other side of it, which is to say, “I need you in this deal. Your money is the best money for this deal. If you’re my partner, this is going to be a love affair that’s going to last 20 years until one or both of us die. We’ll probably be that couple,” and here’s the improv, right? “We’ll probably be that couple that when one of us dies within three hours, the other one will die, and it’s all going to start here because we just can’t live with each other, and it’s all going to start here with this investment. Honestly, I mean, I feel that way.”
So that’s prima facie needy position, but on the other hand, now I exhibit that I’m busy and I don’t need it, but on the other hand, I’m super busy and you’re busy as well. This is two trains passing in the night. If we can’t get comfortable with each other on this 45-minute call and do two more calls this week, even though it’s Wednesday, it’s going to be sad, it’s going to be frustrating. It’s going to be another tier spilt into a full beer, but that’s the way it goes. Life is not fair.
So it’s the desire and the emotional state of being ready to work hard and bringing resources to the table, but also not needing this at all. That frames the walk away. Hey, if I’m willing to walk away from you, as much as I want it, after expressing that I wanted, if I’m willing to walk away within five minutes of starting the pitch, well, what will happen if you are high friction and difficult to deal with at the end? You’ve already seen my willingness to walk away, and now I say, “Hey, I don’t know. This seems high friction. Might not be for us.” That has teeth because you … So wanting the deal but not needing it is the ultimate in the alpha-beta frame control.
Now, this is some gold. One of the things that I learned in realtor training is the one who ask the questions is the one controlling the conversation. So they would actually run us through exercises where I would be talking to someone like Rob and I would be holding a pen as long as I was asking him questions, but if he could switch the conversation around to where he was asking me questions and I had to reply, he would take the pen out of my hand.
When you do an exercise like that, you realize how real it is that when someone’s asking questions, they’re the ones that are controlling where the conversation goes. You notice people doing this to you that are really good, that have a very strong frame in certain situations. So if a client walks into an open house or I should say a lead and they say, “Tell me about the house. Tell me about you. Tell me about area,” and I’m just responding to everything they say, they control that whole conversation. They’re probably going to walk away and go find a different agent that made them feel safe. I didn’t.
If I control the conversation, if I say, “Well, what are you guys looking for in a home? What did you like about this area? Did you know property taxes are higher on this part of town than they are over there? Did you know we can get you loan that doesn’t have PMI?” I put myself into the alpha position simply by asking questions and then was able to reveal to them knowledge I had that would make me a more attractive agent to choose.
Oren’s getting into the same thing right here. When they’re responding to you, you’re the one who’s in control. When you’re responding to them, they’re in control. Think about a time you’ve been on stage and you’ve been listening to the speaker. Was the speaker responding to you or were you responding to what the speaker said? A speaker should be holding control. You want to look for this at any time in a relationship where you want to be in the first position or the alpha position. People need to be responding to you. Rob, do you have any thoughts on that?
Yeah. I feel like one of the other things I took away from this was, honestly, just being honest with your business model because I think what happens, especially when we’re getting started, is we become yes people, right? So if the investor’s like, “Hey, I’ve got 100 grand to invest. Can you do this?”
“Yeah, yeah, we could do this.”
“Can you do this?”
“Yeah, sure. I’ve never done that before, but why not?”
So we get into this yes mentality. Whereas what it sounded like he was saying it’s like I actually am to the point now where when investors are pitching me wacky ideas, I’m like, “Look, I appreciate it. I’ll handle the wacky ideas. All right? I like your idea, but it would be irresponsible financially for me to do that for you, not just for me to go and be the guinea pig with your money, but to all the other investors that I have that I only invest in these capacities.”
So that’s another way that you, again, taking the control. It’s like being very honest with what your buy box or what your model is because we have done that, we have crammed a lot of different ideas. We’ve tried it. We’ve always succeed in everything like that, but at the end of it we’re like, “Wow. The return was pretty much the same and we worked 15 times harder.” So that’s why it’s like, “No, let’s stick to the script and what we’re good at.”
Well, Oren describes that as your values or dominating in the relationship, and he makes another very solid point. If you want to control the frame in any interaction, make it that the other person has to operate by your values. So if you think about when you’re standing in front of a judge, you don’t have a ton of control. You’re not there to tell the judge what you think should happen. There is a value system and the judge is the determiner or the judge of if you cross the boundary or if you didn’t. Same as interaction with the police officer, same as when you’re a student in a teacher’s class that holds strong frame. There are rules to the classroom that you have to follow and you don’t get to make them.
So the one who makes the rules in the transaction is the one who’s in the position of control. Well, that’s what you just described. We do our deals this way. We operate like this. You’re very honest and transparent. Here is the code that we operate by in this environment and if you’re going to work with us, you’re going to have to follow it.
Those are always people that, honestly, I appreciate the most because the world is made up of yes people. Everyone just wants to make everybody happy most of the time. There are times where I’m talking to someone where I just want to be like … I want people to always be agreeable, but when people are like, “No, I don’t really do that,” I’m like, “Oh, thanks for being real.” That is something that I really appreciate.
Now, they hold your attention more, right? Now you’re like, “Tell me more. I want to hear more about how this person does things.”
Yup. I’m always very fascinated by someone who can just be extremely honest and upfront.
Yeah. So do that in a way that holds your value. So if Rob’s putting a deal together, he’s going to tell the investor, “Nope, we don’t do it that way. Our value system, it has to be worth it for us,” what Oren described as, “We’re busy.” What he’s really saying is we have a lot of other opportunities. So if we’re going to work with you, this has to align with our value system, and by imposing your values on the other party, you put yourself in the position of the alpha, and now they have to cater to what you’re looking for, which gives you the control to put the deal together in the way that works best for everyone.
I understand this is high level stuff, but this is fascinating stuff if you want to get into the upper tiers of being successful. All of us that have been on this journey for a while have learned we have to get good at this stuff, not just running a deal through a calculator or learning how to fill out a loan application.
So thank you very much for your attention. We love that you have spent this time with us and you’ve gotten to hear some stuff that, frankly, people have to spend a lot of money to get Oren’s time and information in the degree that we have. So this interview was a little too long to make it to one episode, so we’ve split it into two and provided some commentary to make it applicable specifically for real estate investors.
So check out the next episode of the BiggerPockets Podcast where we’re bringing Oren back to finish the interview that we did today and provide some more commentary. If you want to know more about Oren in the meantime, check out orenklaff.com. That’s ORENKLAFF dot com, and you can learn about what he has going on, as well as Rob. Rob, where can they find you?
You can find me on Robuilt at YouTube, Robuilt on Instagram. I think as of today, I just hit 50,000 Instagram followers, a lot of those are the BP audience, so thanks everybody for doing that, I guess I should say, and if you want to catch me on TikTok, Robuilto.
You can find me online, @DavidGreene24 and on YouTube, @DavidGreenRealEstate, most boring YouTube name ever, but easy to remember. Any last words before we get out of here, Rob?
No. Just go listen to this one again. Really, I’m being very genuine when I say that I wish I had heard this podcast two years ago. It would’ve saved me a lot of heartbreak, heartache, and trauma, but not really. I’m always happy to go through what I did, but it will help you. Take notes, listen to it again, and use it to inform how you carry on with your real estate career because this is a big one.
There it is. In the same way that I hear people say Rich Dad Poor Dad changed the way that they looked at finance, this book, Pitch Anything, changed the way that I looked at interpersonal relationships and dynamics when you’re talking to other people. So I would recommend everybody read this book, especially if you want to build big wealth through real estate.
All right. That is our show for today. We will see you on the next one. Be sure to subscribe to BiggerPockets so you get notified when it comes out. This is David Greene for Rob Flower Child Abasolo signing off.
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