Oren has been on the show in the past to tell us about how to “Pitch Anything” which is also the title of his first book which Joe highly recommends. He has a new book coming out soon that dives deeper into the same subject. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Oren Klaff Real Estate Background:
Has supervised the placement of over $500 million of investor capital from high net-worth individuals and financial institutions
#1 best-selling business author of the McGraw Hill publication Pitch Anything and has a new book The User’s Guide to Power
Teaches aspects of power and influence that are neither covered by industry leading psychologists, nor top sales executives
Say hi to him at http://pitchanything.com/
Previous conversation with Oren: https://joefairless.com/podcast/jf425-pitch-anything-to-anyone-with-oren-klaff-skillsetsunday/
Based in California
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
First off, I hope you’re having a best ever weekend. Because it’s Saturday, we’ve got a special segment called Situation Saturday, and we’ve got a returning guest, Oren Klaff. How are you doing, Oren?
Oren Klaff: Joe, I’m doing well, and I’d like to spend the remainder of the call talking about my feelings.
Joe Fairless: [laughs] I’m sure that would be entertaining, even if we went that direction… But we’re gonna take a slightly different approach; we’re gonna talk about your book, how about that? We’re gonna talk about the User’s Guide to Power. I thoroughly enjoyed our first conversation. That was over 1,000 episodes ago, it was episode 425, and we’re at like episode 1,500 or something now… And you talked about your last book, Pitch Anything; I was obsessed with it, and still am. I highly recommend it to a lot of the people who I come across… And you’ve got a new book out, The User’s Guide to Power. What’s that all about?
Oren Klaff: It’s not quite out yet. It is gonna be out at the beginning of the year, with a portfolio; if you liked Pitch Anything, then step aside, let the man come through. So I’ve learned a lot about writing, a lot of things have developed, in a million copies, or something like that, Pitch Anything are in circulation. It’s in two different dialects of Chinese, Japanese, Russian, French, Italian, whatever. So that was a worldwide phenomenon, and now I sort of had to follow up with some other things that we really see going on in real estate, whenever you’re out presenting and pitching to someone.
A quick review, obviously, on Pitch Anything, was that information goes not from your mind, your neocortex, the smart, linguistic, capable part of your mind, into the smart, linguistic, capable mind of the other person; we talked about that the last time, right? It just goes into the crocodile brain of the other person, and that brain does understand ROI, IRR, and fund development, and real estate economics, and rise in interest rates, or anything like that.
The crocodile brain only understands, “Hey, somebody’s talking, somebody’s moving; I see something happening, what should I do? Is this something I should eat? Is this something I should mate with? Is this something I should kill?” So there’s a huge disconnect in what you’re trying to explain to someone and what they’re actually hearing. And then The User’s Guide to Power goes further, beyond the fundamentals of Pitch Anything, to think about how to communicate something to someone so they understand it, appreciate it, want it and come over to your side and buy it.
Joe, what are you seeing out there? What are the number one problems that people are having today, that you think they need to overcome? Communication, influence, pitching, that kind of thing.
Joe Fairless: I would say with social media it tends to be about me, me, me, and not about the customer, so it tends to be a lot of beating the chest and not a lot of talking about what is most interesting to the recipients.
Oren Klaff: Yeah, so we have a whole chapter on Be Compelling, and some of the things in that is — really the word is context. People come in and they say “Hey, I’d like to sell you this, I’d like you to invest in my real estate, I’d like to give you this 6,5% current pay with a 20% IRR” or “I’d like to provide you 12% hard money”, or anything like that. Is that the language of the people of your podcast?
Joe Fairless: Yeah, that’s the language. You got it.
Oren Klaff: Okay. We’ve got the lingua franca of real estate and finance, right? But the sense is how well do you really know the world of the buyer? I’d like to think about “How can you put what you’re selling in context of their understanding?” How do they appreciate that this isn’t just a cold call, that this isn’t just a packaged sale, that you’re not just trying to move some product, you’re not just looking for an investor? How do they know that you understand what they’re looking for, and that you really understand the topic?
So when you provide context, then you’re compelling to someone. Context is not “Hey, I have a multifamily in infill Houston, that’s got a 4% current pay. We’re gonna improve it, get it up to an 8% current pay over three years, and then exit at a 7-cap assumption for a 20% IRR.” That’s information, but it’s not compelling.
Joe Fairless: Okay. Compelling or context? Or is that the same thing?
Oren Klaff: It’s the same thing. When you can put things in context of what is happening today, where things are likely to go, where are the danger areas, where are the green fields and why, and you can put that in context in a way that is impartial and doesn’t totally 100% just support your position and the things you’re selling, then that starts to become compelling.
Joe Fairless: Will you go through an example, just to bring this full-circle?
Oren Klaff: Sure. In the last three years, you could buy multifamily in Wichita, in downtown Manhattan, on the Canadian border, basically underwater, 300 feet off the coast of California, and you’d get a 6% current pay, a 12% ROI, and a 20% IRR. But if you look forward – interest rates are going up, sellers are slowing down the pace of selling, inventory is increasing… It’s no longer the case that every multifamily asset is gonna do well.
When we look at the country, here’s what we see changing, and where the red flag areas are, and what is still green, and what looks emerging that’s super-interesting.
We think that if you work a little harder and you focus on the areas where it’s getting super-interesting, and though they’re not obvious, you can do really well. Do we have those? Maybe, sometimes. We’d like to get them. But I think it’s first best to understand the best thing to go for, and then we could take a look for if we have it or not.
So people find it compelling when you can step back and be that third-party, impartial advisor, or provide them information that is not 100% necessarily in your favor.
Joe Fairless: So you tell them a story.
Oren Klaff: You tell them a story. I think that’s a bit of a simplification, but how are things changing, who does that benefit, who does that not benefit, and how do you get into the area of change that’s better, safe and growing? What’s changing, who’s gonna win, who’s gonna lose? Everybody finds that person compelling.
If you go to any Fortune 500 company, who’s the most important person in the company? The CEO maybe, the lead designer/engineer maybe, I think a sales manager, vice-president of sales probably, maybe… But if you drill down, it’s the guy who knows what the sales are gonna be at the end of the quarter. The CEO, the COO, the CFO, VP of sales all wanna hang around with that guy. He’s compelling to be around. And by the way, the guy who knows what the sales are gonna be accurately at the end of the first half, or third quarter, at the end of the year – that guy who knows what is gonna happen most likely in the future and why, is the most interesting, compelling, desirable, wanna be hung around person in the entire company.
Joe Fairless: Got it. That’s helpful, because as real estate investors, we’re likely looking for partners; it just lends itself for partnering up… And we wanna be able to attract partners, whether we’re fix and flippers, or multifamily investors, storage units, whatever. So the components for having that compelling context would be what I wrote down when you were talking – how are things changing? Who will win, who will lose, and what we’ll do? Did I capture that accurately?
Oren Klaff: Yeah, so how are things changing? What are the elements that are actually changing, in a real way? Interpret those. So here’s the facts, here’s the interpretation of the facts, and then project how that is going to affect people like the buyer? Think about a blood test, or a genetic — have you done one of these genetic tests at 23andMe or Pathway, or something like that?
Joe Fairless: I tried, but I didn’t give it enough spit, and the results weren’t conclusive.
Oren Klaff: Okay. Well, let me get my little boy over to your house; he can spit like nine feet, like hit you in the side of the head [unintelligible [00:11:36].17] Anyway, enough of that… So I worked in one of those companies; I worked for them, helped them, I own stock in their equity in one of them… So when you get the genetic data, that’s not what’s actually valuable; it’s the interpretation. What diseases are you likely to get? Of the diseases that you’re likely to get, what would be the preventative courses of action, and if you do get that disease, what is most likely to be the treatment that will work for you? That’s what’s valuable, not the genetic data.
Joe Fairless: Yeah, because you’re taking action on the data.
Oren Klaff: Right. So that is to me what is changing, why is that change important, and then what should you do? Because I think what happens is when we see real estate proposals, it’s “Here’s what we have, and this is what you should do – invest.” It’s ignorant. That route misses the whole step of “What’s changing? How well do you understand that change, and how well are you able to interpret what’s happening in the world for me, the buyer, the investor?”
If I can see guys doing that route more often, I think they’d be closing a lot more equity. Debt is another thing. Equity is the thing we all care about, and they’d be able to put their hands on a lot more equity if they’d put it in context of change.
Joe Fairless: You’ve overseen over 500 million dollars of investor capital from high net worth individuals… You’ve been busy, because the last time we talked, 1,000 episodes ago, it was 400 million, so congrats on that increase… With that experience, what is a scenario that you can think back on that did not follow what you’ve just outlined, and what were the results?
Oren Klaff: Sure. So here’s one that you could definitely run into… We worked on an investment with a — it’s hard to name names, but a billionaire in Southern California. He has lawyers, and he has analysts, and he has an account at McKinsey, and it’s hard to tell him, in context of what’s changing, something he doesn’t already know or something he believes in. It’s just difficult for him to believe that we have better information than he does, because he knows change is important, and he’s buying it… So we couldn’t really lever that kind of expert frame against the power frame.
So I think the next thing is — what I see a lot of people doing is explaining what we’re gonna do, how we’re gonna manage the money, how our third-party is gonna operate, answering question after question… And in that case, the way we got it to work is just saying “We’re the best at what we do. Our track record stands for itself. We do third-party management as well as it can be done. We have a history of returning a 6% current pay. We’ve exited multiple assets at north of 16% IRR. We do this better than anyone else, and this asset is in an area that we’ve invested in before. That’s what we do, and that’s what it is.”
Questions, reduction on fees – no. That’s what it is. I’m gonna put all my stuff in my briefcase and leave. So the next thing, and one of the things I wrote in the book, is stick to your guns. When you stick to your guns, for somebody that has that power frame, somebody who’s very powerful, they find that as compelling. What they don’t like is to see your character shifting everytime they put pressure on you. First you’re the nice guy, then you’re the ShamWow guy, then you’re the angel… “Hey, so what do you think…? Is this something you’d be interested in?”, then objections come out and you’re the wolf, or you’re the sorcerer, trying to spin all this information together, you’re the storyteller… Guys in that powerful position, with that power frame, don’t like to see you go through six or seven different character types, reacting to the pressure they’re putting on you.
So I guess the next thing I would say is stick to your guns theory. You don’t have to explain everything, you don’t have to justify every assumption, you don’t have to answer every question and chase down rabbit holes. “This is what we have, this is the way we do it, this is our track record. We’re the best at it, here’s why. In or out?” Stick to your guns.
Joe Fairless: So in that scenario, because he had access to what’s changing and the interpretation of those changes, you did take the information route versus the compelling context route… Did I hear that correctly?
Oren Klaff: Yeah, I think that’s right. When somebody really understands this stuff as well as it can be understood… Maybe I’d summarize it like this – when you have a power frame, the other guy across the table is very capable of understanding what you have, don’t try and teach, don’t try and educate, don’t try and drill down into the numbers and be reactive to everything they’re saying. Tell them “This is what we do. Again, we’re great at it. There’s no argument online from our references, and our third-party reports, and our fact-write report, and our [unintelligible [00:16:36].06] report, whatever it is. That’s what it is, that’s what we’re doing, and that’s what we’re going forward with. If you’d like to participate, something we’d consider — of course, we need to more about you before we just take a check.”
Joe Fairless: Anything else that we haven’t talked about as it relates to The User’s Guide to Power, your new book that’s coming out, that you wanna mention?
Oren Klaff: I think I wanna mention quickly in the few minutes we have left this idea of plain vanilla. Everybody with a deal tries to contextualize it as sexy, exciting, all kinds of new things associated with it. This happens more in tech, this happens more with developments, not as much in terms of rehab or repositioning… But still, the reason people want to characterize things as new, sexy, different way, different kind of operating model, different kind of fintech platform, different kind of lender, different kind of capital stack with the crowdfunding equity… It attracts attention. You know that, you have a podcast, right? Things that are new attract people’s attention. But I think the deals that get done are the plain vanilla deals that have one thing, that are far improved from sort of the last way of doing it.
There’s lots and lots of big examples of that. We did a deal in Hawaii that was a retail asset… And it was really confusing to understand until we positioned it as “This is just like every other outdoor mall that you would find in Southern California, that you would find in resort areas, but it’s 68 small retailers [unintelligible [00:18:06].26] for an authentic Chinese marketplace.”
So we just made the one thing – the Chinese marketplace, the new interesting thing, and everything else seemed like a basic “Find anywhere in Southern California” kind of mall… Which there were lots and lots and lots of interesting, exciting, different things about it, because it was in downtown Honolulu, but that wasn’t working. We characterized it as one thing being different, then we sold out of it very quickly.
Joe Fairless: How can the Best Ever listeners learn more about your books and what you’ve got going on?
Oren Klaff: If you head over to PitchAnything.com and put in your name, we give a lot of material out; more than I’m certain we should. I’ve gotta get the web guys to go in there and take stuff down.
Joe Fairless: [laughs]
Oren Klaff: Well, because I’ve set it up years ago; when you started, when I started, the thing was “Give as much as you can away. People will love you.” Well, today we give away too much, so… Anyway, head over to PitchAnything.com, put in your name, and we’ll help you get a lot of very useful stuff. I grew up in the real estate business, so most of my examples are in and around real estate equity.
Joe Fairless: A couple themes – one, have compelling context for the people you communicate with, and you boiled it down to “What’s changing? Why is that important, and what should you do?” as speaking to whoever you’re speaking to, the audience. And then in some cases, when there is an individual who has, as you say — when you have a power frame, and if you need more information on how that’s defined, then go check out Oren’s book, Pitch Anything; he talks about that… Then you don’t wanna teach that individual; you don’t wanna educate them or try to educate them. You’ve gotta know your audience.
And then lastly, the plain vanilla approach, where deals are significantly better in one area – focusing on that. It reminds me of a quote that Tim Ferriss mentions, where you want to be different before trying to be incrementally better. That’s much better. I might have misquoted him, but that’s basically the gist of what he said.
Really interesting stuff… I enjoyed our conversation again. We will talk one thousand days from now. It seems like we talk every one thousands days, so I’m looking forward to your third book, but before you get to the third, everyone definitely check out The User’s Guide to Power once it releases.
Thanks again for being on the show, Oren. I hope you have a Best Ever weekend, and we’ll talk to you soon.
Oren Klaff: Alright, cool. Thanks, Joe. Let’s make it 500 days, or something.
Joe Fairless: [laughs] Sounds good.
Oren Klaff: Or nine women have a baby in a month, or whatever the real estate [unintelligible [00:20:35].04] Don’t try and teach people what you do. The more you teach, the less they’re gonna buy, that’s for sure… Okay. Joe, I will talk to you soon. Maybe I’ll have you on my podcast if I can get one started.
Joe Fairless: Alright, sounds great.
Oren Klaff: Talk to you later.