Tuesday, August 3, 2010

Real World Negotiation

For those of you who do not know me, my name is Casey Cavell and I am a 25 year old commercial real estate investor and entrepreneur. Prior to achieving success in commercial real estate, I prepared to embark upon the industry by thoroughly educating myself. To do this, I started reaching out to industry professionals, reading everything I could get my hands on, and facing real world situations head on. I also owe a special thank you to my dad for teaching me the art of negotiating at an early age. To this date, it is still one of my most favorite pastimes and it has also helped me in my career. I attribute my ability to reach my goals to everything I have learned throughout my life.

I mentioned above that my dad introduced me to the art of negotiating. I remember we once attended an Atlanta Braves game for only a $1 and ever since then, my dad has almost refused to pay more than $1 for a ticket. Game tickets cost much more than $1 so as you can imagine, we needed to be great negotiators. Since those days with me dad, I've adjusted my price point; mainly due to the inflation that has occurred since the 1990's. I am now willing to pay $10 per ticket rather than $1.Try to do this at a Cubs game on a Saturday in the summer. Its takes work! Check that, negotiating. Negotiating is definitely in my blood!

I can be at a sporting event, a restaurant, a club, or even negotiating with my girlfriend about what TV show we're going to watch that night (Jersey Shore is her favorite). Negotiating is a game to me and if you are treating something like a game and you enjoying it then naturally you will become better at it over time.

Speaking of getting better at something, I paid my way through college playing professional poker and it has taught me quite a bit about life and about people. It also helped me hone my negotiating skills. Poker is about negotiating and becoming comfortable in your surroundings. When I would sit down at a poker table I made sure that I was prepared, comfortable and confident. I would have as much information on the opponent (treat them as a friend) as possible and I would do my best to bring a friendly banter to the game. I now do the same thing when I sit down at a real estate negotiation. The art of negotiation; whether at a poker game or in real estate is a game but it also requires skill.

I now approach a negotiation much like I did a poker game. When I walk into a negotiation, no matter what it is I'm negotiating, I am always well versed in the subject and I always try to find people to play the game with that are not nearly as educated on the subject as I am. Whenever I sat down to a poker game I could tell l right away how knowledgeable my opponents (friends) were. The same holds true to today; whenever I sit down to negotiate with someone, I have a pretty good idea of how knowledgeable they are on the subject. I am able to do this by engaging the individual in our initial conversations. I always try to ask open ended questions and I take notes. Questions could be "Tell me about your real estate career", "How did you get started in the business?" or "Do you play much poker?" Simple questions like these can paint a good picture for you to formulate a strategy against your "friend".

One of the key concepts of doing business and negotiating successfully is trying to work with people that are not professionals in the field and do not operate their business as such. An example of this at a poker game might be a tourist looking to have fun, who doesn't care if he wins or loses, and has plenty of money to blow. For instance, I once witnessed a friend of mine win a poker pot when he had the worst hand at the table. His opponent (treated as a friend) felt bad winning from him and ended up giving him the entire pot. Unfortunately, this does not happen to everyone. The gentleman who gave up his pot of money to my friend was a doctor from California, in Vegas for the weekend to have a good time and really did not care whether he won or lost. He was an amateur and was not motivated by money but by something else.

An example on the real estate front would be someone who has other businesses and doesn't care about the one being negotiated on, someone who keeps bad records, or a mom and pop operation that has no real knowledge of the business they are in other than their own and even then, no real education on it.

When you look at a real estate projects you always want to ask yourself, "What can I do better than the current owners or operators?" If that question is not quickly or easily answered then most likely the operation is running well and provides little to no upside. Management is the key to any business and many times you can buy businesses and real estate at a discount because of poor management. If you do this, then you must have a plan in place to improve management and increase operations. That is how you make your first million. From my experience, by looking and analyzing thousands of real estate deals that most commercial properties or business are ran poorly and with proper training can be improved.

Here are some real world examples of negotiating that I would like to share.

Real world examples (1): An example of this would be attempting to scalp tickets at a sporting event. This by far is one of my favorite activities to do and I get a real kick out of finding a great deal.

You never want to target the professionals "scalpers" with those "I need tickets signs". NEVER ever buy or sell to those people. This is how these people put food on the table and they will win in the negotiation. You need to target people that are not professionals, do not need the money to put food on the table, and are really motivated to sell. I usually target really nice looking people well over dressed for sporting events (stereotype but spot on). These individuals will almost never wear any of the team's merchandise. Odds are that they not only have money but don't want to mess with the hassle of negotiating on price. They would rather just dump the tickets, grab a Heineken, read the wall street journal during the 7th inning stretch, and leave shortly thereafter. It is important when negotiating with these people to (1) create a relationship with them by asking them their name or by bringing up something you may have in common, (2) say thank you before they even sell you the tickets, then you have them emotionally involved and they will feel bad if they don't sell to you, and (3) always and I mean always (when they tell you how much), say "Oh my gosh, you have to be kidding, could you please make me a deal I really want to go?" Then proceed to say something like, I really would love to go to this game and am looking to save some money, what is the "cheapest you could sell me the tickets for?" They will immediately drop their price and then you start negotiating. The key rules to follow are, once again, do not deal with the professionals; deal with motivated sellers who are not negotiating experts and really do need the money. People wearing collared shirts attending game are the best targets. These tips are coming from someone who has attended the Super Bowl, NCAA basketball championship game, the U.S. Open, NLCS (World Series if the Cubs ever make it), AFC Championship game, and many other hard-to-get ticket events. The key is to look hard, never give up, stick to your plan, and never deal with the professionals.

Real world example (2): As it pertains to real estate…. Whenever you get an owner or seller on the line, always and I mean always build repoire before talking about the business or property. Find out their name, what they like to do, and some other information about them but be sure to write it down so you can use it later in the conversation and again in subsequent conversations with the person.

Here is a little tip, if time goes by say a year or more never ask them how there wife is doing when starting up a conversation for the first time in awhile. Many people get divorced but rarely ever do people divorce there kids or dogs. Always ask about their kids or Beethoven.

That way, they will know you are listing to them. When I talk to someone again after the initial conversation, I always like to start with something personal or something they like. It is much easier to build on the relationship if you know something about them. Do not start the conversation with something like, "how's the weather" because although it's easy to start out with, it really is a lame way to start a conversation. It would be so much easier if they were all sports fans, then I could talk for hours?

Next, you need to introduce yourself to them and create a friendly environment. Don't try to act like a know-it-all but rather more like a novice that can help them with their problem. Be friendly and build the relationship. People are much more likely to give you a better deal and do business with you if they like you. Some people won't care about price because they care more about their reputation or the convenience in working with you. In relation to the ticket story, some people would rather get paid $10 for their tickets and sit next to a hot blonde or a Cubs fan rather than sit next to an obese person wearing a stained Cardinals jersey named Theresa who would gladly pay $20 for the tickets.

I just worked a deal on a storage facility where there is no doubt the owner could have sold the property for $1,600,000 but he is ending up selling it to me for $1,230,000 because he wants to leave the property that he worked so hard on for so long, to someone he likes and trust. Do you have any friendships that have made you $370,000 lately? If so, please introduce them to me because they would make a great fit for my company.

Life and real estate are one big negotiation. Do your best to build relationships with people you are doing business with and your chances at succeeding will be much higher. Think about it, wouldn't you want to give your Super Bowl tickets to someone who would love to go and is someone that you actually like? Remember to run the next time that a real estate mogul calls you on the phone and wants to sell you one of his 100 properties. The next time the guy holding that "I need tickets sign" ask you if you need tickets, run even faster. What is a few bucks when choosing between someone you know and like and someone you don't know at all? Always do your best to negotiate and work with motivated people who just want an easy solution; people who are willing to discount a price if you are able to meet their needs. Once you know the needs of that stock broker whose buddy couldn't make the Cubs game, you will have a better idea of how to structure the negotiation and sit next to Ryan Sandberg in Section 16 for $10. I hope my words of wisdom have helped you.

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