BiggerPockets Real Estate Podcast - 548: How to NOT Get Scammed on Your Next “Real Estate Opportunity” w/Mike Nuss & Tyler Combs

Episode Date: December 23, 2021

Your real estate partnership may be closer than you think. Maybe it’s that seller you’re talking to on craigslist, maybe it’s your home appraiser, or maybe it’s someone you meet at a sketchy real estate investing company. Mike Nuss and Tyler Combs never planned on becoming partners when they linked up to discuss a potential sale of a property. But, when fate put the two together again in the same company, they decided to split off and use their complementary skill sets to build a real estate empire. Mike brought the acquisitions and property management side to their business, while Tyler focused on managing and selling flips. Together they brought the rocket fuel of profit and cash flow to their growing business. Now, they’ve acquired more than eighty units and aren’t planning on stopping any time soon. Mike and Tyler built their business on the back of strong investor relationships, truthful and honest work, and the ability to find seller finance deals. With the combo of creative financing, marketing, and hard work, they’ve become real estate leaders in their area with an expanding portfolio, team, and strategy. In This Episode We Cover: How to vet someone who’s raising capital for a real estate investment Combining flips and rentals to maximize growth in real estate  Using seller financing to acquire more units with less money upfront Creative financing options like subject to, raising private capital, and more “Land Banking” and using it to set up your portfolio for future success Becoming a master in your field and going a mile deep on your strengths And So Much More! Links from the Show BPCON2021 BiggerPockets Real Estate Podcast BiggerPockets Talent Search BiggerPockets on Itunes BiggerPockets on Audible BiggerPockets on Twitter BiggerPockets Forums BiggerPockets Youtube Channel BiggerPockets Pro Membership Brandon Turner’s Instagram David Greene’s Instagram Open Door Capital BiggerPockets Podcast 423: Who Not How: Stop Doing the Things You Hate, Free Up Time, Be Happier and Richer with Dan Sullivan BiggerPockets Podcast 297: Mastering the Decision-Making Process with Business (and World Series of Poker) Champion Annie Duke Click here to check the full show notes: https://www.biggerpockets.com/show548 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey everybody, it is David Green here. As you all know, Brandon's stepping away from the show at the end of the month. Now, we have some great co-host lined up in the new year, and we also want to take this chance to get to know anyone else out there who's interested in contributing their talent to the BiggerPockets Podcast Network. If you think that's you, you can make a submission to our system at biggerpockets.com slash talent. That's BiggerPockets.com slash talent. You'll see a few questions and a place to submit a video reel of yourself. Again, that's biggerpockets.com slash talent if you'd like to lend your voice to the growing Bigger Pockets Podcast Network. This is the Bigger Pockets podcast show 548. Just sharding off the disasters, the failures, the times you were screwed by other people,

and just focusing, very clearly focusing on how to get back on top, how to get back in the game. That has been our key to success. It's that just kind of dedication of saying, what is it going to take? and being willing to do whatever that is to get back instead of looking in your rearview mirror and being bitter at whatever just happened. What's going on to board? It's Brandon Turner, host of the Bigger Pockets podcast,

the show where we teach people that real estate investing can change your life forever. And you're going to hear about how real estate changed two awesome buddies of mine, their life forever, on today's show. And we're going to get into a bunch of cool stuff. But first, let me bring in my friend, my bestie and the future full, like full host of the Bigger Pockets podcast in the new year, David Green.

David Green, man, it is good once again to be joining you for one of our last together shows for a while. It's good to be joining anyone that says what you just said about me. I mean, you could do that all that you want. How do I hire a person like you to just go before me and announce me in that same way that you just did? Well, let me just add to your ego a little bit. So as we jump on this call to talk a little bit ago, me and David,

to record this introduction. He was wearing a tank top because he was getting his official shirt on that he was wearing for this episode, the one you're seeing right now. But he, I made some joke about muscles and he flexed his arms. And I'm not kidding. I have, like, I did not know you were that ripped David Green. I'm like, I'm not going to get recorded it. The guy looks like the incredible Hulk.

It was in a good way. It was not so green. But man, you're working out. Has been made an impact. So good job, man. I think I do a better job of hiding anything attractive about me than anybody else that's out there. It is the best kept secret in media, I promise you. There you go.

Well, if you want to say I'm talking about, you have to watch a YouTube video of this show. But anyway, we got to get on with this episode. We got a lot to cover today. Like I said, today's good buddies of mine. We got Mike and Tyler. They're two awesome dudes that come out of the Portland area, Portland, Oregon, not Portland, Maine, Portland, Oregon area. And they're like, you know, when I talk to anybody who's within like 100 miles or 200 miles of Portland, they know these guys. They are a major player in that market.

They do a lot of different types of real estate. We're going to talk today about combining flips and rentals to maximize your growth. We're going to talk about doing some seller financing, then something called land banking. We're going about how to vet somebody. In fact, they went through a really crazy, crazy experience of like meeting each other in this crisis, being taken advantage of in this like Ponzi scheme and all that crazy stories. all that and more coming up. But first, let's get to today's quick tip. All right.

Today's quick tip is brought you by David Green, because let him think of one. Today's quick tip is, find your perfect partner. As Brandon just complimented my physique, which was very nice of them, he compliments me in other ways. And we talk about that on the podcast all the time.

Today's guests compliment each other and they talk about how they bring various skill sets into a partnership. So when you're looking for a partner, a common mistake is that you find someone just like you that has all the same skills as you. And now you have two people who are fighting over the same jobs and avoiding the same jobs. You're actually looking for the opposite.

So to sum that up, look for someone that's going in the same direction as you with the same values as you, but who has complementary skills than you. Wow, man, that was really good. That was good on the fly. Well, all right. Well, let's get on with this episode. Today is, if you're watching this when it comes out, we're our Christmas Eve Eve, right?

So we are coming up on the Christmas holiday season. So Merry Christmas. Happy holidays. And as this greeting card that I bought online says, Meowie Christmas. And yes, this is a picture of a cat in a sweater. So David, I actually- It looks a lot like the sweater that you bought when we were shopping. It looks exactly like that. Yeah, that's funny. So I am actually going to, I have this card in my hand here, David. Funny enough, I was writing this card to you when we started like when I realized,

oh, shoot, I'm supposed to be on a call with David. So this greeting card goes to you. So, man, it's very sweet of you. However, you told me about this card already. So you don't think that I'm going to fall for it. You're going to fall for it to be great. It's the greatest Christmas card in the history of mankind. I'm just going to say that one.

So I'll tell people what it is. So I probably won't send it to each one of you. I found this on an Instagram ad. And when you open it up, it plays this. Can you hear that? Yes, we can. And then it doesn't stop until the battery dies three hours later. You cannot shut off the sound of the meows. So David, looking forward to you. Yeah, I want you to open that or I want you to give

it to like one of your assistant. Be like, here, I got these cards in the mail for Christmas. We just open them all and like put them in your office for a while. Exactly what I'm going to do. Yes, yes. It's very great. Once you open it, there's no going back. It's hours of meowing. All right, man, let's get on with today's show. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little

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jobs, more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. And now before we bring in Mike Nuss and Tyler Combs, two good friends of mine that are killing it.

Anything you want to say, David? Yeah. Just like your Christmas card, this podcast just won't stop. I thought you were going to say it's like Meowie good or something. I don't know. All right, meow, let's get to the episode. Mike and

I forget your name. Tyler, Tyler, welcome to the, just kidding, guys, welcome to the show. How are you guys doing? We're doing great. Man, it is, it is so good to have you.

It's been years since we've been friends. And we've talked to a thousand times about making this day a reality. and it has finally come true. So I'm very excited to introduce you to the world, everybody at the world of Tyler and Mike, and should be a good time today. And in fact, I don't even know your guys a story of how you met.

So I'm going to dig into that today. But first, let's get your individual stories. Why don't we start with any mini, money, Mo? We'll go with Mike. Mike, tell us about yourself. What do you do? And what were you doing before partnering with this other guy? Yeah, I was a real estate appraiser.

So that's how I got into the world of real estate. I was actually in high school when I started. So I was an athlete, hated school, wasn't good enough to get a scholarship or make anything of that. And I got a job opportunity to become a real estate appraiser. Job shadowed spring break of my senior year and then started full time after that. So I did that for about five years before I bought my first piece of real estate. I'm a slow learner. Not really the most aware person.

I've since learned that awareness is a superpower. It took me about 20 years to understand that. So that was back in 1997. So I've spent more than half my year, my life in real estate now. About a handful of properties prior to the big crash, learned some lessons, 2009, wasted 26 grand on a rich dad, poor dad real estate package, which got me into the investing world. I met Tyler in 2010. No way.

All right. Personal section. Yeah. How many relationships have started there? All right. So let's go to Tyler real quick. Tyler, what were you doing before meeting Mike? Man, I was a youth pastor, a missionary, and then I finally, what was I doing when I met Mike?

I was working in some tech job, kind of working from home, and I had a lot of free time. And so I started flipping houses on a whim kind of right after the market crash, 2009. Everyone seemed to be running away. So I jumped in and started buying up REOs. and I found all of my contractors, everything off of Craigslist, which at first I was really proud of. And then I discovered they were all stealing from me. So I kind of had to learn some hard lessons. The only contractor who was ever directly stole from me, like I gave him $5,000 for Windows, he pocketed it and never showed up again came from Craigslist.

So it's a, it's a pattern. So then you decided to meet your partner on Craigslist as well. So tell us how, like, how did that happen? How'd that go down? Yeah, I, I bought an REO that ended up being a, I think it was a three-year legal battle with the city over a floodplain issue and some other stuff. So I eventually did whatever good flipper would do and tried to pawn it off on someone else. So I put it up on Craigslist as a flip opportunity, put all the key words,

motivated seller, you know, will. willing to owner carry, just everything. So I actually got to know a lot of the, uh, the scrappy flippers in the area that were combing through Craigslist. And Mike was one of them that called on it. And, uh, we had a brief conversation. He asked me all the best questions. And then, uh, and then he wisely passed on the opportunity. Mike, why did you pass on the opportunity? Um, well, I had a business partner at the time. And I don't know that I can say on this podcast, the word. I came out of my mouth when I hung up the phone.

But, you know, I felt for him. I had a little appreciation for the struggle he was going through. And, yeah, it's eventually we actually ended up getting out of that project together. Oh, I was going to ask what, yeah, what was the end of that one? Ended up having to sell it at a loss. I ended up having, I resolved it with the city and was able to finish the remodel and and sell it to somebody. But after all the holding costs, and I had some pretty interesting squatter issues

while I owned it over the years. So at the end of the day, it was a pretty significant loss. But we were moving and shaken and with all the other stuff we had going on by that time. So it was a loss we could stomach. That makes sense. All right. So you found each other. And let's get to like, so you find each other.

What happened next? How did you end up coming together to decide to work together? Yeah, that's, I mean, that gets into a recurring night. We had met. Thanks for bringing up PTSD, Brandon. Yeah, yeah. No problem. That's what we do here.

Yeah. So when I, you know, bought that real estate package, I cashed out a 401k to do that. And like I said, I learned some lessons in the great crash. So I had no money, no credit. What do people that want to do real estate full time do with no money and no credit? They try to become wholesale. So ended up finding two guys that I was able to wholesale a couple deals to. they saw value in me and said,

hey, we're putting it together this Ponzi scheme for lack of a better term. We want you to bring all your deals to us. And they had this little event they're putting together. I show up at this event. There's this AV guy named Tyler. And I'm like, Tyler Combs, Tyler Combs. I recognize that name.

Oh, you're the guy I talked to on Craigslist. And met him in person at that point. They had conned him into doing the other end of that. Ponzi scheme. So I was finding, negotiating, evaluating, and getting all the deals, bringing them to the Ponzi scheme. And then Tyler was going and raising capital to fund the Ponzi scheme. And then these two guys had nice suits, nice cars, boat, nice house. They just essentially made sure there's never any profit to share. And so after dealing with that for about a year, we split off to then form our own partnership and started that partnership with a lot of losses stacked together that we had to

build up. Individual losses that used right to the partnership. Not only that, but investor losses that we wanted to make ride on. So people that had lent us money that these other guys had stolen from, we took us several years to dig out of the hole and make everyone whole again. What exactly was the, what was the ruse or the scam or the scheme? Like, what were they, what were they doing? Just taking investor money and then just living on it? Was that essentially? I mean, it was a mixture of mismanagement and then just, you know, overspending, uh, taking, you know, funds that were meant for projects and buying boats and cars and, and then, you know, their books were a mess, but when we dug into them, found out, you know, they were just mismanaging a lot of money and then

just, you know, it wasn't all stolen. A lot of it was just poorly managed construction projects. Yeah. So let me jump in real fast. I'm going to ask you, if someone is listening and they're trying to vet someone who's raising money, because there's a ton of that out there right now, what are some things that they should look for that might indicate this would be a bad person to invest with? That's a great question. I'd say that, you know, one, you have to get references from people that have done actually

finished deals. I think that all the references that we got from these guys were from people that, that were mid-project. So, you know, no completed deals. No one had actually gotten their money back. So I think knowing how old these references are and waiting the references they've been working for, say, you know, years with person, those are so much more valuable than someone who just started working with that person.

That's a great point. So you just want like references you can contact who has been paid and they can kind of testify to the experience they had. Yeah. And then you can audit their books. You can ask for P&Ls of the last several projects. You can ask for balance sheets. You know, a lot of people can be really good at hiding their sins in QuickBooks,

but a lot of people are surprisingly dumb at the accounting. And if you have any accounting background, you can sniff out that stuff. Like if I knew what I knew now, I'd be able to take one look at their books and call a spade a spade of spade. By the way, maybe we should establish right now, where were you, guys at when all this has happened. What city? Portland. Portland, Oregon. Portland, Oregon, the weirdest city in America, I think. But you got good donuts there. So, you know, you got a good bookstore and you got good donuts. You have a few good things going for you. I actually love Portland. But today, you guys have quite the empire. I mean, a lot of people, even just earlier, I was talking

my buddy Gene who's out here, who's from like the Salem area. But he's staying out here in Hawaii with me right now. And I mentioned something about, I'm doing an interview too. And I think I mentioned Mike, your name. And he's like, oh, yeah. Yeah, I just talked to him on the phone a while ago. He's like the guy you talk to when you have a problem or something like that. And it's like he's really, you just have like your reputation. You guys, you guys have a name and a reputation around.

So I want to go to, I want to get through here you are starting, Rocky, you know, coming together, trying to form this partnership to now you're like a player like in the Portland space. So walk us through like, what's your portfolio or what's your business like today? And then we'll go back and fill in all the gaps. Yeah. So we have a development company, a development company that does short-term projects. We have various LLCs that holds a bunch of rentals. We have a property management company, and we have a brokerage.

And so we started as investors. And just by taking incremental steps consistently over a long period of time and the compound effect through that, we slowly built a rental portfolio, which allowed us to then take control of our own management. By having enough properties there, we could afford our own manager. We sold enough real estate. Tyler had a broker's license. It made sense for us to start our own brokerage. And so then it just snowballs from there, right? And we have a big enough name, a lot of enough marketing out there that we get a lot of real estate opportunities. And then we just kind of fit those opportunities into the various buckets that we have based on how we set everything. Okay. And what's the, what's the portfolio like? Like if you were to, is there units, a multifamily single,

family, a lot of houses. Like, what's the, what's the makeup of it today? All right. So I'd say our kind of rule of thumb has been to flip the single family and hold the multifamily. So almost all of our multifamily, all of our rental portfolio is small multifamily or a few single families that are tied to other multifamily acquisitions. All right.

So total then, how many units does that make up between you guys now? Yeah, somewhere in the 80 to 85 range. You know, most of that small apartments, we do have some commercial products. And then a little bit of single, a couple of single families for land banking purposes. Land banking purposes. All right. We got to cover that. What is land banking purposes?

Yeah. It's something with zoning that allows a future higher and better use with a building on it that creates an income stream to pay for itself now. Right. So it's not, doesn't have a lot of value right now. It doesn't provide a lot of cash flow. But sometime in the future when either zoning is going to change or when the neighborhood's going to be ready to be developed, then we can put it to a higher and better use.

That's smart. So you guys are looking down the road saying, hey, 10 years from now, you know, this might be a really good spot to put up a parking lot or I don't know, sell storage or apartment complex. But right now it's only single family houses. We're going to keep it, hang on to it for the big picture. Is that right? Exactly. Ah, that's very cool. Yeah, an example of that is like our office building is on a zoning where we could build a high-rise structure on it. So we just put as little amount of money as we can into the office. We bought up several things around that, you know, that we're adjacent to it. And later down the road, when it makes sense for us, we can build whatever we want there.

Now, what would be the plan? How high is a high rise you think you want to build? We can go 105 feet. So nine to 10 stories. All right. Have you ever built that big yet in the development side? Not yet. No.

Well, let's go back and fill in the, let's go back and fill in the blanks a little bit. So here you are at the beginning, struggling, not sure where you're headed. You know, debt, I guess is the best way to say it. And then today you're like this, you know, fourth in Portland. So how did you get there? Walk us through some of your journey. Yeah, I think your first off is it's easier to move forward than it is to clean issues up, right? So we knew we had debts to pay off.

We knew we had investors to pay off. So immediately, what do you do? go find some short-term flips, right? So we got some flip projects. That way we could create some lump sums of cash, pay for our livelihoods, pay some investors back, and then start stacking those wins. The way we started building our rental portfolios through seller financing. So we learned some really, really good seller financing techniques to help us start building a portfolio that then created a chessboard. So I think if you look at real estate, the idea of getting a chess board, you have some small projects that are your ponds, you have some rooks,

some knights and bishops and kings and queens and you build out get pieces on the board so you can move them around to fit your ultimate goals but that's we worked ourselves out it's probably two two years of solid just flipping to work ourselves out of the whole yeah all right that makes sense so then let's talk about your individual roles in the partnership like what do you focus on mike what do you focus on tyler well so mike does the acquisitions um side of thing So he stirs up the chaos, finds the deals, helps negotiate it with our team. And then he hands off the project. And we're kind of working out our project management systems.

But we recently switched where he hands off that project. And I manage our team that is going to be doing the actual flip or the construction. And then I handle the dispensation, the selling of the flip. And then he handles the, if we turn it into a rental, he kind of oversees our property management company. Okay. All right. And how are you finding deals today? Yeah, we have various sources.

Like deal flow is a, the best analogy I've heard is, it's like a bicycle wheel, right? You have lots of different spokes. So we do direct-to-seller. We do Facebook ads. We do cold calling. We do a lot of referrals, pocket listings. Repeat sellers is always a great, great example. bird dogs, wholesalers.

And so you have to have lots of different spokes on the wheel to create a good enough volume. At the end of the day, if you have a good enough volume, it's really easy to say no. And the ability to say no to a lot of deals ensures that what you're doing is ultimately going to stay profitable. And so that's kind of our ethos on how to deal acquisition. All right. What are you guys, what's your favorite? I like direct. favorite type of acquisition? Yeah, acquisition process. You know, is it the Facebook, the director?

I know you're doing a lot of it, but there's one that you're like, now, this thing is it we're really, really good at? Or is there something, is it all pretty, you know, whatever comes in comes in? I think we've gotten really good at sniffing out the seller finance deals in a way that isn't, you know, that when we can smell a deal that it's beneficial to the seller, there's a lot of motivation for them to do a seller finance deal and it works for our goals. We can smell that pretty fast. We know how to market to that ideal seller that has a lot of options. And then when they start the conversation and they have a lot of experience in real estate, they're pretty savvy, then it's just a really fun transaction all the way through. Everyone wins. And there's not a ton of education or

expectations that have to be realigned. I think that's probably my favorite, where you get the residual, the exchange where everyone is winning and then you're getting the long-term benefits and the partnership that extends. So your energy spent up front extends years into the future because of the seller finance. Yeah, seller financing. That's something I really want to dig in with you guys a little bit on because that's something that we don't talk a lot about on the show, but can be a really powerful tool. So maybe Mike, I'll start with you. Like, what is seller financing And then how does somebody start using it? Yeah, well, in the IRS code, it's an installment sale, right?

So you're making a down payment and then you're structuring installments, whether that's monthly for a long period of time, whether it's monthly for a short period of time and a balloon payment at the end. But it's just an installments to control real estate. And the key to seller financing is what makes sense from a seller perspective? I think a lot of times people say, well, I want to, I need this property. I need a seller financing. And, well, it doesn't make sense for the seller.

So it starts with the seller. If it aligns with them, then you find out what installments are going to make their life flow in the way that is going to meet their goals. And what can the property afford to make it successful as well? So simple as that, down payment, interest rate, monthly payments. Monthly payments can be interest only. They can be all principal. They can be negative amortization.

They can be whatever you want it to be. So that's the beauty of seller financing is it does not fit. it in a box. You can do exactly what you want to do based on what needs to happen. I think that's a great point to highlight. I hear a lot of people will say, how do I get the seller to sell it to be in seller finance? And the answer is, you don't. If they're not motivated to or that doesn't work for them, that's not the right strategy. But it often gets portrayed to people who don't have money. I mean, if you think about when someone's targeting an investor to sell a course to them or a class or something, they're looking for a person who has some form of vulnerability, bad credit, no money.

That's why like everyone gets into wholesaling, right? Like you were saying earlier. And seller financing is this magical pill that will work if nothing is right. The problem is you have to dig to find usually an off market deal because like realtors aren't going to be listing a house if it's going to be selling with seller financing very often. That person is selling their house with the realtor because they want a convenient transaction where they're going to go use the money for something else. So a great piece of advice you just gave is that you got to have a motivated seller and you got to work to find a motivated seller. So can you guys share any maybe like, I don't want to say red flags, but something that pops up that makes you go, ooh, that person might be someone who's interested in seller financing that people can look for when they propose that solution.

Yeah, we call them green lights. Better than a red flag. There we go. Yeah. Yeah, okay. Yeah, we call them green lights and they are, I think it's the opposite of what you just said is the audience for the predatory real estate seminar. It is someone that the seminar attendees, someone without options, right? They have poor credit.

The real estate seller that we're looking for if we're going to do seller finance is someone with options. They have the option to sell with a realtor if they want to. they have the option to keep renting it. They have the option to 1031 exchange if they want to. But they have all these options. A lot of times they're overwhelmed by those options. And we have kind of found our niche in the ability to go in and say, all right, here's, let's lay all your options out on the table.

Let's analyze them. We'll give them kind of the numbers for every scenario. And a lot of times being able to defer their tax gains over time through an installment sale is the one that meets their needs the best. So can you cover that a little bit? What does that look like when somebody defers their tax gains by selling with seller financing? The simplest way to put it is that they don't have to pay taxes until they take the money. So if you delay the time that they have to take their money, then they're only paying on what

they get. And so a lot of times if they're really concerned about their tax hit, they want a very small, down payment because then if they receive that money, they have to pay taxes on it. So they want a small down payment and they want a small installment sale payments. So a lot of times those payments are interest only. They're not even amortized because they want to keep that payment as small as possible. And so those balloons at the back end are very large when we do it in paying the note. But it allows us to cash flow in the meantime pretty easily.

So are you, it sounds like the way that you're describing this, if I understand it, right? Is if I sell my house and you pay me all the money up front, usually traditionally you get a loan, you use the money from the loan plus your down payment to pay me. I pay capital gains on the full gain. But if I sell it to you as seller financing and I don't get all that money up front, I actually just collect a payment from you over time. I only pay taxes on the money that you are paying me. Is that correct? Exactly. So what type of person is doing something like?

like that. Is this an experienced real estate investor? Is this a new real estate investor? Is this just a regular homeowner? I'll let Mike speak to that. It's the experienced real estate owner. What we've found in our life of doing a lot of it is they've owned real estate for a long period of time. They have significant capital gains. They don't eat the cash. They like the income stream. They have below market rents. They have deferred maintenance. They don't want to deal with realtors. So they have a mindset of costs and expenses they want to avoid. And a lot of times they want to pass on a legacy. They see themselves in you.

And so then you just put all that together. Well, yeah, below market rents, you can increase the income stream, right? So you can match their net operating income that they're currently getting, increase the income stream, and now you have cash flow. The fact that they don't need money. They don't need a large down payment. they're used to cash flow. They don't like management. So you solve a lot of problems by just saying,

hey, here's a little bit of money. We're going to take control of your property. We're going to improve that property and improve the income stream. And we'll all benefit from that elbow grease, so to speak. Yeah, I like this concept of like seller financing in that, again, it's not taking advantage of people. It's not saying, hey, I'm going to trick you into it.

It's like, I know a number of investors. In fact, my mentor all growing up, or, you know, get into real estate growing up as a real estate investor, Kyle. Like that was always his plan. He would always tell me that. He's like, yeah, my plan is just acquire a bunch and then pay them off and then sell them off on seller financing when I get older. And that just provides me up income to get through life.

And I always thought that was cool. And he's actually doing it right now. In fact, my in-laws bought a property from him on seller finance and that he had paid off. And he's just going with it. Now, do you guys ever do anything with people who don't want to pay them off? Do you ever do any subject to or release option stuff? Or do you only do or how do you get around like they do on sale clause if they have? have a loan. Yeah, we subject to you for us, we've done, and we typically just do that on short-term

projects, so we don't take on the risk we do on sale clause. But yeah, at least option is a great way to get around that. Or you have the ability to pay the loan off if it's called, right? So we've done that where it is set up a seller financing. There is a loan on it. It is disclosed. And then we just have a clause in our promissory note that should the loan get called, we will pay that loan on. So you just plan ahead and accordingly for that and don't put yourself in a position where if that loan gets called, you're going to have to take a loss or you're going to have to struggle in order to get that loan date on. Yeah, that makes sense. But the vast majority of the seller finance we do is definitely free and clear. So there's no loan on the property to begin with. And that makes it

real simple. Or if there is a small loan balance, a lot of times we'll just make that the down payment. So if they owe a certain percentage of the property and say it's like 20 or 30 percent, we'll just pay them that. Well, let me ask you this then. If your ideal like seller finance type person is an experienced investor, how does that change your marketing? Like what, like I'm assuming you're not like writing a, I mean, maybe you are, but like it's, I'm assuming it's not like a yellow letter with like, you know, misspelled words like,

I buy house, your house for cash money. You know, it's probably not something like that. So what are you doing to attract people? who would be willing to do dollar financing for you? We went back and forth on this as to like how personal do we want to make it versus kind of professional. Yeah. And as we got as we got more experience and had a legit company with acquisitions guys and

realtors, we decided to go the professional route. And especially because we started targeting larger multifamily projects. So we have our logo and our branding on there. And we talk about being local guys. that are building a portfolio in Portland. And we talk about the experience of how we've helped people like that owner of that we've helped people in their position save money or whatever the goal is, whatever the specific marketing campaign is.

We talk about how we have helped people like them accomplish their goals. Yeah, that's cool. That's cool. Yeah, I feel like this is where having, you know, in the book, the multi-family millionaire, which we just released at bigger pockets. I talked a lot about this thing called the crystal clear criteria, which is like, this is the property type, this is the location, this is the strategy.

You know, this is like, this is what I'm doing. This is very particular what I'm doing. And when an investor knows that, one of the reasons that that's so important is it gives you the ability to then cater your marketing toward that. Like, let's say you're an investor and you're like, I'm going to do seller financing. That's going to be a big piece of what I do.

Not that it's all you do, but let's just say it was a big piece of what you want to do. Well, great. Then you know that your ideal seller is somebody who has owned a property for maybe over 10 years or 20 years. And I, okay, great, now you can target your marketing just to those people. You can go send direct mail to that type of person. And the letter will look like something that will appeal to that type of person. Versus if you have no strategy or no, like, plan, you're just like, I'll buy anything.

I just want a good deal. Then you're just sending a general message to everyone and it doesn't appeal to anybody. And so instead, I just like that concept. If somebody can pull that out of this episode, like, you know, pull something from this episode, be it that. like know what you're going after and then you can specifically target that thing. And then you can broaden what you go after, go after numerous things, but then have a plan for each of those things because the thing that's going to attract a 65 year old seller, a real estate investor's been in the game for 40 years is very different.

It's going to motivate the 25 year old kid who got in over his head and buying his first property and now wants to move to Vegas and be a showgirl or something. I don't know. Like it's just like it's a different type of marketing. So all right. That's cool. So the seller financing is cool. What other stuff are you guys doing for financing-wise? Let's say you can't go seller financing. Are you doing, I mean, do you just save up money for down payments? Are you doing any kind of syndication stuff or raising money or what's that look like?

Yeah, we do a lot of private financing. We haven't done anything syndication is for like a pooling money standpoint. We do have some capital partnerships where we're bringing all the real estate expertise. Our partners are bringing capital and we form an LLC and we have our rules in that. But it's your traditional sources, private capital, hard money for our short-term projects. You know, we will get bank loans for BERS on the back end. We also like to move our seller financing around. So one thing that we learned early on is financing a real estate are two separate things. And a lot of times the financing may be a long-term agreement or long-term commitment,

but the real estate is not a long-term hold. And so you can sell real estate and keep the financing and use it to buy other real estate. where you can refinance real estate, keep that financing and buy other real estate. We've used seller financing as like a perpetual machine to help us build out our portfolio as well. Are you referring to like cross-collateralizing the financing your deal? No, re-collateralizing substitution of collateral. I actually heard this full disclosure. I haven't heard a lot of your podcasting.

What? But you interviewed some guys. I know. I know a blasphemy. You interviewed a guy, I think out of Colorado. He called it Walking the Mortgage. Yeah, I remember that, but I remember it was. Yeah, neither do I.

But so again, you created a relationship. What does a seller finance or want? At first, they are intimate with the real estate. They know the real estate. That real estate makes them comfortable. But on a higher level, what they want is they want trust, they want loyalty, they want a rate of return, they want customer service. and they ultimately want collateral.

The collateral doesn't necessarily need to be the real estate that you buy. And so if you're doing a real estate transaction, whether it's a sale or a refinance, you have cash coming into escrow, but you already have a note that doesn't need to be paid off. So then you can take that note that doesn't get paid off and the cash that would have paid off that note to then buy another piece of real estate, refinance another piece of real estate just by recilateralizing the note and keeping the cash or giving the cash to the seller or giving it to a lender. Yeah, maybe put that in a, because this is such a powerful concept. Maybe can you wrap it into a story, whether it's a real one or example of like, you know, House A, House B. How would that work?

Yeah, yeah. So this is a really good story for you. So I got a call from Bob. Bob is amazing. And I remember Saturday, I was washing the dishes and the phone call. You know, I know it's a piece of marketing when the phone comes in. So I'm all prepared for it. And his first words, were, do you need to pay all cash? You know, like that's the magic phone call everyone wants. And Bob knew he didn't want cash. You wanted $5,000 down. The problem was, was the piece of real estate he owned was a piece of garbage.

It was in a part of town that had a high tax ratio. It needed a lot of renovation. It wouldn't have provided any cash flow at the end of the day. But we needed to put, you know, $100,000 into it just to make it habitable. And so what we did is we set up seller financing on that project. And he knew all along that we were going to sell the property, that we were going to collateralize him on that property to begin with. And then six months later, we were going to give him different collateral.

Now, when we bought the property, we didn't know what that collateral was going to be. We just knew that we always have opportunities. We would find that piece of real estate at the end of the day. And so we bought the property, five grand down, put like 100 into it. We sold it. And when we were in escrow to sell it, we were then in escrow to buy something else. Right. So we had a cash out, a cash transaction on the buy side, and we had a sale on the front side. So as that sale came in, we owed Bob $220,000. We needed to buy a property for $220,000. So instead of paying Bob off when we sold the property, we just took Bob's $220,000 and gave it to the other seller on the buy side of the acquisition. And so we just used Bob's financing and liquidated that other piece of real estate. All right. All right. That makes a lot of sense. And it makes sense, too, because Bob trusts you.

Like, he likes you. He likes the payment. He likes all that. So why not just become, basically just becomes just a private lender long term for that stuff. So that's a good chunk of our private lending pool started out as sellers. Yeah. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been sort of complex, time consuming and expensive. But imagine if really, estate investing was suddenly easy. All the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly

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with? And what do you find just, you just like, oh, yeah, we're, we get in flow. This is easy. We're awesome at it. Man, I mean, the, the best part is when you underestimate everything, right? you underestimate how much that neighborhood's going to appreciate. You underestimate how hot the market's going to be and you underestimate how long it's going to take you to do the remodel. Now, most of us that have done any flipping know that it's not super common for you to underestimate all that stuff. So it could really suck when you don't. The thing that sucks the worst for us has been, you know, when the construction budget just, you know, something gets discovered or you completely miss stuff that just blows the construction budget out of

the water. That's probably the most painful. We're really good at at kind of knowing our numbers when we go into a project, but those surprises can sting. Yeah, that makes sense. All right, what about what makes you guys each feel alive in your business? Like, what's like you're like, oh, I'm, I like this. This is my piece of the business is what I love to do. We'll start with, we'll start with you, Mike. You know, at this point in the career, what I really like is I like seeing other people win. And like new investors get traction in their careers. You know, one example is the majority of our staff have all bought a piece of real estate. One staff member in particular has now bought three pieces of real estate over the past 18 months. Everyone has been a successful bird. One of them was seller financing that they rolled into another acquisition. They have no money out of pocket. In fact, plenty in their pocket after. you successfully completing all those projects. So I get more appreciation seeing someone get their first deal than I do from us getting our next deal.

What about you, Tyler? I'm a sucker for creativity. And that's been something that's been kind of a key to our success is how crazy, creative can we get on the deal structure. But it's also been our kryptonite because sometimes we overcomplicate things because we have all these tools that we've amassed over the years, tools of how to do deals in different ways, different ways to finance it, different ways to structure the terms, that sometimes we can kind of get overly complicated. So I'd say that's both partly

my favorite thing as well as the thing that gets me into trouble the most is getting too creative because I didn't used to think that was the thing, but it's definitely a thing. Well, we see that with house flippers, you know, like the boring ones tend to do the best. They just use the same materials. They don't have surprises. It's when you start trying to get creative that mistakes tend to happen. So I definitely think there's a part of that in business. Gary Keller had a quote that was really good for real estate agents where it was something along the lines of we get bored of doing what works.

So we start doing what doesn't work and trying to make it work. And that's definitely like there's a fatigue in business that when you hit a rhythm and you just keep doing the same thing, it gets boring and you want to try new stuff. but that's often like the death blow for your business. So with you two each specifically, tell me what is in your future? Where are you two headed? Where am I headed next? I think we kind of just did some restructuring where we got rid of a lot of distractions in our business.

It was painful. We had to cut some overhead and cut some departments completely. They just really focus. And so I'm really excited about diet. in and becoming masters of the investing that we do and trying to kind of take a break from the shiny object syndrome that we've we've had for so long as entrepreneurs and brandon has uh has hit at home many a time about going a mile deep instead of a mile wide and last time we had drinks with brandon he uh he kind of asked us

some pointed questions about that as well. And so we finally pulled the trigger and cut out a bunch of extra things in our business. And so now I'm really excited about the the amount of mastery that we can achieve with the extra focus. Well, you probably shouldn't, I was pretty drunk that night. So I don't know what I said. You're like, no, we based our whole strategy outfit. I fired 40 people. How much money does it cost to get drunk at Monkey Pod? Is that like a $900 night with those $1,000? No, it's like one drink. One drink. it one mitai it's all it takes it depends on how much of a lightweight you are and i think brandon is pretty light i'm pretty light yeah i'm like all 112 pounds of me uh mike where are you headed in the

future where do you where do you see the business headed yeah i'm really excited like from an affordability standpoint right so affordability is an issue any large ms a especially in portland we have affordability concerns so we have a couple things in the works um we've taken an advantage of a new zoning program in portland which allows you to build more than one unit on a single family lot. So we can have a house with two ADUs. We can have a duplex with an ADU. We can have threeplexes or fourplexes where we can do cottage clusters and get up to eight units on city lots. Right. So we permit density at the city level. And then we can condo convert at the state level to then set up to divide up ownership and sell.

And so what this allows us to do is lower our land cost basis to then bring new construction at a price point that's just almost nearly impossible to get and really high demand portions of Portland. And then on top of that, we've been, we bought a piece of property that we can eventually build a 60-unit affordability, affordable housing apartment building on as well. So I'm excited to kind of start adding, changing the value we add to our community here locally. Yeah, I love that. I love the idea like when you're in a city like, yeah, where there's major problems like Portland and with affordability, when you can become a solution for that. I just think there's a lot of power there.

So right on, man. Well, with that said, we're going to move on toward the end of the show. I think we're like 40 minutes into this thing. So gets us closer to the end here. The next is our famous four. All right, this is the famous four. It's the same four questions we ask every guest every week. So let's throw them at you guys each.

So why don't we start? We'll start with Tyler each time and then move to Mike. So Tyler, first question for you. favorite all-time or current favorite real estate-related book. My favorite, and I will call this a real estate-related book, Crucial Conversations, just because it's so applicable in both the way we run our business and the conversations we have with sellers, with other agents, with kind of everyone involved in the transaction.

I read it again recently. It's really helped me kind of revisit the way I structure the conversations I've been having. All right. What are you, Mike? I'm going to go with my favorite two authors, and I'm not just kissing ass, but Brian Murray, Brandon Turner are amazing authors when it comes to their level of experience and the ability to put it on paper that allows people to implement and take action in their lives. When I read books, I rate them based on the level, the ease to implementation. And I think multifamily millionaire hits that in space.

Oh, thanks, man. You might be the first multifamily millionaire mentioner. on the show. I'm not sure. Well, thank you. It's a new book. Give it time. Yeah, we'll give it time. All right. Number two, David. What are your favorite business books? I'll let Mike go. I really like compound effect. I think that's a great one. I'm sure a lot of people mention that. But I'm a big fan of Benjamin Hardy. Personality is impermanent.

Game gap versus game. Gap in the latest one. Gap in the game. to me who you are as a person is going to speak volumes to who you are as a businessman or a business leader and so your personality or how you look at things, how you take on challenges in life or extremely important. So I look more on that of who am I because at the end of the day that relates too much to business. All right. Yeah, gap in the gain. I just I'm just about finished with that. I got a few like minutes left in the audio book, but that is a phenomenal book. I really, really enjoy that a lot. All right. Tyler, anything you want to add to that? Business books that you're loving. My friend Ashley just recommended a book recently called Thinking and Betts that has been super

brought some new energy into the way I process my business decisions because in our relationship with our partnership, I would definitely be the overthinker, the one that wants to slow down and and have a plan and would be the one that would suffer from analysis paralysis. So have a book like Thinking and Betts that teaches you how to make decisions faster with less information. It was really helpful for me. Yeah, we had Annie Duke, right? She was on our podcast a long time.

I was an episode. But yeah, Josh interviewed her with, I think, Scott back years ago. It was Scott night. Oh, whether you and Scott? Okay. All right. Next question. What are some of your hobbies?

Yeah, I like to golf. I learned out of wake surf this past summer. I do a lot of hiking and a lot of trail running. So typically for me, it's getting outside. Tyler. For me, I have two little girls that love the outdoors, or at least they don't have any other choice. They're going to learn to love them.

And so I'd go, I love the snowboard, mountain bike, paddleboard, and we've just been doing a ton of camping and road tripping this summer and going to go into fall, doing some backcountry stuff. So just getting outdoors and playing will be a lot of fun. Awesome, man. All right. Well, last question for me, and we'll ask each of this. What separates successful real estate investors from those who give up, fail, or never get started?

Tyler, you want to start? Sure. I mean, if I look back at all of our critical moments, it's definitely that idea of just shirk, off the disasters, the failures, the times you were screwed by other people, and just focusing, very clearly focusing on how to get back on top, how to get back in the game. And that has been our key to success. Is that just kind of dedication of saying, what is it going to take and being willing to do

whatever that is to get back instead of looking in your rearview mirror and being bitter at whatever just happened? Yeah, man. What about you? Yeah, I'd say for me, you know, short-term memory, forgiveness, strong ego, not having to win. Like a great book actually is Infinite Leadership by Simon Sinek. Just having that mindset, keeping in motion, you don't have to win the game. You just have to keep playing. And that mindset really has gone, done wonders for us.

Yeah, that's awesome. That's awesome. I've not read that one, but I started it. I read the first like chapter and then somehow set it down. I never picked that up again. But I need to because I take your recommendations seriously. So with that said, guys, thank you very much. Appreciate you guys. And yeah, it's been a blast. So I'll let David ask the final question. Where can people find out more about you? Well, for our combined YouTube page, that would be Rarebird Real Estate to search that on YouTube. and that's where we have a lot of our content that we've put a tout over the years. And then for socials, my social is I am Tyler Combs, Combs of the Sea.

And Mike, you think you just had to get a new social. What's your Instagram handle? Yeah, Rare Bird underscore Mike. And I highly recommend setting up dual authentication because I had my account at. So I'm kicked off Facebook. I can't get back on Facebook and I had a redo Instagram. And so. Dang, man.

Sorry. That sucks. Well, I'll be, I'll go get, I'll put a post on my Instagram later and talk people to go follow you, build you back up a little bit. Guys? In debt of gratitude. All right. Well, thank you guys. Appreciate you a ton.

And thanks for being part of my community, my tribe, my people. So it's been awesome. Good to know you guys last few years. You're so, man. Appreciate you. All right. Well, that was an interview with Mike Nuss and Tyler Combs. These guys are incredibly smart and talented. Make sure you guys connect with them over on social. And, you know, follow Bigger Pockets for more episodes just like this.

Of course, this is one of my last episodes going to be airing. I think my last episode is going to be on the 30th of December. And then David takes over as host as I sail off to go do some more surfing and family time for a while, taking a little sabbatical. So I'll see you. I'll be back again, of course, and I'll be here on the show many times in the next year. But I'm going to take a few months at least to just relax. So, David, it's on you, man.

For people that miss you, Brandon, what can people do to help you in this next phase of your life? What are you looking for? You can send me teddy bears, preferably cat teddy bears with like sweaters. That would be a probably good thing. Or you can follow me on Instagram. I'll still be active there, Beardy Brandon. So hang out with me there. I don't know how active I'll be.

Anything we can expect from Open Door Capital. any reveals that you can drop in this podcast. Oh, man, we just got done with our annual goal planning thing. Like, we are going to the moon. And we're actually changing our name from Open Door Capital, just shortened it to ODC because of the confusion with Open Door, the other company. So ODC is it. But we're going to buy some massive apartments this year. So if anybody has any $100 million plus apartment complexes, let me know. There you have it. All right. Sounds good. Anything we should say before we get out of here? I don't know, man. I just appreciate you a lot. Thanks for being a good friend.

Thank you, Brandon. That's incredibly sweet of you. And for the guidance that you give me over the years, I've told everyone that you'll sort of be steering me from behind the scenes like the good friend that you are. So your spirit will live on forever as well as it will be looking at us from above. From our bubblehead. Our bubblehead partnership. It's great. Awesome. Get us out of here, man. All right. This is David Green for Brandon ODC Turner. Signing off. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday.

I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calicoe content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own.

Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.