How We Raised $3.45M: Behind the Biggest Capital Raise Yet

Hello and welcome back to another episode of the Owner Meeting Podcast. I'm Christian Osgood, your channel host, joined today in person by the one and only Caleb Hommel.

Thanks for having me. Welcome back.

Now you guys have had Caleb on this channel many times. Today we're going to talk about one of my favorite topics of all time, the capital raise. Caleb, you are on the very, very, very back end with me of raising a little over $3 million, uh, right after we just raised $2 million for our last deal. Yep. So we are closing out $144,000 acquisition. What's the total raise amount for this deal?

Uh, total raise amount is $3,450,000.

That is some capital. Now this is the most that I've ever raised, the most you've ever raised. And one of the things I think a lot of people ask themselves, how much money can I actually raise for a good deal? This is by far the most we've raised, almost twice what we've ever raised before.

Yeah.

When you're going into a deal and you underwrite the deal, First question I have for you, how do you know that the money is going to appear for the deal? If you've never done the amount of money before, how do you know?

I think having a little bit of wherewithal and awareness is probably important. If you are not a very connected individual and you were deciding, hey, I have a single-family house, I'm going to go buy 150 units, you probably need to rethink slightly unless you're bringing in a capital partner or a capital raising partner. But if you've done this thing before, like this isn't going to double my portfolio, this isn't going to double Christian's portfolio. We've done this thing before. Cumulatively, we've probably raised more than this, I think, total in past deals, I would say. Yeah, that's true. So this isn't going to be doubling the amount of money we've raised. I think we kind of had those pieces and had those tangible kind of inputs. We realized we probably could do it.

So if the goal is to learn how to raise private capital, how to do this well, and how to manage your, manage these projects, what's a good starting point for someone? Let's say you are leaving your W-2. So you're like a, let's say you're a low six-figure earner. Yeah. Or you've done some single-family investments, maybe you've done a small multifamily deal, but haven't raised yet. First ever capital raise. What's a good size deal? What's a reasonable amount that anyone could do for a good deal?

I think anybody doing for a good deal anywhere from $250K to $400K, I think anybody can raise that much money on their first one. Like 100% agree. Like 10 to 25 units, that range, even maybe up to pushing a 25 or 30, depending on how good the deal is. I think that's 100% doable.

I've never found any lack of people who want to make money in real estate. So of course the more connected you are, the easier your race should be. But where do people go to find capital? If I'm doing a first deal, you did your first deal at, were you 18 or 19 when you closed the first one?

What? It was, was it late '21 or late '22?

I think, I believe it was late '21.

If it was late '21, I was 18. I can't remember. It was already been, it's been quite a few transactions ago. I was 18 or 19 years old and the biggest thing kind of where would you go? I've given this advice, I don't remember what podcast I heard this on, it might even have been from you. Give this advice to a few people, it's just always talking about what you're doing. You would be amazed how many people that draws into your circle and how many people that results in getting capital from deals from new connections. That is like the single most underrated thing for beginners is just talk about what you're doing at all times.

You did one of your earlier deals, I think this was deal number 5 for you, which is crazy that that's You're 22 and earlier deals was like deal number 5. You did a 26-unit that had a capital raise. Where did the capital come from for that particular deal?

That was the capital for that. That's a guy, very dear friend from San Diego who I met when I like saying this snuck into a BiggerPockets event because I didn't have the money to go. Literally didn't have the money to go, walked in, met that guy there. And usually that turns into a deal and a connection from a deal and he funded the whole thing.

See, that's, that's the type of stuff that I love. So a random event, you go to a random meetup. We've seen $44 million of deals done through the school community for multifamily strategies.

I mean, dude, real quick, we're talking about random meetups. Do you wanna talk about how I got connected with you guys in the beginning?

Oh yeah. Here, here's a good one.

Literally went to a— so born and raised San Diego, went to a meetup 50 minutes away from home talking about these guys who got started, did their first 38-plex. Literally just asked the event host, hey, do you have their contact info? Got their info. Joined the mentorship. Over 4 years later, we're partnered on deals now.

How did the capital stack work for the first deal you did, by the way? So you're— I want to go back to the very first deal for how you raised this. You've never raised before. Kael's been on the channel many times, but Cliff knows Virgin. COVID was in the middle of his high school, so he has like equivalent of a 10th grade education. He did a little bit of baseball in college, dropped out end of first semester, end of first year.

I didn't really make it through the first semester. I stopped showing up to the Zoom classes.

So didn't finish going to the first semester of online college. We'll count that as no college.

Fair.

Had never had a job outside of DoorDash. Caleb's coming into this. You find a deal. This is in McAllen, Texas. How do you raise capital on those credentials? You have no money, you have no experience, you have no job. It's out of state. You are a teenager. How do you raise the money? What was the amount of raise? Give us that story.

Yeah, so we'll start with the amount. So it was $90,000. 3 people brought $30,000. I think even to this day, mm-hmm, I think it's more important they bet on the individual than bet on the deal. I think it's still something that holds true. I think you could have the greatest deal of all time, but if you're an idiot operator and you don't know what you're doing, people are going to, like, if they don't believe in you, they're not going to believe in your deal. So I think one, building the connections, building the relationships so people actually believe in you and who you are is, I would say, far more valuable than a great opportunity. But a great opportunity doesn't matter without a good operator with people who believe in them behind them. So as far as that goes, I would say that's the most important thing. As far as that first deal goes, it was two guys I'd known for an extended period of time. They're both in kind of single-family real estate in San Diego. One guy's a roofer, one guy's an incredible GC. Knew them. They both gave me $30K. Needed the other $30K. Literally made a post on Facebook of all places and was like, hey, looking for the other $30K, looking for a partner, was not soliciting capital, was looking for a partner to potentially give some feedback on an investment. And eventually she came in, was the third partner. And that's kind of how it went. But I think going like, even like the, you're hitting hard there. They have to believe in you more than the deal or they're not going to invest in you.

Yeah, I think that is the main thing when I see people present. So we run the Multifamily Strategy Mentorship. One thing that I hear for the deals that take time, and we've never seen a failed capital raise, but the ones that are the hardest, when I talk to the operator, they kind of waffle back and forth on structure. We had a call this Monday. Where it's a great deal. It's truly a great deal. And when I'm like, what is your actual cash flow on it? They're like, well, it kind of depends if we raise his debt here. It's kind of low. And for investors, we're hoping someone will come in and it's a 15% equity. We could give up to 25%, but as an investor, I'm looking at it and the deal's awesome. When they did a practice pitch with me, I'm like, I would not invest in the deal because I don't believe based on that presentation that you have any idea what you're doing.

That's a really important point.

Or what you're going to offer. Know what you are offering. It's not a crazy hard ask.

And the crazy thing is that can change.

Yeah.

Like, like let's say like a curveball comes up, you can, you can pivot. Yeah. But it's when you use this, when people use this really uncertain language, it could, if, maybe, not sure, I don't know. It's like, when you're talking to people about money, you say things like, not like super overly arrogant, but you need to sound confident. Don't— if it's truly a question, like some crazy outlandish question that you do not have in front of you. Today I got asked while driving, hey, what's the top line number for the year exactly? I'm like, let me call you after I get off the road. But for that, it's like you don't say, oh, it maybe could be sort of kind of this. It's you give an answer and you say it confidently. If it's a question you truly do not know, say, hey, let me get back to you shortly on that answer. Yeah.

Well, and when you present stuff, don't present a whole bunch of multiple situations. We, we're, we're presenting this $100,000,000 deal. The only option in there is that on our exit, we can extend another 5 years if enough of the partners want to stay in the deal. I don't like either or, but you pitch it appropriately. It's not, oh, well, we might do this or we might do this. It's like, here's the best part. We have a planned exit and we have a plan A. But there's actually multiple exits on this. Having multiple strategies as a benefit, as opposed to communicating, well, I'm not quite sure how we're going to exit. It will look a little different on how we do it. We could do this or we could do this. Right there, I'm already out on that presentation. If it comes in as like, hey, we have a plan A, this is what returns look like on the worst of the two options. Now, when we get here, we could extend, but that is a bonus. Our plan A is a 5-year hold with an exit here, and anyone who wants to exit at 5 will be exited at year 5.

And it's this certainty there. That's the thing. It's your, your being certain.

I'm saying the same thing though. It's a, it's a, it's the only option.

Exactly.

But if you have a two-way thing, give certainty in your answers.

People, when you're pitching or to investors or even people, decision makers, even a broker for crying out loud, even about a deal, you don't want to provide all this uncertainty. A lot of guys when they're getting started, this kind of goes back to just how you talk and how you say things is more important than what you say. But as if you're talking really fast, high pitch and you're like, I don't really know when you're talking to a broker or an investor. That's when people get asked for the proof of funds. That's when investors ghost you. That's when stuff like that happens because they don't know, like, and trust you. And you're not going to get the knowing, the liking part before you get the trust. Like, you have to talk, you have to talk to them first, actually build up credibility. And having credentials helps. Like, after doing, I know you've done 30-some transactions. I think this is deal number 9 or 10 at this point for me, crossing 300 units. It's like, there's some—

22 years old.

It's going to be 23 next year. There's some track record still there. So that helps. But again, when you're talking to bigger fish, we're getting into the space now where we're starting to deal with family offices and starting to go that route and starting bigger fish, bigger than we ever dealt with before, we have to be confident. We can't go into these meetings and be like, oh, you know, it could make sense for you because it could do this, it could do that. It's like, even then you have to be more stern and strict than ever.

Yeah. I think it's very, very important. Now, when you're pitching capital, speaking of certainty, what things need to go into this presentation? So let's, let's go back to the beginning. You're someone doing that first deal. You're trying to escape the 9 to 5 or do your first capital raise. As an investor, what do I need to see to feel the confidence that you have in your deal?

I think there's a few things. I think one, you need to talk about like, there's a few things. First one, real estate's all about location. So you need to be in a decent growing area. And if you're not, you need to have a really good explanation of what your competitive advantage is there and what makes the deal make sense.

Yes.

Because if it's in Gary, Indiana, and you live in San Diego, California, I'm not giving you a dime.

So before we get into numbers, what are we buying and why are we buying it?

Yeah, exactly. There needs to be like, you don't need to be some like great Shakespeare-esque storyteller, but there needs to be something there of why you're doing what you're doing and how it makes sense. And then on numbers on a pitch, I am— you are never over pitching on numbers. Like if they ask questions, be ready with answers. Understand your numbers, understand your deal, but you're not over there like, hey, let me pull up my 15-tab Excel spreadsheet. We're going to run through this in person or over a Zoom call. Have high-level numbers so they ask more in-depth questions. You can send them the analysis if they really want it, but the more information you give them past that point, they're going to spend years because they don't understand your Excel model. They don't understand how you're underwriting. They don't understand all this stuff. They're going to ask more questions and talk themselves out. Keep it high level and be confident.

And 15% agree. That is exactly— your numbers do matter, but at the end of the day, you're going to tell the story of the deal and people are going to be about 90 to 95% sold right there. Like when you present a deal that I'm excited to be a part of, I am just praying that the numbers look good. Next you have to present, okay, well how is your money safe? I don't want to lose money. That's the most important thing is money.

That's a really good point. People want security. How do you like illustrate security in that investment? If it's like, I mean, if they, if they didn't want security, they go look at some AI startup and pray to God it goes up a million percent. That's, they're, they're talking, they're looking at real estate for a reason.

Real estate, you're typically looking for a risk where reward profile typically for a low risk, moderate to high return. You're usually not looking for the massive multiples unless you get into development, which again, the risk profile changes. Now you're looking at moderate to high risk for a typically very high return. But that risk reward profile in real estate is really, really important. The average investor is looking for stability.

Agreed.

In your project. So how are you preserving the capital and how do you plan to grow it? But I think it goes in that order. I think you nailed this. What is the project? Why is your money safe? And then lastly, how are you going to grow my money? And if it makes sense with their goals, they're going to fund that deal every single time.

And if you deal like we had a lady earlier in this investment who kind of went AWOL, not AWOL is the right word, but I haven't heard back from her. She was also looking at some different wishy-washy tech startups. I don't want to say wishy-washy, but more the boom or bust. And it's like if you're dealing with some investors, some people love the boom or bust, and if that's what they're looking for, they're probably not the investor for you. Just because they have money doesn't mean they should be an investor in your project.

Yeah. And, and not every deal's gonna make sense for every investor. There's different deals with different profiles. Some are cash flow heavy, some are multiple heavy. There's different targets for different people. A lot of it is lining up the right person to the right deal.

Absolutely.

All right guys, it was a quick episode, but wanted to share everything that we're doing on the capital raise. Get Caleb back on the pod since we're working together today. Everyone, hope you enjoyed this episode. See you on the next episode.

See ya.

Thanks for watching.