Why Debt-Based Capital Raising Is Killing Real Estate Deals

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In this episode, Dylan Silver interviews Serena Holmes, a multifaceted professional in the real estate and investment space. Serena shares her journey from running Tigris Events for 20 years to becoming an investor agent and capital raising coach. She discusses her initial foray into real estate, which began with a short-term rental in Florida, and how she expanded her portfolio through various investment strategies, including syndicated mortgages and private lending. Serena emphasizes the importance of education and mentorship in navigating the complexities of real estate investing, especially for newcomers looking to raise capital.

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Serena Holmes (00:00)
Well, I unfortunately have seen a lot of operators go down Canadian side in the last 12 to 18 months. And I would say the predominant two issues that I’ve seen is that they scaled too fast.

then as soon as the market shift and interest rates went up, like things started to fall apart. So that’s one aspect. The other aspect is that they raised on a debt model.

I think if they’ve done it properly, a lot of those operators might’ve been fine if they raised the equity.

Dylan Silver (01:56)
Hey folks, welcome back to the show. Today’s guest, Serena Holmes is an investor agent in Ontario. She’s an author, podcast host, and also the former CEO of Tigris Events, an award winning brand experience agency. She’s also a capital raising coach and you can find her across social media and on our YouTube channel, youtube.com forward slash at Serena Holmes official. Serena, thanks for taking the time today.

Serena Holmes (02:22)
Thanks for having me

Dylan Silver (02:24)
I always like to start off at the top of the show by asking, guess how they got started investing, but you’re involved in so much, which came first, the investing or the real estate ⁓ agents, which came first for you?

Serena Holmes (02:38)
Yeah, well, I was running Tigris for years and I had a coach that basically told me I had too much money. So it’s kind of like a good problem to have. And at the time, you know, I was young, you don’t know what you don’t know. And I had about a year and a half of retained

in my business. So she encouraged me to basically start investing here in Ontario. You know, there’s again, a lot that I didn’t necessarily know, but it just felt like I was kind of priced out of the market. So I ended up buying a short-term rental at a golf course and country club in Fort Myers, Florida.

back when the dollar was at par in 2013. So we rented it to Snowbirds, held onto that for four years, and then sold it when the dollar was no longer par and that market had appreciated a bit. And then I started educating myself and invested in two pre-construction properties, one that I sold on assignment, one that I kept and tenanted, went into syndicated mortgages, land development, and then a ton of private lending.

Dylan Silver (03:10)
smarts.

What’s syndicated mortgages?

Serena Holmes (03:33)
So in that instance, there was a preferred provider that worked for this education company that I had basically gone through their program. And it’s where a group of investors come together to pool the funding for a development project. So in that instance, I went into three syndicated mortgages, and you would get basically passive income or interest income during the course of holding that mortgage. So you’re one of many people pooling it together for that.

Dylan Silver (03:53)
Mm-hmm. Is there a…

Is there a difference between that term and when people generally say, you know, a syndication or they used interchangeably?

Serena Holmes (04:04)
It’s ⁓ similar idea, but instead of being like an LP investor, you’re a first position mortgagee. So you’re coming in like more of a debt model than you would as an equity partner.

Dylan Silver (04:11)
Okay,

These days, it sounds like you’re focused a lot on the coaching for investors. Tell us a little bit about that.

Serena Holmes (04:23)
Yeah, well, just to backtrack, like during the pandemic, my business couldn’t operate anymore. And I had my first daughter just before COVID. So I ended up doing a couple things. I ended up getting my real estate license as a backup plan. If I’m being totally honest, I don’t totally love it. It’s very different working like in the B2C space over the B2B space. So

that was just a dynamic I wasn’t totally prepared for. And it’s just not really what I expected going into it.

⁓ so along the way I ended up selling my business coming out of the pandemic, did the real estate thing for a little bit. but then I just happened to land this opportunity back in spring of last year with a company called one. And I’m basically working with somebody in Marson droads. He’s a nine figure capital raiser. He’s done a lot in the real estate space. And essentially we’re teaching his system to people that are trying to raise capital for their different real estate investments.

So I have a book of about 30 clients and I guide them through the program. We help them build their personal brand, teach them how to develop lead flow, how to conduct the meetings with investors, how to close them. And obviously it’s all about building their portfolios.

Dylan Silver (06:18)
Now, when we talk about capital raising, people might need to raise capital for smaller deals, you if they need partners to do more flips, right? But also you’ve got folks buying, you know, ⁓ residential apartment complexes, right? And, you know, tens, if not hundreds of doors. And so ⁓ is there an approach that without giving away all the gold, is there an approach that you would recommend for someone who may be in that smaller segment?

Serena Holmes (06:31)
Probably.

Dylan Silver (06:45)
whether they’re raising capital for single family or for some small multifamily.

Serena Holmes (06:50)
So I’m not going to say go out and buy like a 300 unit apartment building for your first deal, but what most investors will say is that they wish they went bigger sooner because the amount of time and work that goes into buying single family, when you’re five doors and above at least in Ontario, you can commercially finance it. So that’s easier because it’s a net operating income of the building, not your personal income that qualifies. So that’s one element. There’s the economies of scale. So for example, if one tenant moves out and you’ve got 12,

It’s more of a non-event than if you lose one tenant. So there’s different reasons why people might even, it may make more sense to even start with something like an eight flex or a 12 flex than a single family property. For M1, I do deal with people that, you know, sometimes they’re wholesaling, but I’ve got people raising a hundred million dollars for a fund. So it’s literally all across the board. For someone that’s starting out, if they really want to make this more of like their career path, I would suggest that they partner with someone that is established.

where they can come on board as, you know, maybe they’ll raise a million dollars in capital and they can support a larger deal or someone that has a lot more experience and skin in the game, just so that they’re not, ⁓ you know, figuring it all out themselves for the first time all alone where they could be risking investor capital.

Dylan Silver (08:03)
Yeah, the idea of finding a strategic relationship is so critical, really, whatever you’re doing in real estate, whether you’re a new agent, new investor, wholesaler, raising capital lender, you know, or, you know, in the trades, right? If you’re working on homes and working with with investors, do you see that most of the people who are looking to raise capital?

have run into ⁓ a point where, we’ve exhausted all the capital that we have access to, we wanna do more of the same type of deal, or is it because people may be having to pivot from one asset class, let’s say, ⁓ single family fix and flip to something larger and therefore, they can’t just use their own pockets?

Serena Holmes (08:46)
I mean, I think just reflecting on the clients that we’re working with, in some instances, they could have raised a lot of money from 100 people, 200 people, and they’ve exhausted those connections. And obviously now they want to do more. So that’s where they land with us. And we’re helping them basically come up with a system that’s going to drive all of those leads. So yes, you’re casting a wider net. So some of those could be cold leads. So you have to treat them a little bit different than if they’re warm referrals and things like that.

And then in other cases, people are brand new to this game. Like they’ve never done it before. So they’re literally learning the lay of the land. Like in a lot of cases, they have self-funded to a certain scale. Like they might have a portfolio worth five million or 10 million, but they’ve never engaged any investors before. So they need to learn how to, you know, basically communicate with people in their own networks. We call that their fast 50, you know, basically how to treat those meetings. We have a series of group calls as well, where we’ll support people with investor meeting prep, deal terms, lead gen.

building their personal brand, business operations, fixing constraints,

and all these different elements. Because when you’re working alone, the reality is it’s very isolating, and it can be very difficult, and you want to really just pay for speed. So would you rather waste two years trying to figure it out, or you could pay and you can get there in six months to learn from someone that’s been there.

Dylan Silver (10:36)
There is so much interest

right now in capital raising specifically, even from folks who, like you mentioned, may already be doing it on some level, but then they need to cast a wider net. ⁓ You mentioned leads specifically. Are most people who are raising capital looking at, and I want to specifically talk to folks who are starting out, are they looking at each prospect as a lead or is this something that

is more informal for them and is that a mistake that you see being made for newer ⁓ folks who are raising capital?

Serena Holmes (11:14)
I mean, I think the way that we always want to look at it is that you always want to start with the people that already like, and trust you, right? Because they’re more inclined to potentially invest with you than someone that doesn’t know you, has no relationship with you. So we ask them to basically prioritize them based on…

the level of ⁓ affluence they potentially have, how much wealth we think they have access to, as well as your relationship with them. And then basically it’s just a matter of fact finding. So when you have a conversation with someone, the person asking the questions holds the direction of the conversation. So you can basically ask people all about different things in a catch-up call. You can learn a lot. Did someone just inherit some money? Did they get a promotion? Are they looking to…

do something or maybe on the flip side, like they’re in a horrible place and something happened. So maybe not a good time to solicit an investment, but maybe it could open up a referral pool because again, they like me and trust you. So even if it’s not a fit for them, it doesn’t mean that they couldn’t introduce you to five people that could be a good fit. So it’s all about planting those seeds. We like to tell people that even if they don’t have a deal, you can still have these evergreen conversations with people to plant the seed.

And that way, when you do have a deal a couple months down the road, you can be like, hey, remember when we had that conversation and you’ve already planted all that, you probably started posting about it on social. So people are becoming more aware of what you’re doing. And then beyond that, it’s developing the system to start bringing in those leads. So developing lead magnets, posting on social, just getting people aware of basically what you offer and how you can educate them. And ideally, you want to give them something of value.

to land in your CRM so you can start communicating with them. And then beyond that, it can be a little bit easier to transition them into a potential investor.

Dylan Silver (12:56)
Now, my understanding in the States, at least, is that when you’re marketing and you’re raising capital, but you’re doing it on public channels, that typically you’re working with just accredited investors. Is there an advantage to working with non-accredited investors? Would there ever be a reason to start working with non-accredited versus going straight to accredited?

Serena Holmes (13:08)
That’s right.

So I mean, it really all depends on what your paperwork looks like. So your PPM will dictate what you can and can’t do publicly. So you could have something like a 506B exemption where you can include family and friends that may have a lower eligibility than being accredited. And in some instances, we have investors that they start out as a 506B.

for the first few weeks of their raise, because maybe they can bring in half of that money that way. Then they’ll go to 506C where they can market it more publicly. But I think you can still always be posting on social in a way that’s educating people and you can reflect back on life experiences and deals you walked away from. And it can still showcase your knowledge of the industry and your expertise without soliciting a specific opportunity. So I think you can get creative with building your personal brand and attracting people into your circle of influence.

again without projecting returns, without talking about specific properties and things like that.

Dylan Silver (14:13)
How much or how many of your clients are in Canada versus in the States?

Serena Holmes (14:18)
So we’re definitely US heavy, like out of my book of 30 clients, I only have three Canadian clients. All the rest are US.

Dylan Silver (14:24)
Okay.

What’s it like? ⁓ Because you’re the first person that I’ve spoken with who’s who’s licensed in Canada, but then also doing ⁓ business, you mentioned the property that you had in Florida, but now also working with investors in the States. What’s that process like? And then also to how often are Canadian follow up to that question? How often are Canadian investors looking at investing in the States right now?

Serena Holmes (15:30)
I mean a lot. I’ve got a couple of two brothers that I work with that they’ve got a lot of amenitized short-term rentals all over the United States. And they’re working on their W-2 visas, or is it a W-2 or an E-2, to basically move to the United States right now because there’s just more opportunity, more of an entrepreneurial mindset. There’s more tax advantages. So I’m going to say even though the dollar and the exchange is maybe not our friend at the moment, I think people just see that there’s bigger opportunities down south.

I mean it really just depends on what people really want to do like politically sometimes people don’t necessarily want to go from Canada to the US and other times they look at it very different. Again I’m licensed as a realtor in Ontario specifically but that’s different than working on the investment side.

Dylan Silver (16:17)
Can American investors invest in Ontario right now if we want to buy single family homes up there? Can we do that or are we not allowed to anymore?

Serena Holmes (16:22)
As far

as I know, mean, think just reflecting back on when I bought the condo, you know, there was no trouble with me buying it at that time. I did have to get something called an ITIN number so that I could file my US taxes.

If you’re buying it corporately, I think you just need to work with someone that, you you need the legal side and then you also need to have the accounting side, right? Just to make sure everything lines up when it comes to things like liability, tax efficiency and stuff like that. And I’m not going to say I’m an expert in that area, but that’s where you do want to involve the appropriate people on your team. And if you’re raising capitalist securities lawyers, you know, you just want to make sure that you have all your I’s dotted and your T’s crossed.

Dylan Silver (17:02)
What’s the most common

mistake that you see being made when folks start raising caps?

Serena Holmes (17:09)
Well, I unfortunately have seen a lot of operators go down Canadian side in the last 12 to 18 months. And I would say the predominant two issues that I’ve seen is that they scaled too fast. In some cases, like there are some operators I know that scaled to like 600 doors, a thousand doors in like five to six years. And that was just, they grew way too fast. And then as soon as the market shift and interest rates went up, like things started to fall apart. So that’s one aspect. The other aspect is that they raised on a debt model.

So if you’re already carrying the cost of a property or if it’s a development that can run longer, it’s just not sustainable. And then that has created a lot of issues where I think if they’ve done it properly, a lot of those operators might’ve been fine if they raised the

because then the returns are not due back to the investors until the project is complete or maybe until it’s stabilized. So it’s a very different expectation, but I think it was kind of the low-hanging fruit where people would offer, you know, 15 % monthly returns. So people are seeing that immediate.

return on the money that they were invested, but then now they’ve lost their entire capital because those companies have subsequently gone down or filed bankruptcy. So I think for the person I’m working with, he’s very, very big on compliance. It’s like, don’t talk about my return on investment until you talk about returning my capital. You want to know very clearly what the plan is, what the exit strategy is, how you handle issues that could come up. And yeah, I say like the debt versus equity. I think the debt only works if you’re like wholesaling.

or you’re flipping things very, very quickly, that could work perfectly fine. But I think for some of the larger syndications where people are improving their properties or if there are development projects, they should never have been raised with any kind of debt in that way.

Dylan Silver (18:50)
Yeah, I mean, when we talk about how ⁓ risky these can be, know, people, felt like from like 2016 until maybe 2020 or so that you just couldn’t buy a deal wrong, right? That there was no such thing as buying a multifamily deal wrong. Everything was, you know, hitting a pro forma in half the time it felt like. So you had that trend. And then what happened? Right. You see the reverse side of it where, you know,

mortgage premiums have doubled, you know, they’re coming down now, but have doubled and then materials have increased and then you have, ⁓ you know, policies that affect ⁓ vacancies and so forth. And this all has a compounding effect.

Serena Holmes (19:31)
⁓

So I mean it obviously spiked, but now for people that bought at the height of the market.

you they would be lucky to see 70 % of that value if they sold now. So just speaking about single family, I had listed a property, not in a great part of town. The people that bought it didn’t know it was not in such a great part of town. And they bought it for around 1.1 million January of 2022. So literally right before the bubble burst and they couldn’t even sell it for like 800,000. So they would have lost 300,000 and they still couldn’t sell it. So they basically had no choice but to run it again. They didn’t want to do that because they had issues with the renters given

maybe the part of town that it was in, but it just goes to show you like, you know, how the timing can really impact everything.

Dylan Silver (20:14)
Yeah, I mean, I’m licensed in Texas. And if you look at what’s available for rent on market right now, so many of these properties in the single family space were previously listed, right? So they had their idea that they were going to try to sell and they might have tried to sell multiple times, even over a period of years, potentially, but ended up having a rent because they weren’t getting the offers where they wanted it to be at. We are coming up on time here though, Serena, any new projects that you’re working on? Also, how can folks reach out to you or your team?

Serena Holmes (20:43)
Yeah, so know you mentioned on social, so Serena Holmes official is probably the easiest thing just to find what I’m up to in terms of new projects. ⁓ I have my own podcast called Inspire to Invest. we feature guests internationally that are focused on business, entrepreneurship, and real estate.

So it’s kind of a blend of Canadian and US, but I just had someone on from London, England, and I also had someone from Dubai. So it’s very much kind of expanding into something more international. But in terms of specific projects, my focus on coaching real estate investors is really number one at the moment.

Dylan Silver (21:15)
Congratulations. How long has that been out for?

Serena Holmes (21:19)
I’ve been working with M1 since July of last year.

Dylan Silver (21:23)
Okay, all right. Well, thank you again for ⁓ coming on the show. Thank you for taking the time, Serena.

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Why Debt-Based Capital Raising Is Killing Real Estate Deals

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