Can You Scale It to $250 Million? What Investors Check Before They Back a Small Real Estate Firm

Last year I tried to buy a hotel portfolio, and I called a former board member from a company I used to work for. If you are raising money now, be ready for the question he asked me.

At that company, I ran our deals through the investment committee, the group of senior executives who decide whether to put money into a deal. I scheduled the meetings, prepared the memos, pitched the deals and came back with a yes or a list of what had to change. The investment firm behind that company usually invested at least $250 million at a time, and I needed $100 million. I told him this deal could be the start of something bigger.

He asked, "Can you scale it to $250 million?"

If loans cover about 75% of the price, $250 million from investors covers the other 25% of about a billion dollars of real estate.

He wanted to know if I could grow a platform, starting with this deal.

Then and now

That deal did not close. Raising money for it still taught me how investors choose in this market. My firm was small, and I had three term sheets, written offers to invest, for that $100 million raise.

This year, raising money is harder for a small or new firm than it was when I raised. In the first half of 2026, the 10 largest closed-end real estate funds took 49% of all the money raised by closed-end real estate funds, according to With Intelligence. A closed-end fund locks up investors' money for a set number of years. Only 95 closed-end real estate funds finished raising, 60% fewer than a year earlier, and funds raising money for the first time drew 17% of the money.

Operators raising money deal by deal feel it too. In October, the National Multifamily Housing Council surveyed 130 senior executives in the apartment business. 66% said equity, the money investors put in alongside the loan, was harder to get than three months earlier. 1% said it was easier, according to CRE Daily.

The money has not disappeared. My read: investors are putting it with managers they already know, and the same is true for operators raising money for one deal.

Smaller investors asked me the same question in their own words: "My minimum is $10 million, but how many of these do you have?" If your deal needs $4.5 million from investors and an investor's minimum is $10 million, you are asking for less than half of their smallest investment. Ask whether that minimum applies to each deal or across several. If it applies to each deal, your deal is too small for that investor. If it can be spread, your next deals are how you reach it.

What investors checked before they offered a small firm a term sheet

I was never the one deciding. For years, at more than one company, I was the one asking an investment committee for money. Being on teams that won those approvals taught me what investors look for. On that raise, three things mattered most.

1. Whether I had done this kind of deal before, at this size or larger. Investors look first for people who have already done the same kind of deal at the same size or larger. I could point to growing Brookfield's extended-stay hotel platform, a hotel business that later sold for $1.5 billion, far larger than my $100 million raise. Your record does not need a famous name, just finished deals like the one you are raising for.
2. Whether a person was already lined up for every role. That deal needed eight people on staff. Investors asked, "Tell me who those people are. Do you have them identified?" I had a person lined up for every role. I described each one's background and kept the names confidential until we had a term sheet. A former chief financial officer I had worked with had agreed to be ours. When investors saw that every role had a person, they said, "Oh, the seats are filled." I tell owners investors care about the horse and the jockey: the deal, and the person riding it.
3. Whether there would be a second deal, and a third. That is what "Can you scale it to $250 million?" was really asking. Investors want to know how many more deals like this one you expect to do: the same kind of property, in the same kind of market, improved the same way. In July I wrote that a pipeline is not a list of whatever crosses your desk.

What to build before your next raise

1. Write your track record. List your most relevant finished deals. For each one, write your role, what you bought, what you changed, what it returned and what went wrong. Put the deal most like your current one first.
2. Line up the people before you hire them. List every role your next deal needs and the person who will fill it. Ask each person now whether you can describe their background to investors, and share their resume once an investor offers a term sheet.
3. Write down your pipeline. List the deals like your current one that you expect to do in the next three years, and what they have in common.

Which of the three would be hardest for you to show an investor today: A, your track record; B, the people for every role; or C, your pipeline of next deals? Reply A, B, or C.

-Damon

Damon C. Healey, Founder, Eternal Companies

If you own real estate and need help preparing your deal for investors and lenders, reviewing their terms, or deciding whether to grow, bring in a partner, or sell, write to me at [email protected] and tell me what is stuck.

I read every reply.

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