20-year-old college dropouts explain how they built a 28-unit real estate portfolio with less than $1,000 in savings combined (2024)

• Caleb Hommel and Chuck Sotelo didn't have any savings when they decided to invest in real estate.
• Following a mentor's advice, they focused on finding a great deal first. Then, they raised money to buy it.
• The 20-year-old investors did three deals in 2022 and used seller financing for each one.

Caleb Hommel and Chuck Sotelo met on the first day of high school when they found themselves signed up for a pottery class called 3D Design.

"Chucky thought it was computers," recalled Hommel, who had enrolled last-minute when he learned he had to pick another elective class. "We sat next to each other and the rest is history."

The friends graduated in 2021 and went to different junior colleges in San Diego, where Hommel grew up and Sotelo had lived since seventh grade. All of their classes were online because of Covid, so they were both living at home, five houses apart from each other.

It was during the thick of the pandemic that they started thinking about investing in real estate.

"I was just trying to read books because I was bored during Covid," Sotelo told Insider. "My mom told me to try out 'Rich Dad Poor Dad' and I thought it was really cool so I gave it to Caleb. That's when we decided that real-estate investing is the way to go, but we weren't sure exactly how we were going to go about it."

They didn't have any savings — except a couple hundred dollars each — nor did they have any experience, so they started going to local real-estate investing meet-up groups to get some direction. It was at one of those events that someone referred them to a mentorship program called Multifamily Strategy.

The program cost about $250 a month at the time, a lot of money for them to shell out as students, but they figured it would be a worthwhile investment. They started working as "DoorDashers" and fulfilling food delivery orders to afford the monthly payment.

That was during their first semester of junior college. When the second semester rolled around in early 2022, they chose not to re-enroll so they could direct all of their time and energy towards acquiring their first property.

"We thought we might as well go full steam ahead instead of half-doing two things," said Sotelo.

Plus, "worst case scenario, if we dropped out and it didn't work, we could just come back eventually," added Hommel.

The first steps: choosing a market and finding great deals

Hommel and Sotelo weren't deterred by their own lack of cash.

"One of our mentors started with $3,000, but didn't use any of it — he raised all of his down payment money," said Sotelo. "So we were just following in his footsteps."

That same mentor, who they were working with through the Multifamily Strategy program, advised them to focus on finding a great deal before worrying about how they would fund the purchase.

They young investors have learned that, "the deal always comes first," explained Hommel. "Once we found a deal, then we would worry about raising the money."

To find a deal, you first need to hone in on a specific market. San Diego is a tricky and expensive market to get into, they explained, so they started researching various markets all over the country.

"We were looking for somewhere that had a lot of inventory, the prices weren't too bad, it was growing a lot, and it had favorable landlord legislation," said Hommel. "That led us to Texas and Florida and the reason we chose Texas was because it was closer to where we lived."

Once they narrowed in on Texas, they started sorting through listings. They had three specific requirements: they wanted a multi-family property since they're "a lot more scalable," Hommel explained, they wanted to inherit tenants, and the seller had to be open to seller financing.

The main reason they wanted to buy a property that was already occupied by tenants was because they wanted positive cash flow from day one. Specifically, they wanted a 10% cash-on-cash return, explained Sotelo: "And if it's not filled [with tenants], it's most likely not going to be hitting that 10% cash-on-cash metric."

As for seller financing, it was necessary considering their age and financial standing, said Sotelo: "We worked for DoorDash and made like 400 bucks a month. Nobody's going to give us a bank loan."

Finding a seller willing to do this type of financing wasn't easy, especially in the beginning when they didn't have as much confidence, noted Hommel: "Once we learned how to talk to people and ask the right questions, then it got a lot easier. We stopped going around telling everybody we were 18 years old and people started perceiving us as experienced investors."

Still, it took about six months and over 500 phone calls to land their first deal, they said.

Using other people's money to buy 3 multi-family properties

Once Hommel and Sotelo completed step one — finding a great deal — they needed to raise enough money to actually buy the property. The one they wanted was a $900,000, 10-unit building in south Texas. The seller financing terms included a 10% down payment, so they needed $90,000 to close.

They started looking for the money once they were under contract and figured they had about 60 days to come up with the cash. They reached out to friends, family, and other San Diego-based real estate investors and ended up raising it in half that time, they said.

"Raising the money wasn't as hard as I expected it to be," said Hommel. "It was just reaching out to anybody and everybody, presenting our deal, and seeing if they'd be interested." It helped that they'd put so much work into finding an excellent deal, he added: "It's extremely daunting when you look at those kinds of price points when your bank account has less than $1,000 in it. But once we realized that all we needed was the deal to be good enough, the process became a whole lot easier."

They ended up with three investors who each put in $30,000. They closed on the property in September 2022. One of the stipulations they negotiated in the seller financing terms was that they wouldn't have to make their first payment until six months in. That allowed them to profit a significant amount immediately, which helped them build up a cash reserve.

As for how their investors get paid, "we're paying them 8% interest annually," explained Hommel. "We give that out in monthly installments. And then we also give them a buy-out at a certain year so we can buy our equity in the deal back from them."

That means they'll eventually own the property outright despite using none of their own money.

Hommel and Sotelo used the same strategy to close on two more properties in 2022. The second was a $700,000, eight-unit property and the third was a $725,000, 10-unit property. Both deals were seller financed, and they found new investors for each of the properties.

Currently, the 20-year-old investors own 28 units across three properties, which Insider verified by looking at their closing documents.

Each property is profitable, "but we still haven't pulled out a single dime in profits," said Sotelo. They're building up their reserves and would rather reinvest the money back into their properties than spend it on themselves. As for how they cover rent and other day-to-day expenses, they live off of money they make from doing sales on the side. They recently started working in sales for the original mentorship program they bought.

Hommel and Sotelo plan to continue investing in properties using other people's money and seller financing.

"The goal is to hit as many units as we can this year, while making sure we don't buy a bad deal in the current market," said Hommel. "It's very hard to find deals that are making sense right now because of the divide there is between buyers' and sellers' expectations."

If they can invest in real estate, anyone can, emphasized Sotelo: "We had no experience in real estate. We didn't have any credit, we didn't have any money, and we didn't really have any connections before we started networking during junior college. We literally started at ground zero."

As Hommel put it: "It's hard to have a worse start than Chuck and I did. A lot of people are in better spots than that, so I definitely think anybody can get started in real estate. It's just going out there and taking action."