Building Success with Purpose: Dave Holman’s Approach to Real Estate Investing

Dave Holman (00:00)
I really believe that you have to build that solid reputation of following through and standing behind the work and the deals you do. And then people start to know, Dave, he can buy deals. He’s got money. He would be a good person to close with because he’s friendly and easy to work with. And I’ll sell in my building, you know, and that can get you way better deals than you’ll ever find.

Scott Bursey (01:53)
Welcome back to the Real Estate Pros podcast. I’m your host Scott Bursey. And in today’s show, we’re talking all things real estate with a man who knows the industry inside and out. We’re joined by Dave Holman of Holman Homes, an exceptional operator who brings deep expertise from years of successfully implementing high level investment strategies. Dave, thanks for joining us.

Dave Holman (02:17)
Thanks for having me, Scott. Excited to chat with you today.

Scott Bursey (02:21)
Absolutely. And for those of our listeners who may not be familiar with your journey, please tell us how did your career begin and what’s your focus now?

Dave Holman (02:30)
Well, I was born in 1983. The weather was, I can skip ahead a little bit. ⁓ I didn’t start in real estate. I didn’t come from a real estate family, you know, kind of middle-class background. But I learned about green building and architecture in college and that got a little wheel spinning. I owned a chain of retail stores in South America and Bolivia. And as a renter, I started thinking like, ooh, wouldn’t it be better to own? Yes, I think it would. ⁓

That I took a very circuitous path came back from Bolivia in 09. I had three stores, 10 employees didn’t know about business. So I got my MBA. And I went straight into the lucrative small nonprofit world where I pulled in 30 grand a year as a communications and marketing coordinator for a small save the world nonprofit, helping kids in the Guatemala city garbage dump called safe passage. And then went to work for Bowdoin college and

we got pregnant with our first child and that was when this, you know, biological need said, you know, it wouldn’t hurt for you to invest more wisely and have a little extra resources for this family you’re about to grow. And so that’s what really led me to real estate and the idea that I could make the world a greener and better place with renter money and what better way to do well by doing good than improve people’s homes and lives, charge a fair price.

and reinvest that money back into energy efficiency and things and be able to get passive income for myself and my family. That was the goal. It doesn’t always work out that way every time, but ⁓ that is how I started. And I grew and grew ⁓ both as a commercial agent, I started a property management company, started syndicating ⁓ group investments with passive investors. And we now have several hundred units under management.

in Maine, all in Maine, in, well, all of Maine is rural except the downtown Portland basically. So we’re a little bit north of Portland for the most part. We own a little bit in that city and now we’re doing new construction. We just finished 63 unit apartment community and we’re building 183 nearby. And then I’m doing 50 condo units on the main street of a local town and things like that. So it’s been a journey.

you know, from nothing to something. And I don’t, I’m not an expert on everything, but I know enough to be dangerous usually.

Scott Bursey (04:56)
Awesome. Talk about noble beginnings and your quest continues to be noble, Dave. This is awesome.

And what kind of might you do? You really do. What is your what your why?

Dave Holman (05:53)
You gotta have a why.

⁓ make the world a better place and teach others how to do that. ⁓ So I’m kind of a shameless tree hugging do-gooder and you can write me off or not, but I have an MBA, I’m a capitalist, I’m not trying to ⁓ use a foreign system here. I very much believe in our free market economy. I just think that we need to do good in our lives and do something that gets us up.

Scott Bursey (06:05)
Yes.

Dave Holman (06:28)
fired up every morning and puts us to bed wishing we had more time to do more. And whatever career that is, whether it’s real estate or not, I mean, that’s where I want to be. And I honestly feel like I make a bigger difference in the world doing more good for more people as a developer and landlord than I ever did as a nonprofit fundraiser and marketer. And when a tenant gets cancer, they get to stop paying their rent if they have to, and we’ll make a plan to work with them. And we can really…

do those kinds of things that get me emotional of like the level of ⁓ benefit that can be transferred. You know, we’re not operating a charity, but at the same time we can be charitable, ⁓ you know, when circumstances call for it. And that, you know, requires a lot of judgment and building a team with good judgment. You know, it’s all well and good if you’ve got it, but if you’re delegating to careless people, you know, you’re not going to get the right results. focusing on team building has been a big part of my life and very gratifying to do.

Scott Bursey (07:29)
Absolutely, and that is a tremendous why Dave. What caught my attention about you is your ability to cut through the noise and focus on the fundamentals that actually drive growth. And I thought that was really cool.

Dave Holman (07:41)
Yeah, you gotta

have your numbers going up and to the right. ⁓ You have to be sustainable. And I think that applies on an economic level. Ultimately, it’s gonna apply on an environmental level globally. And so, I think we can live in a built environment that uses way less energy, is way more comfortable ⁓ than it is now. And we have a lot of the tricks, tools, equipment, trade to do that. We just need to put those pieces together where it makes sense.

and not go overboard where it doesn’t make sense. You know, I still have a few natural gas burning systems, because they’re pretty new, they’re pretty efficient, and they’re not the lowest hanging fruit to go rip out and replace with heat pumps, where when I find oil burning systems, or I find an uninsulated attic, you know, that becomes a no brainer with a double or even triple digit ROI. ⁓ You know, to me, the landlord, like insulation is often that way, you know, every thousand I put in insulation.

I get it back in one, two or three years and good luck trying to do that with your average investment. If you can get a 30 % IRR or 50 % IRR, you do it in a heartbeat, but things like insulation aren’t sexy, they’re not flashy, you can’t see it most of the time and it’s subtle, but that’s where I think a lot of investors, owners, operators are wise to focus on existing buildings and making the new buildings.

⁓ you know, to set them up for success and think about operating costs, you know, which is why I like that long-term, you know, build, buy and hold own perspective where I’m not just flipping it off to someone who may or may not suffer a high operating costs. I’m going to be the one paying those. And thus I care about them. And my Performa reflects that, you know, to a big degree, when I go and sell it, I want my NOI to be tip top high as can be. And if I’m paying huge energy bills, ⁓

that’s ⁓ damaging economically speaking.

Scott Bursey (09:40)
Well, absolutely. And Dave, if you could walk us through for operators looking to implement high level investment strategies. How has Holman Homes adapted its private or institutional capital stack to mitigate interest rate volatility?

Dave Holman (09:56)
I have never floated in rates ⁓ except for once during construction.

I think floating during construction, if you’re a year or 18 months is not a highly irresponsible thing to do, highly risky. But for folks that floated indefinitely, ⁓ that can really come to bite you. And I always try to fix in ⁓ multi-year debt, five to 10 years. I’m averaging five these days.

⁓ I think that’s a really important strategy in the financing side of things. With investors, I just tell them it’s a long-term buy and hold. We’ll sell if we get an offer we can’t refuse, but expect this to be tied up for five to 10 years. And I think you’re going to get a dynamite rate of return in that time. You might get 15 % or more IRR in that investment hold period that you can’t get in the stock market. But the trade-off is that it’s illiquid and Dave’s in charge. ⁓

Scott Bursey (11:28)
Yeah.

Dave Holman (11:29)
that means that you may want me to sell, but if it’s not the right time and we’re not going to get the best price. you know, I have a few of those situations now where I went crazy refinancing things when rates were in the threes. And then I was lucky to lock in almost everything in the whole portfolio at three point something. I had a two point eight five for 10 years, actually. So ⁓ those are now starting to come due in the next year or two. And that’ll become the strategic decision is

Do we do a cash out refi? What are rates gonna look like? Do we sell? Do we do a 1031 exchange? Do we do a drop and swap where everyone can exchange their own separate ways? Your biggest cost after labor and utility bills is taxes, both federal and property taxes. And ⁓ that’s something that a lot of people don’t think about.

And they should, ⁓ obviously, that’s a really important consideration. If you sell and don’t turn 1031, that’s going to create a likely significant capital gains event if you’ve done it right. And if you didn’t and things went south and you don’t have capital gains, well, mean, that’s bittersweet. ⁓ So I think it’s important to think of these bigger picture things and not assume too much. Don’t assume that rates are going to be higher or lower.

that cap rates are gonna be that much better or worse, try to be conservative ⁓ and navigate so that, all right, well, I know if I fix this in now for the next five years, I ought to be able to cashflow. If I execute my business plan, control my expenses, get my rents where they should be, this ought to be a good cash flowing property. That’s really all, that’s as far out of the windshield as I’m looking. I’m not trying to say, I just need to wait. There were all these sayings of like,

Stay alive until 25. Well, guess what? Rates are kind of as high in 25 as they were in 24. like, you know, the sweet relief of three or 4 % interest rates did not and is not coming tomorrow. But you know, they’ll come at some point, I think, and the way they’re going to get there is not going to be pretty because it’s called a recession. That’s the only thing that will dramatically lower rates very quickly. And so we don’t want that. So be careful what you wish for. But the crystal ball.

Scott Bursey (13:42)
Dave,

is some excellent, excellent perspective. Thank you for sharing that. And securing resilient capital structures is the bedrock of growth in a tightening market. Operational excellence means nothing if the funding runs dry.

Dave Holman (14:04)
Yep. Yeah, I’m trying to keep more dry powder. I actually just named one of my LLCs dry powder LLC. And then dry powder lines of credit, you know, set up on, on, you know, real estate equity that you can tap when you need to. I’m a strong proponent of setting those up when you can. You know, if you’re down to 40, 50 % LTV, you know, go to your bank and get a big line of credit, you know, for 20 or 30 % of that property’s equity. You don’t have to use it.

you can leave it sitting there, you know, but if a good opportunity comes along where you can make 10, 12, 15%, well, yeah, it might make sense to borrow at 6 % or 7 to get 15. Or just, a big expense comes along and you need a new roof, you need a new boiler, you need new whatever. It’d be awfully nice to have that giant low interest credit card sitting there, you know, to tap. Because when you don’t have that liquidity, even if you look great on paper,

⁓ you can get blown up and bankrupted.

I think that is, you know, ⁓ a dance that in the early stages of people’s career, you often have to flirt with, but you have less to lose. And I think as I grow, I get more risk averse and try to keep, you know, more resources available, you know, to plug whatever holes may come. Cause it’s just, I want to sleep well at night, you know, and I don’t care about maximizing profits so much that I…

I’m gonna plow all my reserves right back into the next shiny object. I think that’s a dangerous mentality and I know that because I’ve done it. And you know, I’m a sinner too. I’m speaking from experience and I’ve been lucky to be doing it in this great time of the last five to 10 years when anyone who bought something five or 10 years ago, if you’re not double what you paid for it, you did something really wrong or you bought in the worst possible location or who knows, but. ⁓

I think a lot of the success around real estate investing has been whether you’re operating in a good market or a bad one. And it was a good market through COVID, it better than good. And now it’s not so great. I think rates are high, conditions are tight. There’s a lot of impaired asset classes out there like office, large office formats. this is where the weak and the strong kind of get separated out. Some people leave the profession. A lot of these gung ho young

Scott Bursey (16:44)
Yes.

Dave Holman (17:06)
wannabe syndicators blew up and lost people a lot of money. And, ⁓ you know, I think there was a lot of bubbles happening, you know, through COVID just invariably naturally. And now a lot of those are bursting and there may be bigger ones yet to burst. mean, I think it’s a time to be very cautious and not to be too overly optimistic, you know, cause, you know, gasoline and diesel are the lubricant of our entire economy. And if you just double their price overnight,

⁓ There’s gonna be a real impact of that that I think is still largely yet to be seen. They could halve again overnight too. I mean, we’re not gonna predict what geopolitics will bring here, but by converting my buildings to use electric baseload heat, I’m just ⁓ zeroing out that risk. And I’ve had several clients and friends be like, ⁓ man, my heating bill just doubled. I’m like, that’s too bad, mine didn’t. You know, and that’s the ending is like,

I’m using new technology, you you’re using old technology and old technology comes with risks, all the straight of hormones that, you know, new technology doesn’t have at the same degree. So, you know, I think that is something for people to think about in the future is that baseload electricity has never and will never double in a year, barring World War Three or something. So ⁓ it’ll go up. don’t, I don’t see it.

Scott Bursey (18:13)
Yeah

Absolutely.

Dave Holman (18:29)
probably going down until we figure out fusion or something, but it’s reliable, it’s predictable, it’s usually a single digit per year increase. It’s something that you can pass on to tenants through rent increases or whatever, they’ll pay directly. And it’s slowly simmering the frog in that pot of water. It’s not cranking it up to a hundred. You don’t have that exposure and risk, but you can also win with the fossil fuels too. On average, natural gas and propane have been the cheaper, better source of BTUs.

than even the best heat pumps, but those lines are starting to cross. I think they probably already have crossed at the current prices.

Scott Bursey (19:05)
Excellent perspective. Very, very good. Thank you for sharing that as well. Considering the current market threats, what is the one pre-acquisition vetting step your team adheres to, regardless of how motivated the seller is, Dave?

Dave Holman (19:23)
Ooh, that’s a really good question, Scott. Location and people. Those are the two biggest factors. And they’re the age old, ancient fundamentals. Location, location, location. It’s very hard to do a big deal on a bad location. So don’t try. It may look good, you know, and that’s often hard to tell, you know, is your location up and coming? Is it the path of progress? You know, like that’s hard to suss out sometimes, but.

Scott Bursey (19:29)
Yeah, okay, sure.

Yes.

Yes.

Dave Holman (19:52)
But there’s

times when you know, and I think that’s important. then, know, Warren Buffett, the great investor has a lot of great quotable phrases and I’ll try to quote one of them as best I can. You can’t do a good deal with bad people. And I think that only applies in the long-term. You know, so I don’t want to syndicate anything with someone that I don’t trust like a family member. I don’t want to get in bed, you know, long-term with them, but.

Can I buy off a seller who is a crazy person and totally mean and weird and nuts? Yeah, I’m doing it right now, in fact. you know, like, yeah, you can tolerate doing good deals with bad people for like 90 days, 60 days, 30 days ⁓ of a closing period or something like that. But, you know, if the contractor didn’t work out well, don’t use them again. You know, if the syndication partner doesn’t work well, don’t partner with them again. And I’m very careful about…

who I partner with, a lot of people come to me looking to do that, because I think it is a great strategy to partner with people with more experience, but ⁓ I just, don’t want to have personal tension, stress and conflict over money. And I think it’s very hard to set yourself up for success in relationships where there’s money at stake and that your behavior or performance can either lose or gain your partner’s a lot of money.

And I’ve just seen people’s personalities and morality change over money, often in negative ways. And that makes me very cautious about getting into deals ⁓ where I don’t have full control or something like

Scott Bursey (21:28)
Sure, Dave, given the current market environment, what’s the single most efficient and budget-friendly channel you rely on for consistently generating highly motivated leads?

Dave Holman (21:40)
Word of mouth and reputation in the community. ⁓ Like I said in the beginning, I don’t market and I probably should. will eventually. I’ll do, you know, letters and postcards and all kinds of different things, but ⁓ it’s reputation. And almost all the deals I have have either come to me or I’ve come to them through the people I know and just doing, you know, honoring my word as a buyer. You know, if I get under contract with you, I’m going to close if nothing dramatic has changed there that we didn’t know.

you know, from the get-go,

really believe that you have to build that solid reputation of following through and standing behind the work and the deals you do. And then people start to know, Dave, he can buy deals. He’s got money. He would be a good person to close with because he’s friendly and easy to work with. And I’ll sell in my building, you know, and that can get you way better deals than you’ll ever

The other place I get great deals, Scott, that no one ever looks is… ⁓

right in plain sight on the MLS, Loopnet or any CPE, the ones that have languished. My best deal ever had been for sale for three years before I bought it and it was just mis-marketed and misrepresented. So a lot of times, the worst pictures and description you find online, the more I’m like, ooh, let’s go see because this broker clearly doesn’t care, doesn’t know.

⁓ They may not realize what they have. There may be extra rooms, extra units, different zoning, you know, these little things that they’re not thinking about that can transform what appears to be online, a bad deal. And it’s actually a smoking hot deal if you do it differently than the way it’s been presented ⁓ or you dig a little deeper. So I would say don’t assume that all the stuff just kicking around out there.

is bad and a lot of times it’s about seller motivation, right? They weren’t motivated for the first six months or a year, but now they’re about to fire their broker. You know, they’re pissed off and they finally realized that what they thought was gold is actually kind of a turd and they’ll, they’ll start to take a different price for it. And so just cause they listed it a million bucks doesn’t mean you can’t negotiate. All right. It’s going to be 7.50 and you’re going to give me half of that and seller financing at 3 % for five years. They might be overjoyed to be able to brag about getting 7.50.

you know, to their friends for a property they got for 130 years ago or something. I mean, that’s the kind of thing that can happen when you go and dig into something a little deeper and see where’s the motivation, you know, what is this property really? Can I, I really want to put my arms around it and see it. So don’t write off those things that are just out in plain sight either.

Scott Bursey (24:21)
Sure. And Dave, what’s one key takeaway or golden nugget you’d like to leave with our audience here today?

Dave Holman (24:29)
⁓ You know, lead with your heart, do what makes you happy. And I think that’s where I found ⁓ success. ⁓ I think that, you know, doing things purely for money is something we all have to do sometimes. And, you know, sometimes it sucks, sometimes it’s great. But the more that you can do something you love for money, ⁓ I think that really changes your life. It’s changed my life a lot. And I’ve been lucky to really like what I do for the most part, but

real estate, investing, management, brokerage, it’s really unlocked an ability to help other people in profound ways while helping myself and acknowledging that we’re all human, we’re all self-interested to some degree. I’m not Mother Teresa and yet I also don’t want to be Mr. Burns, right? Like, you you have to walk a line somewhere in between those two archetypes. And I think that is the advice I would give people is find, you know, where you fit.

and go right after it.

Scott Bursey (25:29)
Dave, that is wonderful insight. Thank you so much. And we love fostering connections here at Real Estate Pros. For the listeners who want to follow your journey or collaborate with you, what’s the best way for them to reach you?

Dave Holman (25:41)
Yeah, right online through my website, Holman Homes (www.holmanhomes.com), we get a contact form. You know, we work with passive investors a lot and I love meeting new people, you know, and we always have new deals coming up, you know, one, two, three times a year. ⁓ So that’s the best way to connect. I’m happy to hop on a phone call, you know, and just kind of hear about you, what you’re doing, ⁓ you know, what your interests are. If I can be of service, you know, I’m happy to do that briefly.

and come to Maine, we’re a great place and I would love to meet up for coffee or something and get to know more people as they come to our great land. So those would be my ways to get in touch with me. Again, my lack of marketing, I’m not very active on social media. I need to step up my game. I’m on LinkedIn, I try to, with social media, I try to just connect with people I actually know in the real world, call me old fashioned, but.

that’s sort of my MO is like, we at least have to have some kind of conversation, be it a Zoom call, phone call like this. And then I’ll connect with you and we can interact there as well.

Scott Bursey (26:43)
Dave Holman, everybody. Dave, thank you so much for being on the show. Your insights have been so valuable.

Dave Holman (26:51)
Thanks, Scott. I’m glad I could be of service.

Scott Bursey (26:53)
And for our listeners, we appreciate each and every one of you. If you got value out of today’s episode, please subscribe. We have more conversations coming up with exceptional operators just like Dave. Until next time, everybody keep your standards high and your vision clear. We’ll see you in the next episode.