Real Estate Investing Advice for Beginners: Why Dave Holman Says Start Small Before Scaling Big

Dave Holman (00:00)
most dangerous things in real estate or any business is the sunk cost fallacy, where you’ve put in a hundred hours of time and effort into chasing something and you just can see it just over the horizon, but you’re not looking at it empirically, analytically. ⁓ You’re using your heart more than your brain and you’re following this sunk cost and you’ve spent money on it. You spend time on it. That doesn’t mean that it’s a good deal ⁓ just because you’ve spent a lot chasing it.

Michelle Kesil (01:57)
Hey everybody, Welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Dave Holman, who is a commercial realtor, investor, property manager, and also works in construction. So excited to have you here today, Dave.

Dave Holman (02:16)
Yeah, thanks for having me, Michelle.

Michelle Kesil (02:17)
Great, let’s dive in. So first off, for those not familiar with you and your work, can you share what your focus is these days?

Dave Holman (02:26)
My main focus is Maine, the state, which is where I’m from and where I’ve been building, ⁓ which is one of the markets where it’s supposed to be impossible to do anything profitably, because we’re not in the Midwest or the South or the Southwest. ⁓ We’re in the East Coast, where everything’s expensive and old and difficult, ⁓ but that creates high barriers to entry. for those that can handle…

zoning, the NIMBYism, the costs, if you do a project, then you’re putting supply into an absolutely starved market. ⁓ And housing costs are very high. Both rent and the cost of ownership are too high because very little new supply ⁓ is built in our state and I would say our region writ large. ⁓ Most of that due to bad anti-housing policy that’s disguised as pro-housing policy.

But ⁓ that’s what we’re focusing on is trying to build more housing and housing that is really energy efficient to operate, that reduces energy costs over time, that drives NOI for ownership and helps keep the planet a little bit cooler.

Michelle Kesil (03:37)
Awesome. Yeah, what a unique state to work in, like you mentioned compared to the typical ones.

Dave Holman (03:46)
Yeah, it’s very small. We’re just over a million in

population, but it’s steadily growing and it’s been growing since COVID. ⁓ So while it’s a small place, I mean, we would just be a borough in Manhattan or in larger cities. But ⁓ for someone who really enjoys investing in their own backyard, ⁓ I’ve really enjoyed that. And I’m lucky to live in a place where investing is possible. And I believe it’s possible anywhere, even downtown San Francisco, if you’re dedicated, creative and

⁓ You can make partnerships to figure out what are the needs and how can we meet those needs. You can get things done anywhere in the country.

Michelle Kesil (04:23)
Absolutely. And what do you feel have been some of the main keys that have allowed your business to be able to grow and run successfully?

Dave Holman (04:31)
Yeah, it’s a good question. ⁓ I think the biggest thing is team building and setting a

⁓ that’s positive, that’s productive, that rewards hard work. ⁓ That has allowed me to grow a lot because I’m not all that smart and there’s only one of me. And so if it wasn’t for all the bright people on the team that I’ve built,

we wouldn’t be able to do a lot of new construction, manage a lot of existing real estate. So I’ve definitely…

taking the approach of building teams of people that are well compensated, that are kind of a little further along in their careers than the average property manager or maintenance technician or folks like that, and try to provide a higher quality of service than people are used to. Because for better or worse, in landlording, it’s a pretty low bar, especially in historic buildings. And that gives us a chance to really exceed people’s expectations, which

You know, can’t do 100 % of the time and there’s certain people that you probably shouldn’t make them happy because they’re asking you to turn yourself into a pretzel and bend over backwards. But I think for the vast majority of people, you know, we strive to provide a really good service ethic. And that has led to really good retention rates, you know, in our units. don’t charge exorbitant fees. We’re nice to people. We try to respond, you know, as close to immediately as we can to work requests and therefore.

⁓ We have a loyal following, we have a good reputation, and that allows us to grow.

Michelle Kesil (06:46)
absolutely. And what type of investments are you primarily focused on?

Dave Holman (06:53)
Yeah, I invest in my own projects

and occasionally other people’s, but ⁓ I’m both an active and a passive investor in my own projects in a sense that I join investors putting cash in each deal, big and small. And I think that’s really important to put your money where your mouth is. ⁓ The only deal I didn’t do that on was literally like my first deal or two when I had no money and I was doing a single family house or a small building and…

you I was willing to put in really hard work and I was only partnering with family and a few close friends. ⁓ You know, now it’s really important that I’m one of the larger investors ⁓ in each project, if not the largest investor, because, you know, people want to work with sponsors who have skin in the game. ⁓ And that skin didn’t just come for free. Cause a lot of sponsors are like, yeah, I’m putting in a million dollars. I’m like, yeah, but that’s your developer fee that you’re just creating out of thin air from this project. So ⁓ that’s very easy to put in.

⁓ into a project that doesn’t hurt you at all. Whereas if you’re putting in actual cash, chase cost and that kind of thing, it’s a very different picture.

Michelle Kesil (07:59)
absolutely. And what have been some obstacles or challenges that you’ve had to overcome in your investing journey?

Dave Holman (08:08)
Yeah, it’s a good question. ⁓ You know, think obstacles are often, you know, a new construction in the form of permitting and zoning, trying to convince people that dense multifamily housing with great common amenities is something people like and want, and it’s better, you know, for the towns, it’s better for society. That is hard. You no good deed goes unpunished. ⁓ I think

capital is sometimes hard. ⁓

But other times not, it just depends. I usually wait until I have a really good deal that has a double digit IRR and we can be very confident that it’ll be a good long-term trip for investors. And therefore we’ve never had a deal, do a capital call, we’ve never had a deal lose money. I’ll knock on some wood because maybe someday that’ll happen. But we’re very transparent with investors and therefore even when…

something isn’t performing the way we might hope it would, people have stuck with us. And then when things outperform and do really well, we can celebrate that as well. And we’re having one of those moments now where investors are up like 400 % on one of the properties that was early on in our portfolio. So they’re not all 400 percenters, but we’ve been able to…

overcome a lot of the bureaucratic hurdles to make that happen by trying to be a stakeholder in the towns we operate in and building good relationships with local officials. And that takes a ton of time and work. It’s not something you can just swoop in and do.

in an old fashioned place like Maine, people are kind of like skeptical of outsiders. I think that’s part of why I love operating here is because I grew up here and I can get to see ⁓ my own home become a better place to live.

Michelle Kesil (10:28)
Yeah, amazing. And what are you most focused on solving or scaling to next?

Dave Holman (10:36)
Yeah, I’m really

focused on a condo project that we’re doing and this multifamily project that we’re right now in the middle of the race for. You we’ve gotten our final permits. We’ve got a great bank offer. Our interest rate starts with a five. ⁓ You know, it’s really exciting in this day and age when, you know, things are kind of going off the rails internationally with energy costs, with copper, you know, a lot of the inputs to buildings. ⁓

not going in the right direction. Labor ⁓ in the construction trades, a lot of that comes ⁓ from what we call new mainers or immigrants. And ⁓ we need those people here at work very badly. there’s a lot of headwinds, think, right now to build housing. And I’m hopeful that here we can overcome those and have successful projects because they’re desperately needed. It’s a very simple supply and demand equation. And ⁓ if we don’t build enough supply,

People come in trying to legislate low prices and that almost never ends well.

Michelle Kesil (11:36)
Yeah, that makes sense. What opportunities are you most looking forward to?

Dave Holman (11:42)
Yeah, I think looking for new projects, trying to find ways to make the communities around me better places that are more walkable, more dense, that have better buildings in them that people can live and work in. It really excites me and gets me out of bed in the morning. Like right now, we’re going to try to see if there’s a way we can do a geothermal heat pump system

Michelle Kesil (11:45)
Mm-hmm.

Dave Holman (12:02)
the 70,000 square foot condo building. And everyone says, no, it can’t be done. It’s too expensive. And we’re exploring ways to harvest the 30 % tax credit.

⁓ to directly offset hard costs. looking at ways there’s ⁓ efficiency main is an entity in our state that has monies for some of those things. ⁓ So if you get creative, you can sometimes make things pencil that wouldn’t otherwise. And as high-end condos, that’s a real interesting amenity to have radiant floor heating and things like that. So ⁓ I don’t like doing the same thing twice. Once I’ve…

kind of learned or mastered something, kind of like get bored and move on, which is maybe not good in a way. know very successful people maybe just do the same thing over and over again for 40 or 50 years and then retire, but that’s not me. I love learning new things and seeing what’s next. for me, the condos, I’ve never done condos. I’ve always done buy and hold, you know, long-term projects. So this is an exciting, you know, new direction for me.

Michelle Kesil (12:59)
Yeah, absolutely. And what advice would you give to someone that’s looking to get started in investing?

Dave Holman (13:09)
The best advice I can give is

take action ⁓ and get started. However, that is for you. know, like I started by air being being out like a broom in my house. It can be super simple. You know, you don’t have to go and buy a 40 unit building as your first, you know, project. even though, you know, gurus like Grant Cardone will tell you to kind of go big or go home, swing for the fences like

That’s probably not the right choice with anyone with a family and a lot to lose. It might be great for a 20-something, you know, to go out and kind of fake it till you make it attitude in real estate. But I’ve gotten to where I am by, you know, crawling before I walked, before I ran. And now I’m kind of jogging or running, but I certainly didn’t start that way. My first investment was a single family home. And then I did another one of those. And only then did I go to a small mixed use building and things like that. So.

I do think it helps to just start where you are. Don’t try to ⁓ shoot for the moon on your first deal. I think it’s just get on base, hit a single. Don’t try to hit a home run on your first project.

Michelle Kesil (14:58)
Yeah, absolutely. And where do you feel like most people go wrong? was there anything that you wish you did differently, like along those lines?

Dave Holman (15:07)
Yeah, mean, people doing the opposite of what I just said is where people go wrong. I think

Michelle Kesil (15:10)
Yeah.

Dave Holman (15:15)
I’m very grateful for the path I’ve taken, you know, which has not always been that every investment has been the right one to make. I mean, I did due diligence on a building for, you know, almost six months before I decided to back out. And that turned out to be one of, it was a very costly lesson, but it was a great decision. And I think one of the

most dangerous things in real estate or any business is the sunk cost fallacy, where you’ve put in a hundred hours of time and effort into chasing something and you just can see it just over the horizon, but you’re not looking at it empirically, analytically. ⁓ You’re using your heart more than your brain and you’re following this sunk cost and you’ve spent money on it. You spend time on it. That doesn’t mean that it’s a good deal ⁓ just because you’ve spent a lot chasing it.

And I think being able to know when to say no and, know,

take your toys and go home is important because you shouldn’t do every deal that comes across or that you do a lot of due diligence on. ⁓ But by the same token, I think one of the biggest threats to real estate investing that I see, and I see this a lot, is analysis paralysis. Are the people that have like, I’ve been working in the spreadsheet for five years. I’m like, what? Like, no, no, no, no, no. Like just go buy something. Like don’t work on a spreadsheet for five years. That’s not how you do real estate investing. ⁓

Analysis paralysis is more it’s much more a mental block than a physical one You know go Airbnb a room in your house Don’t don’t just sit there on the sidelines waiting for everything to be perfect and every single star to align in the universe because they never will and You’ll you’ll miss out on good times

Michelle Kesil (16:50)
Yeah, absolutely. That’s good advice.

And what, like I know you mentioned that you’re also working in new construction and doing property management. Is that all for your own properties or are these partnerships as well?

Dave Holman (17:06)
Yeah, good question. ⁓ I would say like 95 % of what we manage is our properties that I have some ownership interest in. And then there’s 5 % that are just friends and other folks. We haven’t really advertised or tried to

a large property management company in that regard. Any other construction that I’m involved with right now is all for projects that I’m sponsoring. But I got a call just the other day, you know, someone who wants to hire me as a consultant.

you know, to help with their development project. And, you know, I did 63 units last year and then 11 units and we’re doing 183 units and 50 units. So, you know, this little 12 unit building a couple of years ago for me would have seemed out of my league and ambitious. And now I’m like, units, that no big deal. You know, you can do that in your sleep. But one thing to bear in mind is like all the permitting work and the soft costs that go into building 12 units are basically the same as building 120 units.

So it’s not a linear increase of time and effort when you’re doing development and permitting and those kinds of things. So you probably do want to focus on whatever you think will be the most bang for your buck, which for some people might simply be adding an ADU onto a one single family house. But for other people, it’s like, well, if you can do a 50 unit, maybe do that instead of just 10. If you’ve already done 10 and you could scale up, I think there are economies of scale in this business for sure.

Michelle Kesil (18:33)
Yeah, absolutely. And what does your team and like operations look like with all of these different projects involved?

Dave Holman (18:41)
Yeah, we ⁓ trend towards vertical integration,

a lot of times ⁓ if there’s a great professional and we only need five or 10 hours a week of their time, I’d rather just pay them for five or 10 hours a week than hire them in-house and then have them be working on random other stuff that’s not in their wheelhouse or what have you. So, ⁓ it’s a mix of people that are internal to our team, our bookkeeper, the bookkeeping is in-house, for example, ⁓ most of our…

maintenance is in-house, but not all of it. We don’t have the plumbers and electricians and some of the higher skill trades in-house yet. ⁓ I say yet because I’d like to eventually, but you need something to keep them busy 40 out of 40 hours a week if you want them to earn that plumber and electrician salary. Right now, I like having the ability for people to drop in when they’re needed, not make work to keep them busy.

⁓ Whereas for landscaping, painting, turnovers, repairs, that’s pretty never-ending and constant and we keep that in-house on the team, et cetera. And I think for these things, I bring in other sponsors and I like to share the pie with people that I’ve known for years and years and trust really well. For anyone listening, I don’t partner with anyone I haven’t known for many years on a personal level.

in a general partnership sense. But a lot of our limited partners, our passive investors come ⁓ from hearing about me through shows like this and we get to know each other and work together in that capacity.

Michelle Kesil (20:11)
Yeah, that’s great. Thank you so much for sharing all of that.

Dave Holman (20:14)
Absolutely.

Michelle Kesil (20:14)
Well, before we begin to wrap up here, if someone wants to reach out, connect, learn more, where can people find you and connect with you?

Dave Holman (20:23)
Yeah, absolutely. ⁓ Best way ⁓ is through my website, holmanhomes.com, H-O-L-M-A-N-H-O-M-E-S. um you know quick Google will get you to me pretty readily. And I’m happy to hop on a call with someone to introduce ourselves, hear about your goals, and see where the Venn diagrams may overlap.

Michelle Kesil (20:44)
Okay, perfect. Well, appreciate your time and your story. Thank you so much for being here.

Dave Holman (20:49)
Yeah, thank you, Michelle. Appreciate it.

Michelle Kesil (20:50)
And for those tuning into the show, you got value, make sure you have subscribed. We have more conversations with operators like Dave who are building real businesses and we’ll see you on our next episode.