Dave Holman, Founder of Holman Homes, explores the world of green building syndications, historic renovations, and innovative refugee housing. He shares how he’s built a $40 million portfolio and is able to give back to his community while remaining profitable.
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Transcript
Slocomb Reed:
Best ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and today we are joined by Dave Holman. Dave is joining us from Maine, just north of Portland, Maine. His company is Holman Homes. They organize green building syndications, historic renovations and refugee housing in Maine.
He is a real estate developer, a real estate agent, team leader, and a property manager. Current portfolio, uh, consists of 370 units for $40 million in assets under management between current holdings and current development projects. Dave, can you tell us a little bit more about your background and what you're currently focused on?
Dave (02:34.926)
Absolutely. Thanks so much for having me here. Excited to share any advice and all the mistakes I've made so that your listeners can avoid a few of those and do better in their own real estate investing. I grew up in Maine, kind of middle-class background, never knew anything about real estate investing. We just owned one house growing up. In college, I started learning about green building and architecture, energy, renewable energy, how it relates to the built environment, which accounts for about 40% of the pollution, of the carbon emissions that we generate as a society. So it's huge, it's the biggest single contributor to global warming and yet so many people never think about it in those terms and that got my wheels spinning.
And I went down to Bolivia for the next four years, like everyone does, started a chain of retail stores down there, kind of typical next step in life, met a young woman who I got engaged with. We're now married with two kids up here in Maine. I came back to the US, got my MBA, realized I just needed to learn accounting basically. And went right into the lucrative realm of nonprofit communications development on fundraising. I did that for about nine years, but I started as a passive investor in a friend from college, his syndication. We had done the same green building class at Carleton College.
And that got me interested in it, you know, as a neat area that I'd like to check out later in life. And lo and behold, I decided to start small. I invested in a single family house, you know, with family who had some retirement money in excess of what they needed. I did all the work. They put in the capital. And that's how I got started. And I've done over 20 different deals. I'm a buy and hold investor by and large.
I've done some of the smallest syndications on the planet and I'm now getting bigger and bigger. We're doing an $18 million 63 unit apartment building that'll be really exciting, very renewable, sustainable materials and that sort of thing. So that's where I've come to. And I'm a syndicator that does asset management, but I also have a team of agents, both residential and commercial doing brokerage and a property management company with 12 employees.
Slocomb Reed (04:57.82)
Nice. Dave, I don't know if you're a frequent listener of the podcast or not, but after, when did you graduate from college?
Dave (05:07.122)
2006 and I am a frequent listener.
Slocomb Reed (05:10.34)
Okay. I graduated in 09. Uh, my then girlfriend, now wife and I moved to Ecuador. Uh, when we got back from Ecuador, uh, I was a full-time professional youth minister before I got into real estate by buying a house hack and then becoming an agent. So yeah, not, not everyone goes to Bolivia to start a strip mall business, but some of us do end up, uh, in, in South America after after college and speaking fluent Spanish. I imagine yours is pretty good at this point.
Dave (05:41.97)
Excellent! Podemos seguir en español. Now we'll keep interviewing in English I guess for this time. Yeah, we'll record the next one in Spanish.
Slocomb Reed (05:47.652)
Yeah, for the three other people who are listening who also speak Spanish. Yeah. For the sake of the listeners, the vast majority of listeners, at least.
Green construction, historic renovations, and refugee housing. I wanna ask about each of those things. You brought up the green construction already...building with LEED certification and building, uh, building more eco-friendly real estate is inherently more expensive than just building what it takes to meet code requirements. Where, where are you finding the profitability and going green?
Dave (06:42.282)
Great question. And I wanna pick something apart there because what you mentioned, going green is way cheaper than doing things the normal way. However, certifications, lead certification is a useless waste of money in my opinion. It's a marketing gimmick, where you say, all right, we're gonna pay an extra a hundred grand to architects and engineers to prove that we did it green so that we can market to people that we are green.
What we do is like, no, we're just gonna do the right things but we're not gonna pay the extra money for certification because the reason, you know, we can still market and say, hey, you know, we're using VRF heat pump systems to heat this building instead of natural gas. We're doing that because it was actually cost competitive with natural gas and on the ownership side, which is the side you always wanna be in real estate, in my opinion, the long-term ownership.
That means it's a lower operating cost. That means we're gonna have a higher NOI, net operating income, and that translates to a more valuable building at the end of the day. And every time that fuel prices go up, I mean, we can kind of smile because our costs can go down. And actually our electric rates in Maine are going down 35% this year. So it's a kind of strange dynamic, but you're absolutely right. Like there's certifications like passive house certification, LEED certification.
They're expensive and they're a great fit for like museum and higher education projects, big skyscrapers that have plenty of budget to comply with those kind of requirements. But in most cases, I don't think that is worthwhile and we didn't for our project. We'd much rather do some things that'll enhance the performance of the building and you might pay, let's say 5% more upfront or even 10% more upfront.
But if you're saving five or 10% a year in fuel costs, or in some cases, 30 or 40% a year, if you plan to own the building for multiple years, that can very quickly translate into profits.
Slocomb Reed (09:51.896)
Dave, I'm not as familiar with your world as you are, of course, but I want to give a counter argument. And I will say I'm based in Cincinnati, Ohio, and I'm sure that local and regional regulation, political policy play into this. But I feel like the answer to, first of all, why things like LEED certification is so expensive.
It's the cases in which the increased expense of the certification is balanced out by reduced property tax expenses because of incentives coming from your city or county or other municipal authority that governs both new construction and property taxes. You're in, I'm in Ohio, you're in Maine.
Is there anything like that? Is that a, uh, is that a calculation that you were making when deciding not to go with the certification?
Dave (11:08.686)
Yeah, it's a great question. I think we don't have any incentives in terms of property tax, state, local, or otherwise. The IRA act on a national level has some really great energy efficiency, like rebates, incentives. That could be a whole other show on the implications of that legislation.
You know, you're now getting tax credits on heat pumps and related installation costs, just like you would with solar, which is huge. It's hard to get tax credits in this world. So that's a separate matter. You know, the reason we're not going for certification is simply because we, A, you have to make hard choices. You know, like we wanted to do our water heat with a commercial heat pump system. Those are not very common.
I mean, there's very few installers in this state that have worked with them. And unfortunately, that material cost was gonna be an extra $100,000 to the project. Water heat's pretty inexpensive with natural gas. We don't use that much of it. We're using low flow appliances throughout the board. It just didn't pencil. So I don't mean to act as though I'm an angel and I do everything perfectly. I think every owner has to make hard choices.
And there are energy efficient design features that make a ton of sense and they're kind of no brainers. There's some that really don't make any sense and they're also kind of no brainers not to do unless you're a personal homeowner and you just want it perfect. And then there's some that are kind of on the margin and those ones are really tough calls and that one is really, there's pros and cons to it. I think for us, a lot of buildings, you want to market to a clientele and the public, there's a lot of people that would love to live in a green building, whatever that might mean and how that manifests versus not. And if they're very similar price, that could actually help you with occupancy, get boost your NOI at the end of the day.
Slocomb Reed (13:25.392)
Yeah, that makes a lot of sense.
Going back to something you said earlier on, are you, I know you said you're syndicating some of these deals that you're doing. Are you a long-term hold investor? Is the plan to hold on to these properties for the foreseeable future, or do you have a more targeted hold period with a disposition?
Dave (13:52.866)
We are very long-term, which makes us fairly unique. We work with investors of all ages. A lot of them are in their 40s to 60s because we're not promising a three-year flip turnaround or a five-year hold or that kind of thing. The project we're building now is in an Opportunity Zone. And we registered as a Qualified Opportunity Zone fund. And there's huge federal incentives now for us to hold that for at least 10 years, committed to doing that, you know, to benefit our investors' tax situations.
But, you know, on year 10, we're not just going to automatically sell. We would sell if we think it's a good time in the market to sell and we can get a good price. But if we can't and we don't feel like it's a good time, we would hold on to it in cash flow, you know, until we felt it was the right time. And I'm pretty honest, you know, I'm completely honest with investors in saying, I don't know how long of a hold this is. So only invest money that you don't need anytime soon.
But we've been lucky to be able to do cash out refinances for a lot of properties that we acquired three, four, five years ago because the market has done so well and actually get people their capital back much earlier than we had promised. So we always try to under promise over deliver. But I think being a long-term investor helps you do the right thing. If you're going to live somewhere and you got two options, one's a recent flip house and one was a single homeowner for 40 years, which one is gonna be of a higher quality that you really wanna rent or live in?
I might go with the homeowner one over the flip house. Some flippers do great work, but some are looking to shave every corner, cut every cost, et cetera. So when we develop and build with a long-term ownership and operational mindset, it's quite different and a lot more attention is paid to the design of each unit, the utilities, the operational efficiencies from a management perspective because we want to save our operational side money too.
Slocomb Reed (16:08.224)
Dave, speaking of saving money, are you still doing, uh, renovations of older housing stock or are you focused primarily on new construction right now?
Dave (16:23.974)
If you're going to do business in a place like Maine or maybe even in Cincinnati, you have to be willing to work with old housing stock. This is not Las Vegas or Austin where everything is new and shiny. In New England, we manage properties that were built by revolutionary war soldiers. We literally have that occupied and rented right now. So it's really a mix of older stock.
We're under contract on a really exciting project where it's an old hospital from the 1880s. It was built and then added on to, you know, in three different times. So really great construction, very high quality, but it's being run on oil, entirely oil heat for a hundred thousand square foot facility, which is spending over a hundred thousand dollars a year on oil, you know, to generate the same heat, the same BTUs, and to add in cooling, you know, with heat pumps, either traditional ones with condensers or a VRF system.
I mean, we can cut the operating cost almost in half. You know, we can be spending 50,000 on electricity, give or take, you know, these are ballpark numbers. And we can do something that's good for the environment. And it's just something that prior owners had never thought about, because people get locked into one way of doing things, and they go, I have to stay on propane. I have to stay on natural gas because that's what it's been before.
And I like questioning that, you know, and saying, and sometimes you do, and we have buildings, I have one building that's 17,000 square feet, and it pays eight grand a year to heat the entire thing with natural gas. That's insane. There's houses that spend more than that to heat themselves for the winter, you know? So that's a super efficient building. It would cost probably a hundred thousand or more to switch it over to heat pumps. And that's not a super high ROI building to convert over, but this hospital one is very high ROI.
So that's areas where when you look at energy efficiency, whether it's insulation or changing your operating systems for heating and cooling, you can generate way bigger ROI than fiddling with somebody's rent, which we also do and want to make sure we get market rents and save money and operate efficiently however we can.
If you can cut your heating and cooling costs, you know, that's huge. That's often your biggest cost after taxes or before taxes.
Slocomb Reed (19:08.972)
Yeah, you were talking about older housing stock. We don't have anything in Cincinnati built by revolutionary war veterans, but Cincinnati, if, if Cincinnati ends are being honest, our city peaked right after the civil war and, and a lot of our urban core was developed between the 18 seventies and the early 1900s. Um, so yeah.
I started an HVAC business a year ago. So, a lot of this is very top of mind for me, but also as a landlord and a property manager myself here, looking at boiler heat in some of our apartment buildings and the conversions that some landlords do now and have done in the past, going from owner-paid single gas meter boiler heat to some sort of electric heating for each of the apartments, which is tenant paid because the electricity is sub-metered. Yeah, I've seen some of those gas bills get massive when people are using boiler heat. The other reason for the transition though is that there are not as many boiler technicians nowadays as there were in the past.
It's much, much harder to get those repairs done and more expensive now than it has been before. But we definitely feel that here too.
Slocomb Reed (21:33.372)
Dave, I mentioned in your bio that you are, you have a focus on refugee housing currently. I applaud you for that. It's incredible that you're doing it. I don't want to get into the why refugee housing, the question about why to house refugees, as much as I wanna get into the question of making it a solid return on your investment, making it profitable. Can you speak to that? Tell us a little more about what you're doing with regards to refugee housing and how it is that you're making sure there's a solid return on investment for your capital and for the capital of your investors.
Dave (22:19.966)
Absolutely. That's a great and very fair and very important question because we're not operating a non-profit. We're a for-profit company and that's critical. To me, you have to do that to be sustainable, whether you're a non- or for-profit. It all happened probably about four years ago. Maine started receiving a big influx of refugees, mostly from Africa, and it filled up our local basketball stadium in Portland. The city used that as a temporary kind of emergency shelter.
And seeing the families with kids who had undergone great danger to get here, my heart went out to them and I wanted to help. I'm the child of immigrants from a couple of generations back myself. And so I just reached out to the city and said, hey, if there's any way these people could ever pay rent or have it paid for them somehow, some way.
I've got a unit that's getting vacant and I've got a place for a family or someone that could come. And the city reached back out to me and they said, actually, yeah, we'll pay the rent. I was like, okay, great. And that's about as simple as it is in a lot of cases. And we've expanded that. We now have over 100 immigrants from Afghanistan, from Congo, Angola, all kinds of different places, you know, staying in different units.
And, you know, the way we get rent is a patchwork quilt. Some are paid by general assistance, which most cities, I would assume, have across the country. And that's often, you know, ultimately federal funding that goes to states, that goes to towns, and it's shared between the town and the state level, at least here in Maine. But it pays a pretty good market rent, if not above market rent, you know, just depending on the circumstance. You which I usually don't like to do, because as you were saying before, anytime that you're paying the heat in a cold climate for your tenants, I see open windows in February and it drives me crazy.
But by and large, we are able to get rent paid primarily through general assistance. Then you have programs like Section 8, if they've been here a little while, gotten their work permits, they could get Section 8. But frankly, most people that get their work permits, well, guess what they're getting? Cash, they're getting money.
And they want nothing more than to work their butts off and pay rent in most cases. And like any other type of tenant, there's good and there's bad. We've had to part ways with refugee tenants and families who could not get with the program. And we've had ones that are the best people that we've ever had. And so it's a mix, but the idea is that they transition fairly quickly from some kind of public assistance like general assistance to working on their own.
And then we've got some that it's really tough. Like we have a dad with nine kids, you know, and like they're all in school, they're not working. And that one dad is gonna have a hard time paying because he's got a whole house, you know, a 2000 square foot house that we're renting him. And I don't expect him to be able to get off, you know, assistance as quickly as some of the others. And he's paying part of his rent, you know, and that's respectable. We've had people that have only been on assistance for a month or two before they were able to get work permits and and go out and pay their own rent.
But you're right, we need to treat them like regular tenants. We do a little more education because not everyone knows the kind of things that you would assume someone from a Western culture would know about how household appliances operate and that kind of thing. But by and large, it's very gratifying, it's very fulfilling. There are challenges that are different. You know, like you gotta teach them not to flush diapers down a toilet because that may not be obvious, like you would think. But once you do, you know, a lot of times these are tenants like any other.
And when you have guaranteed rent being paid in a lump sum with direct deposit from the government, there's a lot to be said for that, especially in hard times. And we've been having a very strong economy and market in the past couple of years, but you know, the musical chairs is gonna end sometime. We're gonna have a recession at some point. And that guaranteed rent, I think will be very beneficial, compared to market rate tenants that may struggle in hard times.
Slocomb Reed (26:52.488)
That makes a lot of sense. You know, my familiarity with the struggle of refugees and other migrants coming to the United States is primarily with people coming here from Latin America. Being that I speak Spanish and I'm a property manager and a general contractor, I always have painting rehab projects going on. I work with a lot of Hispanic contractors. Naturally, hardworking.
Some of them do quality work, those are the ones that I hire. And there's no language barrier between us. And less of a cultural barrier between us as well because I've actually lived in South America and served through the church, mission trips, things like that in Central America.
I've never had to teach any of them how to use a toaster or a toilet though.
What, I, yeah, in the interest of time, I just wanna, I have one more question, Dave, and then we'll transition the conversation. Just attempting an apples to apples comparison here between a market tenant and a subsidized refugee tenant. I wanna give the first answer on your behalf just to make sure that my assumptions are correct and if they're not, please correct me. But I wanna make an apples to apples comparison here if possible. Thinking like a landlord.
I'll answer this question too if you ask it back to me, but thinking as a landlord, whose interest is in operating for doing good work, but also operating for a profit.
How are you building additional assurances into your model for the additional risk you are taking by taking on refugee tenants? People who need to acclimatize to the United States, not just to the climate, but also to the economy, to the workforce, to the language.
There's a considerable amount of additional risk with regards to their ability to pay rent. Like you said, that single father with nine kids in a 2000 square foot house, what additional assurances or policies or infrastructure are you putting in place to make sure that rent is getting paid?
Dave (29:35.53)
Yeah, that's a great question. You know, to make, how are we making sure that refugee tenants don't create a high risk for us and that we do collect rent from them, you know, as we need to. We have a specialist on our management team who handles almost all of our refugee and asylum seeker tenants. She loves doing that. And I think you want to, you know, as a leader, I want to connect people with what like turns them on and makes them like jump out of bed in the morning with their hair standing up, excited to go to work.
And so, you don't want someone who sees it as a hassle and a drag and frustrating, you want someone who's really uplifted by the intercultural exchange and the experience of it. And so we have a manager who works directly with those families and she knows they're social workers and she knows a lot of the people in the different nonprofits who can give them services.
So we're connecting them with the food bank. We're connecting them with all kinds of different services, legal help and that sort of thing to make sure that they're successful. And I think as a landlord for both residential and commercial tenants, it's like, there's nothing I want more than for my tenants to succeed in life and business because they use that to pay rent. So the more that we can be a provider of resources, not a doer of tasks, but a provider of resources and a connector to those resources, that's good.
And then we're following up with social workers. Like if there's a problem, like they're cooking and making lots of smells and not using the ventilator fan or opening a window, like we would connect with their social worker and work through them and let them do some of the management. I mean, that's the other cost saving piece of it is that you have other resources helping you that can actually take on some of that educational and interaction load and save your staff time.
And then I think the biggest thing is that when we have refugee asylum seeker tenants that are on GA or section eight, that represents a lower risk than a market rate tenant. But would we put them in the same unit as a market rate tenant? Usually not. If you've got high-end class A nice units that you just spent 30 grand refurbishing, and then the same size unit that hasn't had a major aesthetic overhaul since 1994, obviously you would put the tenant who is not price sensitive, who's not paying their own rent into the 1994 unit, which as long as it's up to code, safe and clean, et cetera, is just as good to them as the one with granite countertops and brand new stainless appliances. So there's some thinking that has to go into what's appropriate, what makes sense.
You know, some buildings we do as only refugee asylum seeker housing, because it makes sense for them. You know, those are buildings that are configured in a logical way for that. And others, we might only have one family or no families in the building, just depending on what the units are like there. So yeah, it depends. It's not a one size fits all operation.
Slocomb Reed (32:44.924)
That makes a lot of sense. David, you ready for the best of our lightning round?
Dave (32:48.53)
Oh yeah, let's do it. Bring it on.
Slocomb Reed (32:51.76)
What is the best ever book you recently read?
Dave (33:13.006)
All right, I'm gonna cheat a little bit in two ways, Slocomb, because I've got two books that I'm holding up, Extreme Ownership and Cradle to Cradle. And I read both of them several years ago, so my cards are on the table, but they're so phenomenal. I mean, I think as a landlord, as a leader in real estate, I really recommend you read these. More people have probably heard of Extreme Ownership by Jocko Willink, Navy Seal. And basically it teaches me to like, think of almost everything that happens as my fault in that how could I have circumvented that by thinking ahead, planning ahead, communicating better, being a better leader so that my team was not put in the situation that we just found ourselves. And that way of thinking is a little bit, it's like the opposite of victim mentality, right? It's being ultra proactive and how you can head things off at the pass.
And then Cradle to Cradle to me is a treatise on environmental and green building. And it really makes the case that, you know, we should move to a society and a world where everything is either purely recyclable or purely compostable. And this whole love affair that we have with, you know, toxic, endocrine disrupting, plaque sticks and all that, hopefully future generations will look back on and be like, but wait, why didn't they use these other materials and invent and recycle things better? So it's being more efficient with the systems you have. And this is a book that inspired like the largest carpet tile manufacturer company in the world, you know, Anderson to change their entire operation and save a ton of money, and save a lot of water in the process. So there's a lot of surprisingly capitalistic business, hard edge things and lessons you can learn from looking into sustainability and what ultimately means efficiency, it's operating more efficiently.
Slocomb Reed (35:00.384)
Also, Cradle to Cradle by William McDonough and Michael Braungart is currently free on Audible. I just downloaded it. I'll have to put that on my list.
Dave (35:09.01)
Excellent. Cool. Good deal.
Slocomb Reed (35:17.392)
Dave, what is your best ever way to give back?
Dave (35:21.71)
I serve on the board of a nonprofit called Healthy Homeworks, which helps refugee and asylum seekers transition from renters to ownership. And as a broker, one of the most gratifying things I can do is help some of our refugee asylum seeker tenants who've been here a few years, who've worked, who've built up savings, gotten good credit to buy homes. We just helped a Rwandan refugee buy a three-unit building, and he'd only been here for two and a half years.
So don't tell me the American dream's dead. He did that by the sweat of his brow. He came with a suitcase, you know, and nothing else. And he's a homeowner. So, you know, helping, you know, teach people the skills they need to be successful, you know, as renters or owners is really important to me. I think the service, you know, like you in the ministry, that kind of giving back with my time, it's the hardest kind, cause time gets more and more valuable as you become, you know, a syndicator and a business owner.
But, being able to serve as a leader for organizations, doing good work, teaching people how to fish, that to me is just as important as like obviously giving money, right? Like at the end of the day, just giving money to the organizations that can really make good use of it. That's key too. And I really believe both of those giving time and giving money are important to be happy. If you keep it all for yourself, like you can't take it with you. This is a one-way trip in life, and all the treasure that you've amassed, you know, at the end, which could be today or tomorrow, if a drunk driver gets you, you know, it's not as fun as sharing it around a little bit, you know, with the people that need some help.
Slocomb Reed (37:04.944)
Dave on properties that you have acquired deals that you've done. What is the biggest mistake you've made and the best ever lesson that resulted from it.
Dave (37:15.19)
Ooh, I spent $35,000 upgrading an oil boiler to natural gas, and then I converted the whole building to heat pumps. So that was dumb. But you know, it's hindsight is 2020. And you know why I did it? Because I was told by a professional mechanical engineer that it wouldn't work on heat pumps and it couldn't be done. And there's a lot of people that are just stuck in a mindset that's like 10 or 20 years behind the technology.
And so a lot of and I'm sure you encounter that in HVAC too, where, you know, BTUs are BTUs and heat pumps can make them just like any other heat source. So, you know, I was just given bad advice basically. And when I realized that it was actually still going to be better for me to separate out again, like you said, having tenants be able to pay their own heating and cooling radically improves your operating margins, NOI, that's a huge boost. So even if it hurts to do that, it's often worth it. And in Maine, we have pretty good state incentives and rebates for heat pumps. And now in a federal level, 30% tax credit, you can layer local state federal benefits on and be almost getting paid to do some of these things.
Slocomb Reed (38:36.341)
On that note, Dave, what is your best ever advice?
Dave (38:40.59)
Hmm My best ever advice is to never stop learning to be to be really curious to ask a lot of questions ask questions of people that you wouldn't assume are smarter or know more than you and I've just been able to do well when I Listen like I asked contractors. Hey, what would you do here? If you own this building? How would you do this or that? It doesn't always mean you got to do what they say.
But a lot of times, if you're just thinking that you know best in directing people left, right, and center and following a script that you think is perfect, you're gonna miss out on a lot of other knowledge and wisdom that people have. And so trying to remain curious, both on a personal and professional level, is something that I really focus on and I think it served me really well. I would not be where I am without just lots of learning, you know, and listening to this podcast.
This is a great podcast for people to be tuning into on their commutes, doing chores, when I'm mowing the lawn, I've got you guys or something beneficial in my ear to teach me more that I can use. Because when you invest in yourself, I mean, that's the best kind of investment you can make. I mean, I've made great investments in real estate and buildings, but investing in myself, my abilities to be a better communicator, a better leader, a better father, better husband, I mean, that's really better.
That's the best ever advice that I have.
Slocomb Reed (40:08.708)
Last question, Dave, where can people get in touch with you?
Dave (40:12.598)
They can shoot me an email. My personal email is Dave at HolmanHomes.com. You can find me on LinkedIn. Our website is HolmanHomes.com. I'd love to chat. Happy to hop on the phone with anyone that reaches out and see what you're up to. And we obviously welcome new passive investors. I'd love to meet people, get introduced, and see if we can partner together.
Slocomb Reed (40:39.836)
Those links are in the show notes, Dave. Thank you best ever listeners. Thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five star review and share this episode with a friend. You know, you can add value to through our conversation today. Thank you and have a best ever day.