#201: Investing in Smaller, Multifamily Real Estate with Edward Lowell

Welcome to the Accelerated Real Estate Investor podcast with Josh Cantwell. If you’re looking to retire early with forever passive income, you’re in the right place. This podcast is the go-to destination for real estate investors, both active and passive. And multifamily apartment investors, both new, intermediate and advanced. Now sit back, listen, learn and accelerate your business, your life and your investing with the Accelerated Real Estate Investor podcast.

Josh: So, hey, guys, welcome back to accelerated real estate investor, Josh and I am super excited to be sharing with you once again in the latest episode of the podcast today I am interviewing Ed Lowell. Ed is a twenty-five-year veteran of leadership and management in supply chain and operational functions, bought back in 2017 and realized that although his loved, his job, loved he was doing, was not giving him the financial freedom that he ultimately truly desired. In 2017, 2018 he decided to jump into multifamily real estate. Today he owns nearly one hundred units, one hundred doors and counting, and he does this as a side hustle on top of his very well-paying job in leadership and supply chain management. Today in this interview Ed and I talk about, number one, how he’s able to get the highest and best returns working on twelve to forty unit deals. Number two, how he has larger take away profits from JV deals instead of syndicating his deals. Number three, how he’s able to accumulate these ninety-five units. Ninety-five doors and counting by just having one or two brokers, commercial brokers that believe in him, one or two brokers who really bring him a lot of deal flow. And finally, number four, we’ll talk about Ed’s journey over twenty-five years in the corporate world and how it was truly real estate investing and multifamily apartments that’s helping him create true financial freedom for the first time. You’re going to love this interview, especially if you’re a newer multifamily real estate investor. You’re going to love this interview with Edward Lowell. Here we go.

Josh: Welcome to the accelerated real estate investor podcast with Josh Cantwell. If you are looking to retire early with forever passive income, you’re in the right place. This podcast is the go-to destination for real estate investors, both active and passive and multifamily apartment investors, new, intermediate and advanced. Now sit back, listen, learn and accelerate your business, your life and your investing with the accelerated real estate investor podcast. 

So, hey, Ed, listen, I’ve been looking forward to having this interview. Thank you so much for joining me today on Accelerated Investor. 

Ed: Thank you so much for having me. 

Josh: Hey, listen, I always like to kind of start off my interviews by asking my guests something that they’re working on right now that they’re excited about. Obviously, we’re kind of unfollowing from covid. It’s a brand-new year. The summer is upon us. A lot of exciting things going on and there is a lot of exciting things going on. Entrepreneurs are still making hay and making amazing things happen. So what’s going on in your life that you’re excited about? 

Ed: You know, it’s kind of interesting. I actually just came back from a trip to the southern part of North Carolina Beach looking at an apartment cottage combination. So something unique. I’m looking at it, frankly, because there’s such an incredible amount of deals that are overpriced today. So I’m trying to find something that works. So my niches are more the smaller side. So I went down the beach. All the numbers look good. I had it under contract, did my due diligence just to walk around and found out that the rents they were reporting were not exactly what was on the leases. So initially it would look good on paper, but then when you got down there, it was like, oh, wait a minute, you guys were telling me, you get twenty eight hundred for this one particular college, you’re getting eighteen hundred, you know, so we ran into some issues there and the whole model, to be honest with you, was turn that into more of the vacation rental site. Right. So taking this beach town and saying, OK, you’ve got long term rentals, let’s turn them into vacation rentals, I think we can make a lot of cash that way. And that’s why we sold it to my investors. But when I got down there, they had just signed year leases to everybody and just completely changed the deal. So that’s the latest thing I’ve looked at. And I was like literally last week. 

Josh: Got it. Yeah. So what lessons did you learn about that deal? Like, what were some takeaways? Obviously sometimes the biggest lessons we learned of the deals we don’t do. So what were your takeaways from that one? 

Ed: Right. And I’ve learned this early on. It’s so we agreed on a contract. They wanted some hard money. They wanted a thousand dollars. It wasn’t a lot of money. But I’m like, well, I have to see it before I just do anything hard. Right. So just going down and not going ahead and signing the contract because you think it looks good. That’s the lesson that you need to learn. So actually go and look at the property before you sign that contract. It puts you in hard money, do different things. We’re saying I have a contract and you still have your 30 days to figure out what’s going on, but they wanted  hard money right away. So you need to go down and look at the property and judge for yourself. Don’t do it, sight-unseen.

Josh: Got it. Yeah, absolutely. We talk about it in our business about doing the reps. Right. It’s almost like going to the gym and you don’t feel like working out, but you got to get some reps in anyway. And looking at deals, making offers, underwriting deals like the reps. We just underwrote a deal this morning. Fifteen-million-dollar deal. Two hundred ten units. It could be a deal. It’s not that a deal is probably retail price. I don’t think it’s overpriced, but probably priced right at the market. Six and a half cap and it’s in about a six and a half cap market. But we talk about doing the doing the reps, right. So going down, looking at properties, underwriting them so we can get stronger and better on the next one. So help me understand your particular strategy. You have ninety-five doors now. You’re already have amazing W2, regular job that pays you really well but offers you some. You’ve been around for a long time, some experience, some seniority, some free time, and you’re building your multifamily portfolio on side. So what is your favorite flavor of multifamily real estate? Tell us about that. And why do you like that niche for you? 

Ed: Yeah, so the niche for me has been in that let’s just call it the twelve to forty unit range. And what I found is there is a lot of mom and pop and the larger investors like yourself aren’t interested in that. Right. Know you’re just not going to get involved in it. So I have that opportunity to go in and earn a pretty good return for my investors and my partners. I’ve done both a partnership and I’ve done syndicate. But that niche market seems to be untapped somewhat. There’s more people getting into it now, but that’s kind of where I play. It’s not that I would never go to the larger side, but there’s so many players. So I’ll just give you an example. I live in North Carolina. I’m near Raleigh, North Carolina, which is a major market just outside of Raleigh. There’s a little town called Wilson that most people wouldn’t know. There was a forty-four unit and sight unseen, had three bidders from California, just pay the retail price, didn’t even see it. So I went sell it. And it’s a dump. I mean, it’s going to sell right now. All right. So I’m trying to stay away from those type of investors. It just will bid for anything and try to be a little bit more in that niche market. 

Josh: Yeah, I love it. What? Benefits, do you see in the niche market, as far as you know, I guess getting more, I guess, appropriate pricing? Right. And how are you trying to find these deals before the institutions and the brokers really bid or list the price really high? Well, some ways to find these more mom and pop deals. 

Ed: Well, one thing is, number one, a lot of them aren’t going to be in the major markets and they’re not going to deal with these. Right. There are too small. Right. So then you have to have local brokers and you get to own their pocket bill, write your pocket list. And so I have the relationships that I’ve built over time with these brokers that when someone brings it on the market, it’s before they even put it on the market, they’ll send it to me. So it was really about having that relationship with some brokers as well as there’s a marketing strategy going out and who owns this particular property and direct mailing? You know, there are two sides to that. That’s a hit or miss, right? You know, you send out one hundred, you might get 10 responses. You might close one deal. It’s that type of kind of crazy. If you get to that point, the broker side has been really helpful for me because I developed relationships with two or three really, really key brokers and they bring me the deals. 

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Josh: So when you look at these smaller deals, help our audience understand. The I guess the upside, right, the upside of these versus the larger deals which are kind of priced at retail or over market and the ability, especially for a newer investor or somebody that maybe doesn’t have 500 units or a thousand units, why can these smaller deals be a good testing ground and still have big upside? We’ve made some of our biggest return on investment has been on the smaller deals because there’s the spread there. So just talk through that. And why this niche? You don’t have to go to a two hundred unit or 500-unit deal to get started. 

Ed: Right. So you’re not you’re going to be one of how many investors in that 200 unit. And so when you’re talking about these smaller deals, it’s usually a joint venture. There’s only going to be two, maybe three guys involved. So your returns are going to be higher as far as your actual cash coming into you. And then also what I try to advise and help with my investors is look over my shoulder, I’m going to walk you through entirely everything. Just going to be me and you. And if you want to go out and do this on your own, you can. So I’ve done this now with two or three investors and they’re like, no, you just keep doing that and you don’t really want all that work up front. And it literally, as you well know, the work is all up front after that. I spend 10 minutes a week talking to my property management company and saying, OK, are we on track, here’s our plan or yet. Yeah, you know, the biggest advantage for an investor is if they have 30 grand, if they have one hundred grand, they can put that in one of these types of deals and get a bit larger return. 

Josh: Yeah, I love it. Yeah, we definitely seen that in our own market. I mean, deals that are say two hundred. We just looked at a two hundred ten unit this morning, you know, price at about seventy-five thousand a door. Fifteen million dollars down around the corner, down the street. We had a deal, I looked at about four or five months ago that was only like a thirty-eightunit and it was priced like forty eight a door. Same area, same submarket, similar style, townhouse style. You know, enter your unit from the outside. There’s no big common space to walk through. Very, very similar. Thirty thousand or twenty-seven thousand dollars difference in the price per door. One because it was mom and pop, the second one because it was listed with a commercial broker actively marketed. They got groups walking through it for five weeks and then they’re going to have the big offer day where everybody offers and everybody bids the price up even further. Right. So that’s the benefit to those smaller deals. So so, Ed, when you got started, you’ve built up now ninety-five doors that a number of transactions you’re building that passive income. When you got started, what was it like? What were some of the fears you had or challenges that you faced because you had this long successful career in supply chain management? And for you to just kind of jump in on the side and multifamily and say, I’m going to try this whole new thing. First of all, why did you start this whole new thing and what kind of mind games are going on, what kind of fears or challenges were you thinking through on this first couple of deals? 

Ed: Right. So, you know, this is probably 2016, early 2017. I’m looking at OK, I’ve got my W-2. I do have a very nice job. I’ve invested in stocks and bonds and done all that stuff, but I’m not really getting where I want. Right. I’m not getting to the point of financial freedom. I’m not going to the point where I feel like I don’t have to work unless I want to work. So what else is out there for me to look at? Of course I did, I read Rich Dad Poor that everyone was right. So that triggered real estate. And so I started listening to podcasts and looking around and saying, OK, how do I get into that? How you can teach me, how do I learn? Because again, most things have been somebody somebody’s done it before, right. You just need to find the right people. So Rod Khleif is actually my coach and mentor. Got it. 

Josh: If you let Rod’s, good friend, it’s got a great, him and Ritzenthaler. They run a great organization for sure. 

Ed: So I stumbled across his podcast, took his course, learned the basics in and out and went out and purchased a four unit and a three unit. So seven doors. That part was pretty easy. There was no fear there because I had two separate loans so it the same thing as buying a house. It wasn’t commercial. Yeah, right. Right. So that part went so easy. I’m like man this is great. And then I said OK, now want to buy a sixteen unit outside of Wilmington, North Carolina, which is a coastal town and this little market, all that no one would know. But I just know the area so that one of sixteen became a commercial loan, a completely different process. I thought finally the deal was the easiest thing. No getting the financing in place, getting all the other pieces that you have to do in a commercial, do in place was much harder. That’s where I really learned the lessons and scared the crap out of me. 

Josh: Yeah, sure. So what how did you overcome it like that first transaction. You’re at seven units now. You’re at ninety-five, you’re approaching one hundred and beyond your first large larger commercial deal like scared of it, but you cannot be kept plowing through. Right. To get that door closed. So the fear is there. You kind of use the fear as motivation. Right. Kind of push you through challenges for raising money or structuring the deal that you ran into along the way. 

Ed: Yeah. So like I said, starting out that that first the four-plex and the tri-plex, that was really me, that was my money that was putting together the principles that I just learned and just using them. And I want to do that for about anybody’s money. I wanted to go through that experience, you know, I wanted to have so that any questions that came up. I know I answered them when I did the sixteen unit again, that was I had some people that wanted to invest but ended up doing it by myself. That one was a challenge because I didn’t realize commercial lending was so different than the residential side. Again, the four-plex, the tri-plex I had to separate, it was the same thing as buying a house. How everyone’s been involved in that process. That was pretty simple. But getting that sixteen unit, that scared me because I had no contract. I could not get the financing in time, so I had to have extensions. So I’m adding money, some more money now to extend the contract because I can’t get the financing that I thought I could get easily. So that piece to me is a big learning curve. Make sure you have your team together before you just start. You think that, OK, if I find this deal, everything is going to fall in place. Maybe, maybe not. You really need to have your team together. And that means your financing your property management company, your CPA, your lawyer. All of those things need to be in place before you even go and bid on. 

Josh: So, yeah. Now, how important was that for 16 unit deal to the confidence that you’ve created now to evaluate larger deals, make more offers? And I think the point I’m trying to drive home here is really that first one, no matter how big or small, is ultimately the launching pad. Right. So how is that deal created a new sense of confidence for you to achieve these larger goals with bigger deals and adding to your portfolio? 

Ed: Absolutely. Once that one was close, it was like, all right, it doesn’t matter to me what size is at that point. It’s just the numbers game. You’re going to add a zero, take a zero off. All right. So I got really good at underwriting and a lot of that, of course, because of my background being a supply chain and looking at numbers all the time and dealing in the negotiations and things like that. So I can sit there and you get one hundred deals. You can tell within five minutes whether it’s something that you want to pursue further or if this tape was just me one. So I think that’s the biggest thing that I find when I’m talking to younger because I run a meet as well, talking to younger people, trying to get involved. I’m like, don’t waste a half hour, two hours analyzing this deal. You can look at it in five minutes to say, now, does this make sense for me to go further or no, let’s just move on. 

Josh: Yeah, I love it. I love the fact, too. Like once it’s a skill that you’ve learned and I think some people take for granted. Now, that’s a lifelong skill that. You have and so doing that first deal, hopefully, of course, it makes a lot of money, but even if it doesn’t, it’s the skill of saying, OK, I’ve got it now, like, I understand what is what I should pay for property manager, what I should pay for maintenance, what are utilities, what are cap rates? How do we structure the finance? I’m gonna syndicate this. I’m going to bring in a partner, use my own cash. What’s the cash-on-cash return? So it’s great to start on smaller deals and then ultimately grow from there. Our model that is built off of200-unit pods. Right. So we’d like to buy 200 unit buildings or build to 200 hundred units in an area so that we can have, you know, usually two property managers or budgets, about eighty thousand dollars a year, but one or one and a half or two property managers, two maintenance guys. So I don’t mind buying a 30 unit or 40 unit. We made an offer of twenty-three units last week. We’ve got a fifty-two unit closing in two weeks. We’ve got a fifty-four unit closing in a month from now because it’s rounding out parts of the portfolio where now you can use a property management company and have some scale so that they can be-bop around from from property to property. So you know, if you’re only buying these large complexes, that’s fine. I have, I have a five hundred and fifty-two unit. I have a seven hundred and thirty unit. We’ve got some big boys for sure. But again, they’re still broken down into these two-hundred-unit increments. Right. So in your scenario you get the two hundred you got what can what. One property management company, a couple of maintenance guys. Then you could build the second kind of pod second group of two hundred and go from there. It’s really scalable, this business. That’s why we love it so much. 

Ed: Yeah. Yeah, you’re absolutely right. And obviously the synergy that you’re having within that market helps. Yeah. So one my one property management company in Wilmington, North Carolina manages my thirteen and my sixteen unit so and they’ve been fantastic. So I’m continually trying to find properties within their realm because they’ve just been hit. Another part that’s the other thing that you really, as you well know, you’ve got to vet your property management companies. I just had to let one go. You know, they just were not performing, so I had to find a new one. 

Josh: So that was some things. What are some KPIs or what are some metrics or what are some expectations that you have for your property managers? I get some advice that you could pass on to our audience. What do you think some things that you think are important and a property manager and why did you let that one go? 

Ed: Right. So when I look at property management companies, I’m looking at a business plan I’m presenting them with, OK, we’re buying this particular complex units, either for value add or we think it’s kind of there, but it’s a little bit below market. It just depends on what it was. So in this particular case, we weren’t really looking to raise rents incredibly, but we did see that they were under market. It was more about getting one hundred percent full. And what I found is this particular company was really more involved in single family once I got know, understanding what they were doing and they were just not turning over the reviews as fast. They sure that it was taking them six weeks to review and that’s just way too long. So I let them go. They had four units vacant. Get the new property management company, that area, and selected those four units rented in four weeks. Yeah. And they went and cleaned them. They did the whole thing and in four weeks they’re all rented. So it’s such an important part of your plan. If it’s not obviously owned by you, your probably eventually could be part of your portfolio. But if you’re using a third party just to make sure you have the right team.  

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Josh: So now that you start to build I mean, one hundred units is a great milestone, you’re going to build way beyond that and you’ve already achieved some of the success of some of our audience would love to achieve. So what is some advice that you would give your younger former self about real estate or some advice you pass along to our audience about them getting started or them working on smaller buildings? Or what are some things, some big takeaways that you’ve learned in the last few years? 

Ed: Yeah, number one is start as soon as possible. Yeah. If I could go back, I’d tell myself to start at twenty, right. Yeah. It’s the same thing to start right away. The second thing is there are people that can help people like myself, people like yourself go find someone that’s done it and have a mentorship and ask questions. There’s a lot of people in the industry. That’s one thing that I’ve learned. They are more than willing to help you. I don’t think you have to do it alone, and especially if you’re just starting out and you say, well, I’m afraid of making a mistake. Well, joining with someone, you know, 

Josh: Welcome to the club. I’m afraid of making mistakes every day. Yeah, you got to go anyway, right. You’ve got to let the fear kind of push you from behind instead of stopping you from the front. Right. Every day I’m a little bit scared of some mistake I might make, but you go anyway. 

Ed: Yeah. And then so I’m saying, look at me the other day. I’m like, there’s lots of young guys who are like, well, we don’t know how to get started. I said, I’ll help you get started if you find a deal. That’s the biggest thing. Right? This man is trying to find a new people that’ll help you. And I said, I’ll give you all the advice in the world for free. I don’t know. I’m not I’m trying to give back because I’ve gotten so much out of it. 

Josh: Yeah, I love it. So as we kind of round third and head for home, I’m going to ask you the final five final questions to pass along to our audience. Learn a little bit more about you and about your philosophy in real estate. So question number one is, what is your favorite way to find multifamily deals right now? 

Ed: It’s been a relationship that well, with one broker. We have this unique relationship. We’ve closed on so many properties. The one I was telling you about with, matter of fact, they had higher offers, but she was able to convince them because of my background and what I’ve done. And she knew I could close that. That was an important piece of it. So finding that piece and having that broker relationship was very, very important. 

Josh: Love it. Yeah, we bought we owned thirty-five hundred units, but we’ve used kind of the same small group of brokers for most of them, hugely important relationships. You don’t have to have 30, 40 brokers you work with. Usually a small handful is all you need. Second question, what’s your favorite way to find capital for your deals or to find joint venture partners that you can partner with to get deals close and get the money raised? 

Ed: Right. So there’s two ways that I’ve done it. One is all he has to be. You always have to think about when you talk to anyone. What are you doing? Well, this is my day job, but also invest in real estate because you never know you’re going to talk to. So just to give you an example, I was talking to a friend of mine and I said, yeah, I’ve gotten into the real estate site. And he said, you know what? My buddy used to be in real estate. He’s talking about getting back into it. Let me connect you with you. And he became a joint venture partner. Nice. And then meet ups, start your own meet up in your town, in your city. Just a multifamily meet up, just the education site. I’ve met many partners, investors that way, just hosting a multifamily meetup. 

Josh: Got it. Love it. What is your favorite book or your favorite piece of advice that you were ever given?

Ed: Well Rich Dad, Poor Dad? That is the one that got me into this. So that’s kind of the go to the other best advice I’ve ever had that I didn’t realize I needed is meditation and meditating every day and going through the stages of meditation about where you’re at today. What are you grateful for? Where do you see yourself in the future? That is key to me and to see the success of that man. 

Josh: So let me pull back to, hold on. I’ve had a little bit more help me understand. Like for people that don’t meditate, how do you meditate? How do you prepare yourself to basically decompress? Like, do you do it first thing in the morning? Because this is more of an entrepreneurial hack than a piece of advice, because thinking, quiet space, so important, how do you actually execute that incorporated in the busy day that you have? 

Ed: For me, it’s in the morning. I’ve done it during other times of the day. That seems to be the best and literally the timing, you can take two minutes and go through three different stages. You can spend two minutes and say, OK, where am I at right now? Do I feel my body? What’s going on in the world? I feel the ground. Do I hear what’s going around me? Then you can spend another two minutes just talking about or thinking about, well, where do I want to be, you know, what’s going on, what’s my goals? And then the last two minutes of actually seeing yourself in that role in whether it’s relationship or whatever it is where it is visualizing vividly, so I’ve literally done this for 10 minutes and sometimes I’ll be 30 minutes, it just it just depends. But I just go through those stages. 

Josh: I love it. I love the self-visualization, the actualization. And it’s just your mind thinking and putting you in the space and your body kind of has a tendency to just follow what you’re thinking about, right? Yeah, that’s a great quote. I can’t remember who it was, but it said, you know, we’ve become what we think about all day just by spending a few minutes kind of kick the day off. So, so important. Let me ask you this other question. I’d love to hear this one, because I’ve got some wild answers at what is your favorite place to go, vacation or to decompress? 

Ed: Yeah, I’ve got two. So I grew up in the coast, so the ocean is always going to be calling to me. But actually I find myself decompressing more when I go to the mountains, when I just go and just look at the scenery. North Carolina advantage because we are both I’m two and a half hours from mountains or the coast, so I can do either. And last weekend I was in the mountains and just sitting there and doing my meditation in the cool air and looking out at the beautiful scenery. That’s where I decompress. 

Josh: I love it. Last question is, who’s been the mentor that you’ve had that’s had the biggest impact on your life and why have they had such a big impact? 

Ed: Would have to be Rod Khleif. He’s been my mentor and coach for several years now, and he had the biggest impact because he not only talked about the real estate side, but he does talk about the mental side, you know, so it’s an eighty, twenty rule, twenty percent now is just the mechanics going through process eighty percent of his your mindset, you know, where you at. And so that part, I think, has been the biggest influence on me. 

Josh: That’s fantastic stuff. And so our audience, I’m sure they’re going to love this interview. A lot of things, a lot of takeaways, especially focusing on those smaller deals where they can even make bigger profits. If some of our audience wanted to reach out. Connect, joint venture invest with you, where can they get more information? Learn more about you? 

Ed: Yeah, the best way to reach me is through email. And that’s Edward@blackforestlimited.com

Josh: Fantastic stuff. Ed, listen, thank you so much for joining us today on Accelerated Investor. Thank you. 

Josh: So, hey, listen, I hope you really enjoyed that interview. I appreciate it so much. And I’m so grateful that you’ve listened to that episode, whether you’re at the gym, whether you’re in your car, whether you’re in your home office, whatever you’re doing, just want you to know how grateful I am and thankful I am to you for, you know, engaging with me, being part of the accelerated real estate investor community and just having a good time with me on these interviews. I hope they’re having a huge impact on your life. Don’t forget to subscribe so that you never miss another episode. And also, don’t forget to join our free real estate Facebook group called Accelerated Real Estate Investor. Go into Facebook, search accelerated real estate investor and join the community today. 

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Ed has a successful career in supply chain management and invests in smaller, mom-and-pop, multifamily real estate on the side. He started investing in real estate to really get himself to a place of financial freedom and to start meeting his retirement goals. Today we discuss some of the reasons he likes the smaller deals, important pieces to have in place when investing, and how to get past the fear of the first deal.

Ed’s niche market is the smaller multifamily investments, in the twelve-to-forty-unit range. This is a market that is overall untapped. Many bigger investors and brokers won’t really look at investments this size. Ed finds many of these properties off-market, and the way he finds them is through brokers. It is crucial to take time and build these relationships. Ed has two or three brokers who pass the deals onto him before they’re even on the market.

Why do the smaller deals have a larger return on investment? There may only be two or three people involved, so your returns are higher. These smaller deals aren’t priced as high as the bigger multifamily investments, nor are there as many people interested. With the way the market is right now, these smaller properties likely have a larger profit margin.

Ed’s big takeaways:

  • Start investing as soon as possible.
  • Find a great mentor to get you on the right path. Ask questions.
  • Don’t let fear stop you.
  • Have your team of people together before you start: your financing, your property management company, your CPA, and your lawyer.

Start with smaller deals and build if you want to. Once you close the first one or two deals, you’ll feel much more confident investing in more and more properties. Investing in smaller properties is very scalable, and a great side-hustle to cushion you financially, if done right.

What’s Inside:

  • Facing the fear of the first investment.
  • Why did Ed get into multifamily investments?
  • Why mom and pop deals may have a great return on investment.

Mentioned in this episode​

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