From $20K/Year Salary to $20K+/Month Passive Income w/Ashley Hamilton

0:00This investor bought her first property when she was making only$20 ,000 a year. Now she generates $50 ,000 in cash flow per month just from her real estate portfolio. That is financial freedom, and she achieved it by just buying the same types of properties over and over. And now she's using that freedom to completely transform her life and her health for the better. Let's hear exactly how she did it.

0:30Hey, everyone. I'm Dave Meyer. I'm a housing market analyst, and I've been an investor myself for the last 15 years. And on this podcast, The BiggerPockets Real Estate Podcast, we teach you how to achieve financial freedom through real estate investing. Today's guest on the show is investor Ashley Hamilton. She lives and invests in Detroit and is one of the all-time most popular podcast guests we've ever had. Ashley started her investing career when she was struggling as a waitress with two kids and slowly grew to 10 properties when she first came on to the podcast back in 2019. Today, we're having her back on for an update because she has accomplished a lot.

1:11Ashley has grown her portfolio to 40 properties today, but she's focused on maximizing the cash flow she can get with a relatively manageable number of properties instead of just trying to scale to as many doors as possible. And most importantly, she's using her real estate and the time freedom it has allowed her to make huge improvements to other areas of her life. Ashley is going to share all about a huge personal health journey that was only possible because she took that first step and bought a property more than a decade ago. This is a super inspiring and fun story of how real estate can change more than just your bank account.

1:49Let's bring on Ashley. Ashley, welcome back to the BiggerPockets podcast for your third appearance. Thank you so much for being here. Of course, of course. I'm super excited to be here. And I cannot believe three times, OMG, this one's gonna be the best. Yeah, I think we're gonna make it the best. We have big shoes to fill though. You've had some great episodes on the BiggerPockets podcast before. But maybe for people who haven't listened to those first two episodes, fill us in. How did you get into real estate in the first place? Absolutely, yeah. So at age 23 years old, I found myself as a single mother of two kids under five.

2:25in 2009. I was 22 years old and had no financial backing, no business owners in the family, not even a homeowner myself. But I knew I wanted more and I didn't want to feed into the statistics that have been labeled on me. So basically, I went to a Web & Her or a free live event here locally in Detroit. And I didn't know anything about real estate, but it was trying to get us to invest in real estate. Long story short, I sat through the whole three-hour presentation. And out of everything, only two things stuck out to me, right? Be fearful when others are greedy and be greedy when others are fearful.

3:00And the other one was be willing to spend a couple of years of your life living how most people won't so you can spend the rest of your life living how most people don't. So that was all I took away from it. And then after I left the presentation, I started to look around me and I seen nothing but foreclosures, auction, hood homes, bank foreclosure, because again, it was 2009. So I took that as a sign. I cut on the radio and everybody said, don't buy in Detroit. It's a war zone. You'll lose your shirt. The market's in the tanker. Real estate is bad. And then I see all the foreclosure sign. I was like, well, hey, this is a sign to do the opposite and be greedy when others are fearful.

3:39Yeah. A lot of people were fearful in 2009. That's pretty much everyone. Yeah, for sure. So that's kind of what started it. But again, at that time, I was making less than$20 ,000 a year as a waitress at Red Lobster, again, single parent of two. I had no real education or anything like that. So I didn't have any funds or resources to get started with real estate. Actually, the only time that I had ever seen$1 ,000 in my bank account was at tax time, right? Once a year where the middle class and lower, they'll get a tax refund. So I knew I was expecting a$6 ,000 refund in 2009. So I said, hey, I look to use that to buy my first property.

4:18And that was enough. Yeah, absolutely. How did you buy a first deal with a tax refund? How much was the deal you bought and what did you have to put down? So that's the caveat, right? Everybody was like, oh, that's a great down payment. But how did you qualify for a mortgage? Well, the thing is, the house was$6 ,300. Like that was it. Oh my God. That was the purchase price. And obviously, when I say that, people are thinking like, well, it had to be a rundown property. It needed, you know, a full remodel needed to be demolished. But no, actually, it was a three bedroom branch home, right on the same street as the park close to eight mile here in Detroit.

4:49So very tree line neighborhood. And it needed about 3000 worth of work like plumbing, paint and things like that. But and now today, this house is worth$130 ,000 today. So yeah, I can't do that math in my head. But it's like 20 times the value something like that. That's insane. Maybe the best return on equity I've ever heard on any deal. That's amazing. A very creative, obviously, way to get into real estate and use the resources that you have, even when they're limited, like you said, but figuring out a way to get started and take advantage of a time where a lot of people were scared. And I know everyone's probably thinking, oh man, it must've been so easy investing when things were 6 ,300 bucks to buy a house.

5:29And And yeah, in retrospect, it might be. But no one knew at that time that things were going to take off. Like people thought that the bottom could take years. And actually, if you start in 2009, the bottom didn't come for four more years. So it is, you know, practicing what you preach and being greedy when other people are fearful and sort of having the vision to invest, even though things weren't as obvious as they might have seemed back in 2009. Yeah, for sure. Absolutely. So that property, like I said, it cost$6 ,300. And the crazy thing about it is I was getting$7 ,000 a year in cash flow.

5:59just on cash flow. Right. And then it did take a long time because actually I did not get my first mortgage in Detroit into 2019. So actually 10 years later before banks really felt comfortable to start lending in Detroit and before the values to start going up. So it did take quite a long time. But at the same time, like I knew, you know, I mean, the numbers just made sense. I owned it free and clear. And even at seven grand a year, the expenses were very, very low because obviously if the property is worth$6 ,300, the taxes aren't a lot, the insurance isn't a lot. So it just made sense. And I don't want to sound, you know, obviously we're talking about the past, but I don't want to discourage people that are watching this episode right now that, wow, I can never do that with$6 ,300.

6:42Well, you can, you just have to use it as a down payment. There's first time home buyer grants all over where they'll give you up to$25 ,000 in down payment assistance. And then obviously you can use people like Hart Money Lenders and stuff. I know a lot of the lenders that I use, they're funding 90 % of purchase, 90 % of rehab. So you still could get into a property for around that price, but you will be using leverage as well. So don't want to discourage anybody that's looking to invest now. Now, I imagine that probably changed your lifestyle quite a lot. Like you said, you were making less than 20 grand a year waiting tables and you're go to making seven grand a year in cash flow.

7:19That's like, I would imagine be a windfall. did you use that to supplement your lifestyle or did you just use that to buy more property? Right. And thanks for asking that question, because a lot of investors don't talk about that. Even to this day, like 80 % of my income from businesses go directly back into the business. So when I was building from nothing, every dime I got. So for example, my rent was$700 a month. I still didn't change my lifestyle. I used$600 of that to invest and save up for my next property the following year. So that was the plan. Just buy a property every year using my tax return and then whatever I can save monthly.

7:56So that's what a lot of new investors, I feel like, you know, don't understand. They buy a rental property and now they're like, oh, I can get a new car, you know, or I can go get the Tesla or, you know, start to use the money for a lifestyle. And you can't do that when you're building. To me, my philosophy is the first three years, use all your income, you know, your profit and reinvest it into the business to build your solid foundation. And then you can start doing the lifestyle creep where, oh, I can afford a nicer car now. Oh, I can afford, you know, to invest or save or do other things. That is amazing advice.

8:27It's totally up to you. Like you could invest, buy one property and use it for lifestyle. But like the math is extremely clear. The longer you reinvest your money and if you can maximize your reinvestment and do that as long as you can, you will just get richer. And it's not even close. If you look at a compound interest calculator, for example, and you just Google it, it's one of the most eye-opening things I've ever seen in my life. If you just see how much the difference is, even if you're making, let's say,$7 ,000 a year in cash flow, the difference between reinvesting all$7 ,000 and reinvesting$2 ,000 of that can be the difference of hundreds of thousands or even millions of dollars by the time you actually retire.

9:09And I know that sounds crazy, but it is really, really true. I recommend it if you haven't done this before going to Google that. So Ashley, it sounds like a great scaling plan. You know, you're using your tax refunds, you're saving money. That's just good fundamental real estate. Like that's how most people do it. It's just taking what you got and putting it into it. But how did you scale quickly? Like how did you go from buying one property a year to having a much more sizable portfolio like you do now? Yeah, absolutely. So I have to give credit to the one and only BiggerPockets. and my first interview with David Green and Brandon Turner, of course.

9:43Yeah, so at the time of my first interview, I had 10 properties free and clear. I was semi-retired. You know, I was living way below my means. And I thought that was it for me because that was my original goal, not having any formal education, not knowing anything about real estate. I kind of just, you know, went in blindly. But after the first interview, you know, I got emanated with calls and messages. And then I got David Green's book about the bird strategy and things like that. And financing was possible in Detroit now in 2019. So I basically just said, hey, I'm going to give this thing another try.

10:15I started buying August of 2019. My interview came out May of 2019. And from August 2019 to August 2020, in the middle of COVID, I bought 11 doors in just one year. Oh my God. Picked a good time to jump back in. Yeah. It was like a collapsing time. So what essentially took me 10 years to do, I was able to do in one year and even buy an extra door. And the biggest difference was using leverage, right? So previously, all of my deals were cash. It was sheer savings, investing all the cash flow and, you know, in working and things like that. But the second half was sheer leverage. You know, now, to be honest and brutally honest, to give you guys something to think about.

10:54So my 10 property portfolio was generating probably around four grand a month at that time in cash flow. And then the 11 properties that I refinanced, they were only generating about$2 ,500 a month. So my free and clear portfolio was still kicking the butt of the leverage, but I was still able to get way more doors, a bigger net worth increase. So just that was to me a great case study that I even use today. Like how did my portfolio perform with free and clear and how has it affected me negatively or positively when I leveraged it? So I lost a little cash flow in there, but I was still making an additional$2 ,500 a month off 11 properties versus a$4 ,000 off the 10 properties free and clear.

11:34That's a really important trade-off for everyone to think about because, again, there's no right answer here. To me, it really kind of comes down to where you are in your investing career. If you're trying to grow, it's often worth it to give up cash flow to acquire, if they're good units, like great units that you want to hold on to for a long time, because$2 ,500 a month, that's still a lot of money. You know, it pays for a lot of your life, but that will probably become$5 ,000 or$10 ,000 a month by the time you truly retire, and it's worth it. But of course, there are risks sort of in trade-offs to carrying on that debt.

12:10my recommendation sounds like you believe the same thing is like, as long as it's cash flowing, and you like real cash flow, like not just like pretend social media cash flow, but like, if you have real cash flow, that allows you to take on debt in a responsible way. So that even if like you said, if there's a rent freeze, or, you know, something adverse happens, which does happen, these things do happen, like if you can withstand that and use debt at the same time, can be a very powerful tool to scale. I definitely agree with that. And especially what you said about real numbers versus social media, like that is so important.

12:44The bigger pockets calculator, like, you know, I've had people say, well, I've used a bigger calculator, but I don't have any cashflow. So I just did the numbers myself. And I'm like, wait a second. No, that's not real cashflow. Right. You have to have the real cashflow. And then I've also had people say, well, it's negative cash flowing, but the appreciation or, you know, and that's great. But again, just like Dave said, like once there's a rental freeze or just the inevitable happening, whether it's life or anything like that, you know, you cannot sustain, you know, having negative cashflow.

13:14So making sure that you use the real numbers for sure, and that you're cash flowing, even if it's a hundred bucks a month, it has to positively cashflow. I couldn't agree more. I think people got into the appreciation, no cashflow thing in 2020 or whatever, which is a very unusual time in real estate. Like you can't, that's probably not going to happen again, maybe in our whole lives. We don't know, but it's very, very unusual from a historical perspective. So I wouldn't personally count on that. Absolutely. I want to catch up though, Ashley, with what you're doing today, but we got to take a quick ad break.

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18:55Welcome back to the BiggerPockets podcast. I'm here with investor Ashley Hamilton, who is just catching us up on her origin story, if you will, on how she got started in Detroit in 2009, scaled to 10 units. Then in 2019, started using leverage, got another 11 units. What is your portfolio look like today? So today I only own 45 properties. That's a lot. That's a lot, right? But if you're looking at social media and stuff, I feel like a small girl in this realm of real estate investing for social media. But what's most important is of that 45 properties, I'm cash flowing$50 ,000 a month. And I'll break it down.

19:36And I'm the queen of receipts. So like bring me back on and I'll open up some sheets for you or send some appraisals, but I love to show my receipts. And that's what kind of spearheaded this next journey that I'm on, being able to maximize cashflow without increasing the doors. So I look at 45 properties after my second interview with BiggerPockets in 2023, I doubled down with Airbnb. So right now I have five properties in the city of Detroit on Airbnb. And I know I say Airbnb because you can say short-term rental, but I'm not going to lie. Just with all the businesses I have, I'm strictly on Airbnb, so I can probably make more.

20:11So right now I'm making$20 ,000 a month solely from Airbnb. And I show it on my page every month. Like the beginning of the month, I show what the previous month did and what the new month is expecting to do. So that's public information and it's not hidden. And what I would like to say is even though I started an Airbnb in 2023, I started with one unit, I still use the same principles I did in my investment journey. So I have not taken a salary from my Airbnb earnest, even to this day. And like I said, I made$22 ,000 last for the month of August. And none of that went to me because I'm literally funding the sixth property strictly off the revenue from the five Airbnbs.

20:50So in about two months though, the good thing about it is I'll be completely free of all debt from the Airbnb portfolio just because I'm generating so much. And then I have 15 section eight rentals. Obviously I started in 2020 converting all of my new rentals into section eight. And that was strictly because the rental freeze section eight was guaranteed. They were given incentives and they were given about$200 more than market rent at that time. Yeah. So my Section 8 portfolio, it generates$25 ,000 a month. And then the reason I say that because with Airbnb, even though it's generating the$20 ,000, I have cleaning fees and stuff like that.

21:27And just my regular, you know, our rental portfolio, that's just normally cash and some Section 8, but that's the portfolio. And out of the 45 properties, I only have four multifamilies, which are duplexes. So most of them are single family. Huh. You've invented and succeeded at a totally different approach to real estate investing that I've ever even thought about. Like, I think everyone goes through this stage where they are starting and they use leverage to grow. And then later in their career, they deleverage and pay down their mortgages so that they can get to free and clear. But just from circumstances or intention, like you did it the exact opposite way, which is so awesome because you've basically with free and clear property.

22:13That says every listen, everything is risk, but a free and clear single family rental is about as low risk of an investment in the world as you can probably create. And so you've created an income for yourself with almost no risk. and now you're able to take on a little bit more risk because you have your, essentially your lifestyle is just paid for on these low risk assets. It's so cool. I am so jealous. Don't be, that's okay. And like, I have so much, like, I mean, cause obviously it's all self-taught, but it's mostly listening to the market, listening to the knowledge and weeding out the, you know, the smoke and stuff like that and just figuring it out.

22:50Like one thing I noticed about my journey, I didn't know anything and that's what kind of got me to be more brave because if you were in real estate before and you lost everything in 09, you would be scared or more cautious to invest. Or if you had family members that did that, I didn't have anybody that was a real estate investor. So I really didn't have those naysayers. So I just took it on. I didn't know what I was doing was really risky, but that's exactly right where you were getting at. I am able to take a little more risk now because I do have that nest egg building up. That's honestly super cool.

23:20I love it. Really quickly, I just wanted to talk about just some things that I've done. This is very new to me. This is the last year. So again, and this is my market. I'm in Detroit, obviously, but I've seen this across plenty of markets. There's opportunities. So in Detroit, the most popular asset class is a three-bedroom, one-bathroom home. But I found out that in Section 8, they're paying$2 ,000 a month for four bedrooms, and they have like 20 ,000 families that just are in smaller units because there's not a lot of four bedrooms in Detroit. That was number one. So I studied for my builder's license.

23:52And so I'm a certified license builder in the state of Michigan. Yes. So that taught me what a legal bedroom in Michigan was. And I said, wait a second, I can convert basements into legal bedrooms. All I have to do is add an egress window, which is about three to$5 ,000. So long story short, to date, I've turned five of my three bedroom single family homes into four bedrooms by adding a legal bedroom in the basement. So with the five properties alone, by me adding the fourth bedroom, I've been able to generate $1 ,300 a month in additional cashflow. Wow. Additional cashflow just off that. So basically what a three bedroom would rent for about$1 ,500 here, a four bedroom would rent from$18 ,000 to$2 ,000 just depending on the demand, right?