How I Built a $100K/Year Passive Income Stream in 5 Years

0:00This investor buys houses for only$100 ,000 just outside a major city. He fixes them up, he rents them out, and repeats the process. It's only taken him six years of using this simple formula to grow a portfolio that's now cash-flowing$9 ,000 of passive income every single month. There's no big secret to his success, and in fact, he's helped dozens of other investors buy almost identical properties and start their own journey towards financial freedom. Today, he's sharing exactly how he's done it so you can follow the same path too.

0:38Hey everyone, I'm Dave Meyer. I'm the head of real estate investing at BiggerPockets, and I've been a rental property investor for more than 15 years. Our guest on the show today is agent and investor Joe Hamill, who lives and invests outside of Detroit. Joe only got into real estate six years ago, but he's managed to buy 24 properties which generate over$100 ,000 in cash flow every single year. And on the show today, he's going to explain how he scaled such a profitable portfolio with very affordable properties, why he's converted to the slow BRRRR strategy, love that, and his best advice for other investors looking to do these exact same types of deals.

1:20Let's bring on Joe. Joe, welcome to the BiggerPockets podcast. Thanks for being here. Thanks, Dave. Thanks. Great to meet you. Yeah, super excited to have you on and hear a little bit about your story. So give us your background. Where are you from and how do you find yourself getting into real estate investing? Well, I'm originally from Ohio. I now live and invest in the metro Detroit market. And I signed my first lease. It would have been about five years ago exactly to today. It would have been on October 1st, 2020. Since then, my wife and I, we have bought 24 properties. It's 31 doors and we're cash flowing.

2:02It's 115 ,000 a year after budgeting for vacancy maintenance at CapEx. Sounds like an incredible portfolio to do in five years. And you've also done that across two really different markets starting in 2020. Fast forward to today, totally different landscape that we're in. So I'd love to just break down how you've done this, but would first just want to understand sort of your goals and motivation for being an investor in the first place? I was working in a factory, I was in manufacturing, and I quickly realized that's not what I wanted to do for the rest of my life. So when I was kind of searching, trying to figure out what I wanted to do, I was talking to my buddy, Jake Graff, and he's like, hey, man, you need to listen to Bear Pockets.

2:47And so for many of us who have done that, it flips your world 180. He was house hacking at the time. So he explained that to me. And so I went down the rabbit hole of multiple podcasts a day, watched all the YouTube videos. I read all the books. I was in the forums. And so that's when it really triggered like, this is what I'm going to do either full-time side hustle. I'm going to figure this out. Well, I absolutely love hearing that, that BiggerPockets has helped you hone your vision and figure out how to get into real estate. What is it about real estate that's resonated with you that previous careers in manufacturing wasn't doing for you?

3:24It's the common man's path to wealth, right? It's just the greatest investment. When you look at how much money you can make in cashflow and then appreciation, loan pay down and your tax benefits, it's just, you can't compete with it as an investment vehicle. So it's just dump all my money into it is the best place for it to be. I love that approach. I've never heard it described specifically that way, but it makes so much sense to me. Actually, what makes real estate so interesting that I love is you don't have to like invent anything. You know, it's a path to entrepreneurship where you're not having to come up with some new genius business model.

4:04This is just a repeatable formula that pretty much anyone can follow, which is super cool. So how did you go about financing, finding your first deal and what kind of deals were you looking for off the bat? Yeah. So I had done two deals in Ohio where I bought land, I bought a house and I sold those when I moved to Michigan. And so that was where I initially had some capital. I made like 40K, 20K on each of those. And then by working, I came to Michigan, I had like 50, 60 grand. And so my first property, I was really looking for a house hack, right? I was trying to do what I was supposed to do.

4:42But coming to Michigan, that was a bit overwhelming. I didn't know how to recognize what a good house hack was. So I ended up going with a safe bet, which was I just picked a single family home and it backed up to a nice neighborhood. It was on a busy street, but I got it for$103 ,000. I was going to live there for a while. And I knew eventually my wife and I would get married and we'd buy another house and that'd be my first rental property. And so that ended up being the first property. I bought it for 103. I put 15K into it. It's worth like 190 today. And I thought it was going to rent for like 1300 a month, but I ended up signing a two-year lease at 1600 a month.

5:22And so it's cashflowed$600,$700 a month for five years straight at this point. That's incredible. Well, it sounds like you did pretty well figuring out where to buy the first one. And this podcast has a long history with Detroit. I don't know if you know this, but like Josh and Brandon, when they first started, Josh loved to hate on Detroit. But I've heard that it's one of those markets where if you know the market well, you can do really well, but it's not for people who are maybe out of state or haven't spent the time researching it. Do you think that's true? I mean, I say this in good fun. There's two types of people who dog on Detroit.

6:02and it's people who have never bought a property there and people who did it wrong. Yeah. Okay. That's fair. Because if you do it right, you can really make a lot of money. And we've really identified what doing it right looks like. We call them bread and butter deals. And if you buy those, they're just a great balance of price, rent, ROI, location, and we see a lot of success with them. That's great. So what are those bread and butter deals? Is it similar to what you bought on that first one. These properties, there's your suburbs, bread and butter, and then there's your Detroit bread and butter.

6:36Suburbs are going to be a little higher price, a little lower ROI, and a little easier experience. And that's the difference between suburbs versus Detroit. And so to break it down as concisely as possible, it's going to be an 80K to$130 ,000 house. They're going to rent for$1 ,100 to$1 ,500 a month. They're 1 % to 1.4 % rule deals. Cash on cash, 6 % to 12%. Cash flow, $50,$300 a month. They're good appreciation. We grade properties A to F. And so these are what we call a C plus B minus. So what is your definition of a C plus? Describe the neighborhood for us. Well, yeah. So in my portfolio is a great example, right?

7:16I have 30 plus doors and in five years, I've had two evictions and I've had maybe five or six tenants stop paying and I've had to send them a notice to quit and get rid of them. Somebody stole a trash can once and somebody kicked in a garage door or the only two crime that I've dealt with in much. Yeah. Way more than that. Yeah. Right. And then vacancy is another one that people will look at. I have very little vacancy. I have one unit vacant right now just because the tenant moved out a week ago. So that's what I'm calling a C plus B minus market. And what condition are the properties in? So I do a lot of light to medium sweat equity and probably favoring the medium sweat equity.

7:57So I'm doing the cosmetic plus type rehabs. Now, again, you can find the turnkey at the higher price range of the bread and butter. I'm staying lower price range with more sweat equity. And what does that deal look like? So you said you're buying it for what, 80, 100 grand and putting how much into it? In 2023, my average single family home purchase price was$80 ,000. And my average rehab was probably 15, maybe touching 20K rehab. I'm asking these questions about the specifics because these seem like very approachable kinds of deals, right? Even if you're putting 25 % down with traditional financing on an$80 ,000 property, it's 20 grand down, you know, with a reno of 15, 20K, you need closing costs, you need reserves, you know,$50 ,000, obviously a lot of money, but more palatable to a lot of people who maybe don't want to go the house hack strategy and put three and a half percent down or live in a super expensive market, this just seems quite achievable for people who are thinking about or are comfortable with out-of-state investing, presuming you don't live in Detroit.

9:08You know, the question I think you hear about Detroit that I'm just curious your opinion on, Joe, is like, what about the appreciation? Because it seems like cash flow is pretty solid, you know, post-COVID or going into sort of a flatter market. What do you think appreciation goes from here? You know, I'm sure you've looked at the data, but recently we've done really well, especially in the post-COVID era. I mean, we're in the top, in 2023, we were number one, at least by some sources. And ever since, we're still 6%, 7%, even just 2024 to 2025, which most markets, they can't say that. And I think it comes down to one major thing.

9:45I think it's affordability. I think the other markets that are struggling, it's because of affordability. And the reason why Detroit isn't is because we still are a low enough price point that we have room to grow. I agree. It's kind of been my whole thesis is just that these markets that are affordable, people are going to still keep transacting. Whereas other markets I invest in, it's just unaffordable. And you see the market coming down. There are obviously still people doing stuff, but the number of transactions is just really low. And we've just reached the point where we can't stretch affordability.

10:19People are not able to pay. And maybe when things get a little bit cheaper, they'll jump back in. But these markets, Milwaukee, obviously Detroit, Cleveland, a lot of the Midwest, this is where things are happening because it's where people who live there and work there and have normal jobs are still able to participate in the housing market. That's a healthy housing market. I think bodes well for those types of markets in the future. So this is fascinating. Love hearing the specificity of the kinds of deals that you're buying here. I'd love to hear a little bit about your story, though, how you've evolved your own portfolio.

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14:21Welcome back to the BiggerPockets podcast here with investor Joe Hamill, who's been growing his portfolio in Detroit for the last five years. We heard a little bit about your first deal where you bought a house hack. How did you grow your personal portfolio from there, Joe? I bought that first one, rented it out in 2020. And then in 2021, we bought, I think it was five deals. And the funding for that came from that original 50-60K that I moved to Michigan with. And I also, 2021, I was able to pull out my 401k penalty-free using the COVID, whatever that was. So that was more funding. I did a couple of the soft burrs.

15:06You've been calling them a slow burr. We call them a soft burr. Whatever you want to call them. Yeah. Let's use slow burr. We got to, we got to standardize this. Slow burr is what it is. I agree. It's a better name than soft burr. So it was being able to pull some out there. And then my wife, she had a good income and we both determined, Hey, let's live 100 % off of your income. And then everything that I make through my job and as an investor, we're going to reinvest all that cashflow. So that was the funding. Every time I hit a certain threshold of money, I would go look at the market and I'd pick out a deal and execute.

15:41So you would, you know, have one going, you would do the renovation, rent it out, get rents up to market rate, and then you would refi. So you would basically take some or all of that money, combine it with your income to finance the next one. Exactly. And most of the time it was some of the money. I did hit one perfect burr. Wow. That's awesome. Wow. I'm asking that because if you listen to the show, you've heard me talking about the slow burr. And I like this because it's more realistic and it's just a little less pressure in today's day and age. And just want to reiterate that doing the quote unquote perfect burr where you can refine out to 100 % of your cash is just pretty rare these days.

16:20I'm sure it still happens, but it is pretty rare. And I really just think in the new realities that we're facing, having appropriate expectations is super important and not expecting to achieve returns that just don't exist anymore. That doesn't mean they're not still life-changing events that are going to help you move towards your financial goals. It just means we're not in this free money period where everything was perfect. So I just want to make sure people understand that the BRRRR still really works. These perfect BRRRRs were just there at a certain time and place and is not what we should all be expecting.

16:54So, you know, you keep doing these same deals for five or six years. How have you avoided this shiny object syndrome that I certainly get in real estate? I think a lot of people do where you want to try everything. You want to do short-term rental, you want to flip, you want to do creative finance, you want to do everything. How have you and why have you just stuck to the same approach? I think you said it in terms of haven't you had shiny object syndrome? I think it's because I was aware of not having it, right? That was a very conscious decision I made early on was don't do that. Get good at something and get bored with it, whether it's your job or investing.

17:30And I had something, I hit success on my first one, two, three deals. And so I was just clear the slate and repeat the same thing 20 times. That's awesome. It seems like even though the market has been hot, finding deals hasn't been hard? No, I would say in 2024 was kind of a shift in my strategy. That was an extreme seller's market. Interest rates were higher then than they are today. So I really went from an average price in 2023 of 80K to an average price of 125K in 2024. I was still getting 6 % to 9 % cash on cash ROI, but I really made those changes for a couple of reasons. The one was the market adjustment, right?

18:18It just, I had to, the$80 ,000 house was now a hundred thousand dollar house to get the same profile of property. I had to go up in price. So that decision was kind of made for me. And then the second reason why I really went from a hundred to one 25 was my personal strategy change. I already had 15, 16, 17 bread and butter, really good cashflow. They were two, one, three, one sided houses, maybe a little bit of character. And so now it's like, okay, let's get, let's, let's go up a notch. And I was looking for brick. I wanted a basement and a garage. I didn't want any character. And so that just took me up then to the one 25 price point.

18:58So all four of my deals in 2024 looked exactly the same with that 125 price point. Okay. And is that kind of, I mean, I assume it's gone up a little bit, but those kind of deals are still available to you? Yeah. I mean, like I said, shoot fish in a barrel. I could probably pick a couple out right now. That's pretty incredible. So let's talk a little bit about specifically what to look for, because obviously not everyone is going to invest in Detroit. But I think this model that you've created is somewhat repeatable in a lot of markets. Obviously, if you're living on the coasts, it's probably pretty expensive.

19:35But if you're investing somewhere in the Southeast or in the Midwest, there's a lot of these kinds of deals. So let's just talk characteristics, not just price point. Like, are there certain bedroom counts you're looking for? And how do you try and identify that sweet spot of value add? I think that's a big question for a lot of people. Like what one person calls a cosmetic renovation could be totally different from what another person calls a cosmetic renovation. So what are the kind of properties and upgrades that you're trying to target? So a lot of these are two ones and three ones, right?

20:12Which a lot of people, they really want the three, two, but I think the ROI is higher on the two, one, three, one because less people want them. Your price to entry is lower. So you're doing these two, one, three ones, which makes sense to me. Are you doing kitchens, bathrooms, floors? What's the scope of the renovation you're trying to do? The lighter ones are painting and fixtures. So you go in and you paint and you do new light fixtures, new knobs, new faucets, and the whole house looks great. That's your light version versus your medium one is like, okay, we're going to replace all the toilets, all the fixtures.

20:49We're painting, we're refinishing the floors. We got to do all of our landscaping outside, maybe replace the furnace. Something like that is what I consider a medium versus large is you're doing a gut job. And I think that's when your risk goes through the roof when you take on those big ones. Yeah, literally. It goes into your roof a lot of the time. Yeah, literally. Yeah, I think that makes a lot of sense. And is that sort of what you recommend for newer investors is taking on that kind of fixtures, paint kind of thing first? Yeah, definitely. It's why I'm really cheering on your slow burn messaging right now because it's just so much more realistic to hit the lighter sweat equity and get your feet wet on those.

21:30And if you want to go more aggressive after that, do it. But to start out, just take on the lighter stuff. But I do like taking on some sweat equity because that's how you're going to force ROI in a property. If I had my druthers, I would pay a little bit more and buy a stabilized turnkey property that had solid cash on cash return, not amazing. And those still exist sometimes in some places, but the juice is just better on a light cosmetic rehab right now. Like you will get better cash flow and you're going to build equity. And I think that's the real important thing. People look at Burr and they say, oh, I can build equity.

22:09That is definitely true. but a lot of times that's how you have to generate cash flow too because if you look at a property with the rents that it can command in its existing condition you're probably not hitting that six to nine percent cash on cash return like i i don't see it anywhere you can maybe get three or four percent which is okay for some people that's fine if you just really want to do nothing but if you're trying to hold on to something for a long time that's why the slow burr works because you can do it sort of at a slower pace, but then you get the equity, but you juice up those rents and provide a really high quality experience for your tenants that they're going to want to stay, that they're willing to pay for.

22:48And that just sets you up for a more successful long-term hold period, in my opinion. Yeah, I couldn't agree more. We got to take a quick break, but stick with us. We'll be right back.

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