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

Dave:
This investor buys houses for only a hundred thousand dollars just outside a major city. He fixes ’em up, he rents ’em out and repeats the process. It’s only taken him six years of using this simple formula to grow a portfolio that’s now cashflowing $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. Hey 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 a hundred thousand dollars in cashflow 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 this slow burr strategy. Love that, and his best advice for other investors looking to do these exact same types of deals. Let’s bring on Joe. Joe, welcome to the BiggerPockets podcast. Thanks for being here.

Joe:
Thanks, Dave. Thanks.

Dave:
Great to meet you. Yeah, super excited to have you on and hear a little bit about your store. So give us your background. Where are you from and how do you find yourself getting into real estate investing?

Joe:
Well, I’m originally from Ohio. I now live and invest in the metro Detroit market, and I signed my first lease, it would’ve been about five years ago exactly to today. It would’ve been on October 1st, 2020. Since then, my wife and I, we have bought 24 properties. It’s 31 doors and where cash flowing, it’s 115,000 a year after budgeting for vacancy maintenance at CapEx.

Dave:
It 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

Joe:
In a factory. It 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 their pockets. And 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.

Dave:
Oh, 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?

Joe:
It’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 just dump all my money into it is the best place for it to be.

Dave:
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 invent anything. It’s a path to entrepreneurship where you’re not having to come up with some new genius business model. This 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

Joe:
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 40 k, 20 K 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. I was doing what I was trying to do, what I was supposed to do, but 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, we’d 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 1 0 3, I put 15 K 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. And so it’s cashflow six, $700 a month for five years

Dave:
Straight at this point. That’s incredible. Well, it sounds like you did pretty well figuring out where to buy the first one. This podcast is a long history with Detroit. I don’t know if you know this, but 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?

Joe:
I mean, I say this in good fun. There’s two types of people who dog on Detroit and it’s people who have never bought a property there and people who did it wrong.

Dave:
Yeah, okay, that’s fair.

Joe:
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 ’em 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

Dave:
Bread and butter deals?

Joe:
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 Suburbs 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 80 K to $130,000 house. They’re going to rent for 1100 to 1500 a month. They’re one to 1.4% rule deals, cash on cash, six to 12% cashflow, $5,300 a month. They’re good appreciation. We grade properties A to F, and so these are what we call C plus B minus.

Dave:
So what is your definition of a C plus? Describe the neighborhood for us.

Joe:
Well, yeah, so my portfolio is a great example. I 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 ’em a notice to quit and get rid of ’em. Somebody stole a trashcan once and somebody kicked in a garage door or the only two crime that I’ve dealt with in,

Dave:
Yeah, I have way more than that.

Joe:
And then vacancies 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. What condition are the properties in? So I do a lot of light to medium sweat equity and probably favoring the medium sweat equity. So 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.

Dave:
And what does that deal look like? So you said you’re buying it for what, 80 a hundred grand and putting how much into it?

Joe:
In 2023, my average single family home purchase price was $80,000 and my average rehab was probably 15, maybe touching

Dave:
20 k rehab. I’m asking these questions about the specifics because these seem very approachable kinds of deals. Even if you’re putting 25% down with traditional financing on an $80,000 property, it’s 20 grand down with a reno of 1520 K, you need closing costs, you need reserves, $50,000, obviously a lot of money, but more palatable to a lot of people who maybe don’t want to go to the house hack and put three point a half percent down or live in a super expensive market. This just seems quite achievable for people who are thinking about or comfortable with out-of-state investing presuming you don’t live in Detroit. The question I think you hear about Detroit that I just curious your opinion on Joe is like what about the appreciation? It seems like cashflow is pretty solid post. We’re going into sort of a flatter market. What do you think appreciation goes from here? I’m sure you’ve looked at the data,

Joe:
But recently we’ve done really well, especially in the post COVID era. I mean we’re in the top 2023, we were number one at least by some sources and ever since we’re still six, 7%, even just 2024 to 2025, which most markets they can’t say that. And I think it comes down to one major thing. I 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.

Dave:
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, people 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. Let’s get into that right after this quick break. Welcome 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,

Joe:
I bought that first one rented 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 60 K 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. You’ve been calling ’em a slow bur, we call ’em a softer whatever you want to call.

Dave:
Yeah, let’s use slow bur we got to standardize this

Joe:
Slow

Dave:
Bur is what it is. I

Joe:
Agree. It’s a better name than software. So it was be 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

Dave:
Deal and execute. So you would 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

Joe:
One. Exactly. And most of the time it was some of the money I did hit one. Perfect bur wow, that’s awesome.

Dave:
Wow. I am asking that because if you listen to the show, you’ve heard me talking about the slow bur 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 perfect bur where you can refinance a hundred percent of your cash is just pretty rare these days. I’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 bur still really works, these perfect burrs. Were just there at a certain time and place and is not what we should all be expecting. So 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 I 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?

Joe:
I think you said it in terms of haven’t you had shiny object syndrome? I think I was aware of not having it. 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. And I had something, I hit success on my first 1, 2, 3 deals, and so I was just clear the slate and repeat the same thing 20 times. That’s awesome.

Dave:
It seems like even though the market has been hot, finding deals hasn’t been hard.

Joe:
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 80 K to an average price of 120 5K in 2024. I’m still getting six to 9% cash on cash RO, but I really made those changes for a couple reasons. The one was the market adjustment I had to, the $80,000 house was now a hundred thousand dollars 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 1 25 was my personal strategy change. I already had 15, 16 to 17 bread and butter, really good cashflow. They were 2 1 3, 1 sided houses, maybe a little bit of character. And so now I was like, okay, 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 1 25 price point. So all four of my deals in 2024 looked exactly the same with that 125 price

Dave:
Point. Okay. I mean I assume it’s gone up a little bit, but those kind of deals are still available to you.

Joe:
Yeah, I mean, like I said, shoot fish in a barrel. I could probably pick a couple out right now.

Dave:
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, but 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. 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. 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?

Joe:
So a lot of these are two ones and three ones, which a lot of people, they really want the three two, but I think the ROI is higher on the 2 1 3 1 because less people want ’em. Your price to entry is lower.

Dave:
So you’re doing these 2 1 3 ones, which makes sense to me. Are you doing kitchens, bathrooms, floors? What’s the scope of the renovation you’re trying to do?

Joe:
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 we’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 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.

Dave:
Yeah, literally it goes into your roof a lot of the time doing that. But 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

Joe:
Why I am really cheering on your slow messaging right now because it’s just so much more realistic to hit the lighter sweat equity and get your feet wet on those. And 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.

Dave:
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, you will get better cashflow 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. That is definitely true, but a lot of times that’s how you have to generate cashflow 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 9% cash on cash return. I don’t see it anywhere. You could maybe get three or 4%, which is okay for some people. That’s fine if you just really want to do nothing. But if you’re trying to hold onto something for a long time, that’s why the slow burner 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. And that just sets you up for a more successful long-term hold period in my opinion.

Joe:
Yeah, I couldn’t agree more.

Dave:
We got to take a quick break, but stick with us. We’ll be right back. Welcome back to the BiggerPockets podcast. Let’s get back into our conversation. So tell me a little bit about managing these renovations an agent as well. Are most of the people you’re working with local or out of state?

Joe:
The majority is out of state. It’s like 65% out of state versus 40, 45% local.

Dave:
And how do you coach and get people comfortable with the idea of doing renovations from out of state?

Joe:
So something started building from the very beginning was our resource list and it’s at this point it’s 200 plus names and phone numbers of CPAs, attorneys, contractors, electricians. And so that’s really been a huge ticket to, hey, you can build your core four with this resource list. And I think that’s broken down a lot of barriers, finding contractors. One of the hardest parts for me at the beginning of course. So I ended up getting my builder’s license and starting a small handyman slash general contracting company just to help myself do a lot of these rehabs and obviously clients can use them as well.

Dave:
So what do out of state investors do they find a contractor on your list and then they manage the whole thing themselves? Or how are they developing a scope of work and overseeing the project while they’re out of state?

Joe:
So we do a lot of boots on the ground for outstate clients. So we’ll take a really good walkthrough video most of the time before purchase, and that’s how they’re closing these properties. And so then after they close, they have that video and they can either hire a GC to just do the whole thing or if they want they can pick off one person at a time, hire my painter, my floor person, and just do what needs to be done.

Dave:
As an out of state investor, that is tough. It is tough to run subs yourself out of state. I think it’s easier to do it with a GC or the way I’ve done it. I don’t know what you recommend, but the way I’ve done it is my property manager has a lot of subs and sometimes I will have them run the subs through and help me work on the scope of work. Do you see people do that as well?

Joe:
Yeah, I’d agree. The GC is the more popular route. And then as well as having the property manager gc, if especially for the outstate, that’s typically what they’re going to favor.

Dave:
And then do you see most out of state investors before they purchase with you, do they come and visit?

Joe:
It’s like 50 50. We have a lot of ’em that will close without ever seeing it, and then some of ’em will want to fly in for closing.

Dave:
But do they ever even come to Detroit and get to know the market at all, even if they buy the property site unseen?

Joe:
Yeah, sometimes. Sometimes they’ll want to come in and just confirm that they want to buy here, and then we’ll usually set up some sort of tour from on that weekend. They come in, we’ll go see 10 houses and go from there.

Dave:
That’s my favorite thing to do. I love going to markets and touring around. It’s the best. I really recommend people do that. If you’re an out of state investor, I’ve closed on property site unseen, but going to the market and just getting a lay of the land generally where these properties are going to be, you like this area, you don’t like that area, it’s worth it. It really is worth a thousand dollars or whatever you’re going to spend. I know that’s seems like money you could be putting towards a property and you can, but it’s just money that you need to spend to invest into your business for the longevity of it. I just know myself, I sleep easier at night investing out of state knowing that I’ve been there and I have a general sense of I really like this neighbor. I trust this neighborhood. That’s a good place. Recommend that people take that approach as well. So Joe, tell me you’ve succeeded and had this pretty incredible portfolio that you’ve built up over the last couple of years. What comes next for you? What are your goals now?

Joe:
It’s a good question because obviously I hit some numbers that were my lifetime goals, so it’s kind of surreal at 31 that could be done. But my wife and I talk and we both believe in God’s purpose for our life and he let us know that we’re not allowed to go sit on a beach. So we’re brainstorming some philanthropic ideas. We’re going to keep investing. Oh, that’s great. Keep investing and keep growing. Work on a couple side projects with a FinTech group and hopefully have some cool things for investors at some point there. But yeah, we’re just going to keep going and try to make the world a better place.

Dave:
Oh, that’s awesome. I love to hear that. And I think that’s one of the under-discussed parts of real estate investing. That’s so cool because I’m on board with you. I am not someone who could sit on a beach and not work, but it’s so cool how real estate investing when you reach a level of financial independence just allows you to take on projects that are philanthropic or just have personal importance or meaning to you. Or people often say they want to spend more time with their family, which is a common one, which is great, but if you have other professional interests or philanthropic interests, it allows you to take that on as well, which is super cool. So highly respect that. That’s how you’re thinking about spending your time. Joe,

Joe:
Thanks.

Dave:
Well, Joe, thank you so much for being here today. It’s been great meeting you, hearing your story. Congratulations on all the success. Make sure to keep us posted on your next steps. Awesome. Thanks a lot Dave. And thank you all so much for listening to this episode of The BiggerPockets. We appreciate you listening. We’ll see you next time for another episode in just a couple of days.