Graham, Hahaha. I laugh because I know exactly how you feel. I am 33 years older than you but I was in your exact space back in my late 20's. I had bought a 2 br, 1ba home in a great collegiate neighborhood in seattle at age 21. I was worried about replacing the roof soon, and the narrow easement driveway which one tennent bumped into the siding one day backing out. What I didn't realize was that real estate is a long term investment that doesn't give you just yield, but also is a hedge against inflation. You can always borrow money out of the equity. I chose the route you are now choosing. Munis, mutual funds, etfs, individual stocks, gold stocks, etc. It worked out great for me doing that. But it would have worked out even better had I kept that little 2br, 1 ba bungalow house in a great neighborhood. So think about keeping at least one of those Los Angeles homes. Also remember the tide of LA being so incredibly liberal politically can and may change in the future. Seattle had a Republican governor when when I was growing up and now has a communist mayor. This 4th turning is turning everything upside down. Hard to say if things will revert or what they will be. But stocks do well in inflation and did relatively well even during the depression if you bought solid companies that were profitable or bought indexes (which didn't exist then). The markets in almost all past history go up over the long term. You are still young and have many years to compound your investments going forward. Best,
So much awareness here. How insightful that you saw how this is tide into your identity indeed. And going from the tangible to the intangible might feel scary to some. It feels also as if LA is no longer aligned with your values. The universe sends you signs. Real estate does keep you tried to a certain place and government structure even if you are not physically there.
Such a normal tread of most of my clients. In their 20s and 30s, buy a lot of real estate. In their 40s and 50s, sick of the landlord hustle. It served its purpose, off to other more successful scalable things.
Great article. It takes bravery to admit when you think you might be wrong or see a better way of doing things.
The rate of return you’re seeing is in line with the long term average for real estate, people often think it’s higher, because it can be, just as stock picking can produce a better return then the long run average but very few do it consistently.
Real estate profitability is often linked to those with handyman skills who don’t have to pay labor costs for maintenance. Something I unfortunately didn’t have enough of. 😕
When the yield on something illiquid with constant friction matches something you can hold with zero effort, the math changes quietly but completely. The return stops being the story. The cost of carrying it becomes the story.
Real estate sells the idea of stability, but what you’re describing is a slow accumulation of small disruptions. None of them fatal on their own. Together, they turn into something that demands attention every week. That attention has a price, even if it never shows up on a spreadsheet.
The interesting part is where that capital goes next. When enough people make this same calculation, money doesn’t just leave real estate. It flows toward whatever offers similar returns with less friction. That shift tends to happen gradually, then all at once when people realize they’re solving for time, not just yield.
Sorry to hear you had such a terrible experience (or collection of experiences). I'm always glad when people share the reality of not only owning but building real estate because everyone makes it seem like easy money. It's just sad because big cities around the world are given carte blanche to be as inefficient as possible and taxpayers are saddled with the cost. The only people for whom real estate is worthwhile are the well connected mega developers building $500m houses for whom the profit is worth the hassle or the slumlords who put families in cupboards because the profit is worth it for them as well. We deserve better.
I never, ever understood the buy-to-let small landlord. At the very most, I’d consider investing in REITs. The management of those companies deals exactly with all of this, and rightly so they are paid as it’s a full-time job. But even in that case the economics of a REIT are hardly the best out there. It can be a decent investment but not comparatively to everything else that is available.
Ill be honest bro, that would be different in TX. Lol still the major concept on the asset but some of the city regulations and requirements would be much different
Love this. It’s so true. Someone likened owning real estate like having a savings account with a high maintenance fee. While owning index funds is the exact opposite.
Soooo interesting! I have two rentals that I keep going back and forth on in terms of selling, but I decided to keep them. Maybe the headache of it all will get to me eventually
Great read, Graham. The risk-free rate argument really hits home. When Treasuries are yielding what your LA portfolio nets after expenses, maintenance, and the mental overhead of being a landlord - the math becomes very clear.
The bureaucracy story with the ADU is a perfect case study in why regulatory complexity is quietly killing real estate as an asset class for individual investors. A $600 inspection turning into a $22,000 repair with a 75-day notice - that's not just a cost, that's a fundamental shift in the risk-reward equation.
The sunk cost fallacy point about identity is the one that most people won't acknowledge. It's hard to step away from something that's been such a defining part of your story. But the ability to say 'the environment has changed, so I'll change my approach' is what separates successful investors from the rest.
Curious what your timeline looks like for the full pivot. Are you going all in on munis and index funds, or keeping a small real estate allocation in a more landlord-friendly market?
Graham, Hahaha. I laugh because I know exactly how you feel. I am 33 years older than you but I was in your exact space back in my late 20's. I had bought a 2 br, 1ba home in a great collegiate neighborhood in seattle at age 21. I was worried about replacing the roof soon, and the narrow easement driveway which one tennent bumped into the siding one day backing out. What I didn't realize was that real estate is a long term investment that doesn't give you just yield, but also is a hedge against inflation. You can always borrow money out of the equity. I chose the route you are now choosing. Munis, mutual funds, etfs, individual stocks, gold stocks, etc. It worked out great for me doing that. But it would have worked out even better had I kept that little 2br, 1 ba bungalow house in a great neighborhood. So think about keeping at least one of those Los Angeles homes. Also remember the tide of LA being so incredibly liberal politically can and may change in the future. Seattle had a Republican governor when when I was growing up and now has a communist mayor. This 4th turning is turning everything upside down. Hard to say if things will revert or what they will be. But stocks do well in inflation and did relatively well even during the depression if you bought solid companies that were profitable or bought indexes (which didn't exist then). The markets in almost all past history go up over the long term. You are still young and have many years to compound your investments going forward. Best,
Eddy
So much awareness here. How insightful that you saw how this is tide into your identity indeed. And going from the tangible to the intangible might feel scary to some. It feels also as if LA is no longer aligned with your values. The universe sends you signs. Real estate does keep you tried to a certain place and government structure even if you are not physically there.
Such a normal tread of most of my clients. In their 20s and 30s, buy a lot of real estate. In their 40s and 50s, sick of the landlord hustle. It served its purpose, off to other more successful scalable things.
A lot of people hold bad investments because selling feels like admitting the original decision changed.
That attachment keeps more capital trapped than bad analysis does.
Curious why you didn't just hire someone to handle these headaches for you? Or would that bring your returns below the 4-5% level?
Great article. It takes bravery to admit when you think you might be wrong or see a better way of doing things.
The rate of return you’re seeing is in line with the long term average for real estate, people often think it’s higher, because it can be, just as stock picking can produce a better return then the long run average but very few do it consistently.
Ben, most people miss we make money 5 ways in real estate. Rate of return which is mentioned in the articke is only one of them.
Real estate profitability is often linked to those with handyman skills who don’t have to pay labor costs for maintenance. Something I unfortunately didn’t have enough of. 😕
When the yield on something illiquid with constant friction matches something you can hold with zero effort, the math changes quietly but completely. The return stops being the story. The cost of carrying it becomes the story.
Real estate sells the idea of stability, but what you’re describing is a slow accumulation of small disruptions. None of them fatal on their own. Together, they turn into something that demands attention every week. That attention has a price, even if it never shows up on a spreadsheet.
The interesting part is where that capital goes next. When enough people make this same calculation, money doesn’t just leave real estate. It flows toward whatever offers similar returns with less friction. That shift tends to happen gradually, then all at once when people realize they’re solving for time, not just yield.
Sorry to hear you had such a terrible experience (or collection of experiences). I'm always glad when people share the reality of not only owning but building real estate because everyone makes it seem like easy money. It's just sad because big cities around the world are given carte blanche to be as inefficient as possible and taxpayers are saddled with the cost. The only people for whom real estate is worthwhile are the well connected mega developers building $500m houses for whom the profit is worth the hassle or the slumlords who put families in cupboards because the profit is worth it for them as well. We deserve better.
I never, ever understood the buy-to-let small landlord. At the very most, I’d consider investing in REITs. The management of those companies deals exactly with all of this, and rightly so they are paid as it’s a full-time job. But even in that case the economics of a REIT are hardly the best out there. It can be a decent investment but not comparatively to everything else that is available.
Ill be honest bro, that would be different in TX. Lol still the major concept on the asset but some of the city regulations and requirements would be much different
Love this. It’s so true. Someone likened owning real estate like having a savings account with a high maintenance fee. While owning index funds is the exact opposite.
I remember following your early YT vids back in the day. I think you're making all the right moves.
legitimate and probably wise tbh
Soooo interesting! I have two rentals that I keep going back and forth on in terms of selling, but I decided to keep them. Maybe the headache of it all will get to me eventually
Great read, Graham. The risk-free rate argument really hits home. When Treasuries are yielding what your LA portfolio nets after expenses, maintenance, and the mental overhead of being a landlord - the math becomes very clear.
The bureaucracy story with the ADU is a perfect case study in why regulatory complexity is quietly killing real estate as an asset class for individual investors. A $600 inspection turning into a $22,000 repair with a 75-day notice - that's not just a cost, that's a fundamental shift in the risk-reward equation.
The sunk cost fallacy point about identity is the one that most people won't acknowledge. It's hard to step away from something that's been such a defining part of your story. But the ability to say 'the environment has changed, so I'll change my approach' is what separates successful investors from the rest.
Curious what your timeline looks like for the full pivot. Are you going all in on munis and index funds, or keeping a small real estate allocation in a more landlord-friendly market?