I Made Millions In Real Estate…It Wasn’t Worth It.
In a Nutshell
Graham bought seven rental properties in California at low prices with 3% mortgages and saw strong appreciation, but after years of ownership his actual returns dropped to just 4–5% once he factored in repairs, rising insurance, utilities, and missed rent increases. Rent control capped his ability to raise rents, which permanently reduced both cash flow and sale prices by roughly $100,000 across his portfolio, while major repairs like a $20k expense or $800 ice maker fix wiped out profits in single years. Depreciation recapture at 25% plus state taxes, plus the constant time and mental load of management, made the hassle and opportunity cost exceed the returns—so he’s selling and wouldn’t buy investment properties again unless house hacking nearby.
These notes were generated by AI and may contain inaccuracies.
Graham explains he is addressing Shelby Church's video titled "People are admitting real estate investing wasn't worth it," where he appears in the thumbnail. Despite buying properties years ago at low prices with locked-in low mortgage rates, when he examined the actual numbers, he acknowledges she has a point. He wants to be honest about the aspects of real estate investing that almost no one discusses publicly: repairs, vacancy, risk, expenses, taxes, and how deals that appear good on paper can fail in reality. His goal is to help others avoid similar financial mistakes.
Graham obtained his real estate license in 2008. After saving commissions, in 2011 he purchased his first bank-owned foreclosure in San Bernardino County for $59,500. The property required repairs before he could rent it out. He became focused on acquiring rundown properties and renovating them. As a real estate agent, his income grew, allowing him to reinvest in additional properties. He eventually acquired seven rentals across Southern California, all financed with 30-year fixed mortgages at approximately 3% interest. Rents covered expenses, each property generated positive cash flow, and all held substantial equity.
The first property purchased for $59,500 is now valued at approximately $400,000. Two properties in San Bernardino County were sold several years ago with returns exceeding 300%. A West Los Angeles property purchased for $780,000 is now worth about $1.3 million. His final home was sold for $500,000 more than the purchase price just seven months prior. Much of this success resulted from buying during an ideal window of low prices, low interest rates, and strong rents, with market appreciation providing significant gains.
Graham's philosophy was to keep rents low for good tenants who paid on time, prioritizing peace of mind over maximizing income. This approach worked initially but failed in Los Angeles due to rent control ordinances. Under these rules, annual rent increases are capped at a small percentage, and missed increases cannot be recovered later; future increases are calculated only on the lower base rent. One missed increase compounds into thousands of dollars over time. He never raised rents for many years. In 2020, despite fixed-rate mortgages, insurance costs doubled, repairs increased 50%, and utilities rose 30%. Some years he broke even after major repairs. A three-year city ban on rent increases prevented him from adjusting rents during this period. When he finally raised rents by 3%, it covered only a fraction of the expense increases.
Lower rents affected not only cash flow but also property valuation. Investors price properties based on income produced. Below-market rents capped at 3% reduced the properties' paper value, leading to lower offers. Although Graham never planned to sell initially, when he listed properties, the compounded missed rent increases over six years translated to roughly $100,000 less in sale price. Real estate investors had warned him against this approach.
Graham discusses how credit quality directly impacts long-term wealth by affecting loan costs for mortgages, cars, and other financing. He promotes Kickoff, a credit-building tool with monthly plans starting at $5. Users build credit through on-time payments reported to all three major credit bureaus. The service has no credit check, no interest, and no hidden fees. Users with credit under 600 who made on-time payments saw an average 25-point increase in the first month and up to 86 points after one year. Kickoff is ranked as the number one credit-building app. Graham notes his own strong credit helped secure competitive mortgage rates. Viewers signing up via his link receive 80% off the first month (as low as $1). The signup link is getkickoff.com/gra.
Standard advice suggests budgeting 1% of property value annually for maintenance, but Graham states this understates reality after 10–15 years of ownership. Properties can experience multiple quiet years followed by sudden major expenses. Examples include roof replacement, unexpected plumbing issues discovered during repairs, and air conditioning failures during peak summer heat requiring premium contractor rates. One property required zero maintenance for years before a single $20,000 expense eliminated that year's profit. Even minor repairs add up significantly; a tenant's ice maker repair cost $800 when the refrigerator was only worth $400. Property managers still require owner approval on decisions, and small issues accumulate. Substantial repairs are inevitable, and rents must account for them or owners lose money.
Graham previously measured performance by property value increases and equity. However, appreciation only becomes real upon sale. After subtracting repairs, vacancy, insurance increases, utilities, and maintenance, his actual annual return was only 4–5%. Treasury bills offered the same return with no stress, work, illiquidity, tenant risk, or liability. Even with leverage, index funds would have performed comparably after accounting for time spent on phone calls, contractor negotiations, property taxes, and insurance. Real estate effectively became an unpaid part-time job with full liability. This realization prompted him to begin selling properties.
To maximize sale prices, Graham spent over $100,000 across three properties on renovations, staging, landscaping, and miscellaneous expenses. He offered a tenant a voluntary buyout to vacate a unit so it could be shown empty. Small landlords often cannot afford such preparation costs, making it difficult to sell tenant-occupied properties at top prices. Bare-minimum listings rarely achieve multiple offers or prices above asking; properties require significant upgrades to appeal to buyers seeking turnkey homes after 8–10 years of tenant occupancy.
The IRS allows depreciation of rental property structures over 27.5 years, reducing taxable income during ownership. Upon sale, these deductions trigger depreciation recapture taxed at 25%. All previously claimed deductions must be repaid unless the proceeds are reinvested in another property via 1031 exchange. Graham's California properties also incur an additional 10%+ state tax from the California State Franchise Tax Board on top of federal capital gains tax. Depreciation functions as a deferral, not a permanent benefit, and becomes due upon exit from real estate.
Real estate ownership involves ongoing time commitments never reflected in spreadsheets. Owners must handle insurance renewals, property tax bills, city inspections, permits, compliance requirements, rent registries, and utility notices. Even with property managers, owners receive calls for approvals and bear final responsibility. These tasks consume mental energy and represent significant opportunity cost. Graham clarifies he is not complaining but illustrating the full behind-the-scenes reality.
Graham states the early properties performed well due to favorable purchase timing and rates, and real estate helped launch his channel. However, after accounting for opportunity costs, taxes, repairs, and hassle, returns fell short of expectations. Some issues stemmed from his own decisions (not raising rents), while others resulted from external policy changes like rent control and pandemic-era restrictions. He recommends building margins for unexpected events.
Graham would likely purchase again only if buying a nearby property for personal use where he could manage the hassle factor. His current situation—living out of state, not occupying the properties, and lacking capacity for management—does not fit this profile. He believes real estate can still work for individuals willing to handle the work, such as house hacking by living in one unit and renting the other. He no longer has the capacity for this himself.
For properties under rent control, rents must be raised to the maximum allowable amount every year; skipping increases compounds into permanent losses. Repairs should be budgeted 30–50% higher than expected, with any surplus carried forward. Investors must calculate the opportunity cost of their time—including every phone call, management task, and decision—and compare total returns against passive index fund investing. Real estate is not fully passive; it functions as "customer service with property taxes."
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