Why I Stopped Buying Real Estate

What's up, Graham? It's guys here. So, you probably clicked on the video because you saw the title and wanted to see if it was clickbait after all. For nearly my entire adult life, I've been known as the real estate guy. It's what I did right after high school. It's how I invested almost all of my money, and it's even how I started here on YouTube by making real estate videos.

So, on the surface, it doesn't make a lot of sense as to why the real estate guy is not buying real estate. Now, I’m sure there might be some assumptions out there that I must think the real estate market is about to come crashing down, or that maybe I know something that I'm choosing not to share with everybody. But I think if you just hear me out, you'll understand my point of view and how this makes sense. And dare I say it, maybe you'll even agree with me.

Because this was not a spur-of-the-moment decision, and I'm going to outline everything for you right here. But real quick, if there's one thing that I have not stopped doing, it's smashing the like button for the YouTube algorithm. I know this might sound trivial to even mention it, but it does help my channel out a lot. It's really easy to do and it takes you just a split second if you're logged in. In fact, I'm gonna even smash it with you right now. I'm going to my video, and, uh, done. So, thank you guys so much, and we'll begin right here.

First, it's no surprise that I owe pretty much everything I have right now to, you guessed it, real estate. When I was 18 years old, I got my real estate license right after high school and I began working as a real estate agent. I saved up as much money as I could, and after a few years, I then began investing my money in real estate during one of the lowest points in the market. This was back in 2011 and 2012 when every other home on the market was a bank-owned foreclosure, when very few people thought the market was going to fully recover, and coincidentally, when prices were at their rock bottom.

But I sunk everything I had into buying and fixing up rental properties so that I could have a consistent, predictable income every single month. It was so much fun! I loved being able to put my own personal touch on each place. I got so much personal satisfaction taking a spot that nobody wanted and turning it into a place that someone would be happy living in. And the challenge of finding a good deal was just too much for me to resist.

So, over time, my strategy evolved into a process of spending months scouring the market, trying to find the right home, trying to find something priced under market value or a hidden diamond in the rough that I could then fix up and subsequently rent out. Now, usually, once the property was fixed up and rented out, it became a fairly passive investment. But there was a lot of work involved prior to that, that took up a lot of time.

For example, it would usually take me anywhere from six to twelve months looking through the market just to find one deal that actually makes sense to buy. During that process, there are a lot of offers that go out; a lot of them don't go through. But the one deal that goes through at the very end usually makes all the time spent on the others completely worth it. But then after I buy the property, it's another three to sixteen weeks worth of renovations depending on how big the project is. I tried to be as actively involved in the process as I could, but that usually meant that I was going to the job site one to two times per day.

I was going to and from Home Depot, and I was constantly haggling with contractors who would overbid and under-deliver. So, it was a lot to manage between that and working full-time as a real estate agent just to pay for it all. However, over the last ten years, I could absolutely unequivocally say that buying all that real estate and spending all that time doing it was 100% worth it.

During that time, I've bought and held on to eight properties. They're all rented out with tenants who love living there, and that income has provided me with a foundation that I could then build from. So, what changed now? Well, a few things happened, but first we should look at the current climate of the real estate market. First, interest rates are at their all-time historic lows.

Now, typically, this would bode really well for real estate investors like myself and I'll be honest, it has. I've been able to refinance my loans to a lower interest rate to save more money. I was able to get a 30-year fixed-rate mortgage at 2.875 percent. At those levels, long-term, it's pretty much like banks are giving you free money to go and buy real estate with. But second, that comes at a cost. Because interest rates have become so inexpensive, it's driven up the cost of real estate because now people could afford to buy just a little bit more than they could before.

And that demand is causing people to want to get mortgages. Now, third, speaking of demand, there's a lot of it. So much so that it's caused inventory to drop to its lowest level again in history. That means, fourth, when you combine low interest rates with low inventory and high demand, you get a market that's extremely difficult to find the types of deals that I like to buy.

I want to buy something under market value that needs work in an area that demands a premium for rents. And I want to do all of that while getting the best bang for the buck for my renovations. The homes that I like to buy are the ones that I am so sure of that I never have to worry about not finding a tenant or not being equity positive the moment I close on a deal. Even if that means I pass up a dozen decent deals, I've always been the type who's just patient to find that one really good one that stands out above the rest.

And that, of course, brings up my first problem: one good deal is very difficult to come by. The reality is that it's not impossible to find something that makes sense to buy in today's market, but it's certainly a lot more difficult today than it was a year ago. It takes a lot more patience, a lot more searching, and a much higher cost to find something that really works. Not to mention that might include buying out of state depending on where you live.

I've made a few videos over the last two years talking about the growth of cities like Phoenix, Arizona, Dallas, Texas, and Atlanta, Georgia, and how much those cities have appreciated. I believe today what it often takes to get a good deal is to expand your search radius beyond just your backyard.

Now, two, this is something I really haven't talked much about here on the channel, but that would be the importance of diversification. For the last ten years, I've invested nearly everything that I've saved into real estate, and for the longest time, that's made up almost the entirety of my portfolio. Now, sure, I've also been consistently investing in the S&P 500, but for the most part, that's only been a sliver compared to what I've been throwing into real estate.

For me, it just made sense to buy real estate so I could have direct control over my money. I could force appreciation by fixing it up. I could get nearly guaranteed cash flow by renting it out. And best of all, I could depreciate that house against my taxes. By nearly all accounts, I could get a higher return from my leveraged real estate investments than I could from the stock market. So, my thought was, may as well go for it.

But after a while, as I started earning more money and those properties started going up in value, I realized I am way too heavy into real estate relative to the rest of my portfolio. Even though it was very profitable, I don't think it's that smart to hold 90 percent of your net worth in real estate in one city. I think it's just too big of a risk that something else could happen without having a hedge against that investment.

Something like this never really clicked when I was younger because I just went for whatever would make me the most amount of money. But I think at a certain point, it becomes more important to try to preserve your wealth and try to grow it as fast as possible. And by diversifying away from real estate, it's given me a lot of peace of mind that just in the event something were to happen, I'll be totally okay.

Now, three, another revelation that I've come to understand over the last year is the value of time. Listen, in my early 20s, my time was worth whatever I could get for it. Like, my thought was that in the evenings if I wasn't doing anything, I may as well help out another agent of my office for ten dollars an hour, whereas otherwise I would be making nothing. So, in that context, I'd much rather earn ten dollars an hour than stay at home and watch TV.

The same thinking also applied when I was renovating all those properties. My thought was that if I spent my early mornings and late evenings managing a renovation, at the very least it would save me money from not hiring a manager. So, by that metric, I would just take whatever I could possibly get for my off time. I did credit card churning, focus groups, renovations, work for other agents—literally whatever I could get.

But now I've gotten to a point where I just don't have enough time in the day to get everything done. Even something like hopping on a 30-minute phone call has turned into a "I need to schedule this a few days in advance," because otherwise, everything else is booked up and I would have to pull away from something else just to make the time. If I didn't prioritize everything this way, then nothing would get done and things would fall through the cracks.

So, now I have a value for my time and I really have to ration it carefully. Because of that, I'm not able to spend the time like I used to to find the right real estate deal and manage some of the work myself. For me, and I think for most people, real estate is a phenomenal tool for wealth creation. There's pretty much no other investment out there that allows you to consistently double your money year after year by buying the right property and then fixing it up—besides, of course, Tesla call options.

And sure, it's not easy work and it definitely takes a lot of time up front, but when done right, you could potentially build your wealth faster than nearly anything else. Again, besides Tesla call options. However, I think at a certain point, I had to take a step back and realize that I was too oriented towards real estate. From a diversification standpoint, it makes sense to take a more hands-off approach and focus on other endeavors.

This year, for example, I've invested three million dollars into the stock market. I've made three angel investments including yada bank (link down below in the description for anyone who wants to try that out), and I'm in the process of continuing to grow this channel and several other startups alongside with it. For now, the ROI I get from using my time elsewhere just makes a lot of sense, especially because I love continually learning new things, expanding on what I'm doing, and following where my heart goes.

And right now, that's pointing me in the direction of running my own business. I've mentioned before that I have a coffee company in the works that I can't talk about quite yet, but just give me a month and you'll hear all about it. And I have another project I'm working on on the side that, trust me, you guys will hear about it non-stop soon.

And those are all things that I never would have had the opportunity to pursue in the first place if it were not for real estate. But given how much I'm juggling right now, going and buying new property needs to be put on the side. And even though I've happily labeled myself to be the real estate guy at my core, my real passion is just being an entrepreneur. I love all aspects—business, investing, saving money, and personal finance—and real estate just happened to fall in one of those many faucets.

This certainly is not meant to take away from the decade of experience I put in with real estate, but that has allowed me to shift my pursuits so I keep growing as a person. Today, my investments are really just all about a low time commitment, low risk, a low return, more diversification, and the allocation that will continue to allow it to grow, but at a slower, more consistent rate.

It's less stress, less work; the less I have to think about and the more I could just streamline my entire life. I say this not to discourage you from buying real estate, but instead to explain the importance of using real estate as a foundation to grow and build from. Everything I'm doing today is made possible because of real estate, but as my time has become more limited, and as I want to continue growing and expanding and diversifying into other things—combined with the market that makes it very difficult to find a good deal—I’ve chosen to hold off from buying any more real estate for right now.

Now, I'm sure at some point I'm going to get back into it, but until then, I'm enjoying the hands-off approach of investing and I'm looking forward to all the new challenges that come along with growing a business. Alongside that, I think it's totally fine sacrificing some profit up front if that means that now I have more time left over to focus on other ventures that could do better long-term, like, of course, asking you to smash the like button for the YouTube algorithm.

So, with that said, you guys, thank you so much for watching. I really appreciate it! As always, make sure to destroy the subscribe button and the notification bell. Also, feel free to add me on Instagram; I post it pretty much daily, so if you want to be a part of it there, feel free to add me there as my second channel, The Graham Stephan Show. I post there every single day. I'm now posting here, so if you want to see a brand new video from me every single day, make sure to add yourself to that.

And lastly, if you guys want four free stocks, use the link down below in the description and Webull is going to be giving you four free stocks when you deposit 100 on the platform, with those stocks potentially worth all the way up to 1,600 dollars. So, if you pretty much want free money, use the link down below. Let me know which stocks you get. Thank you so much for watching, and until next time!