How Oppenfolio Can Beat Los Angeles Real Estate

(and why this isn’t as crazy as it sounds)

Every time I tell someone about my Oppenfolio strategy, a dividend-focused ETF portfolio tuned for high after-tax yield, I eventually hear the same thing:

“But isn’t real estate the best investment? Especially in LA? My accountant says I should buy more property.”

It’s a reasonable question. For decades, Los Angeles real estate has been the default “smart move” for anyone who wants to build wealth. And to be clear: I do own LA real estate. In fact, my family recently completed construction of an ADU in mid-city, and we live on a property with a mortgage and a 100-year-old main house.

But once I started looking at the actual numbers, not the story we tell about real estate, but the real-world, after-tax, capital-adjusted cash flow, I realized something surprising:

Oppenfolio, managed well, can outperform LA real estate by 4–5x in after-tax yield.

And I’m going to show you the math.

What are we comparing?

Let’s say you deploy:

• $400,000 building an ADU in LA, and rent it out.
• Or $900,000 of value in a main house, and rent that out.
• Or ~$18,000 in an Oppenfolio-style high-yield ETF portfolio.

Here’s what happens.

Scenario 1: Renting out an LA ADU

• Gross rent: ~$2,500/month → $30,000/year
• Vacancy: -8% → $27,600/year
• Property tax: ~$4,800/year
• Insurance: ~$1,000/year
• Maintenance & repairs: ~$4,000/year
• Capex reserve: ~$2,000/year
• Net cash flow before tax: ~$15,800/year
• After-tax (if not fully sheltered): ~$9,500/year
• Yield on $400k capital: ~2.4%–3.9%

Scenario 2: Renting out a 2BR/3BA LA house

• Gross rent: ~$4,500/month → $54,000/year
• Vacancy: -8% → $49,680/year
• Property tax: ~$4,800/year
• Insurance: ~$1,500/year
• Maintenance & repairs: ~$12,000/year (old house)
• Capex reserve: ~$5,000/year
• Net cash flow before tax: ~$26,380/year
• After-tax (if not fully sheltered): ~$15,900/year
• Yield on $900k capital: ~1.8%–2.9%

Scenario 3: Oppenfolio

• Capital deployed: ~$18,000
• Estimated annual after-tax income: ~$3,400
• Yield: ~19% after tax
• Capital appreciation: Yes, many of the assets in Oppenfolio do appreciate in bull markets. They are not static income bonds. Covered-call ETFs give up some upside, but NAV growth can and does happen when markets rise.

Visual comparison

Why does this happen?

Because real estate is capital-inefficient for generating spendable cash flow:

• Maintenance is constant, often underestimated.
• Vacancy hits harder than you think.
• Capex surprises will come, especially in old homes.
• Property taxes keep rising.
• You can’t easily rebalance real estate.
• Your money is locked into a single metro market.

But real estate appreciates!

Yes, sometimes. But so does Oppenfolio.

The idea that “stocks are for income, real estate is for growth” is an outdated simplification. Many of the assets in Oppenfolio do appreciate, particularly in bull markets. Covered-call strategies do give up some of that upside in exchange for yield, but not all of it. And unlike a house, these positions can be rotated dynamically to capture market trends.

Real estate appreciation, meanwhile, is deeply cyclical, highly local, and often lagging. The past decade’s appreciation was driven largely by artificially low interest rates, a tailwind that is unlikely to repeat.

But isn’t Oppenfolio risky?

Of course it is. All investments carry risk.

But it’s a mistake to compare the risk of stocks to some imagined “safe” version of real estate. Here’s reality:

Los Angeles real estate is extremely risky:

• After this year’s fires, no private insurer would cover our property, despite being far from any fire zone, we had to go through the state plan.
• Earthquake risk is ever-present, and earthquake insurance is expensive and comes with high deductibles.
• Rent control risk is growing, your rental income is not guaranteed to keep pace with costs.
• Regulatory and political risks in LA are rising fast.

Meanwhile, Oppenfolio is:

• Liquid, I can adjust or exit in a day.
• Diversified, not all in one geographic market.
• Actively managed to mitigate NAV decay risk.
• Participating in global economic cycles, not just one city’s housing market.

The idea that real estate is “safe” and stocks are “dangerous” is a boogeyman argument, not a fact-based one.

Both carry risk, they are simply different risks. The difference is that in Oppenfolio, I can adjust my portfolio any time I see risk building. With an LA house, there is no “rebalance” button when earthquakes, fires, or political winds shift.

But you can use leverage!

True, and I do. The LA house has a $700k mortgage, $300k still owed, at 1.8%. That’s about as perfect a loan as one can hope for.

But even with that leverage in place, the actual yield on total capital deployed remains modest. Leverage amplifies risk as well as return, and rising capex and regulatory risk in LA are very real concerns.

The real problem: outdated mental models

Real estate was the best path to wealth for many people in previous decades, especially when you could buy LA property cheap and ride the wave.

But today:

• Entry prices are sky high.
• Yields are compressed.
• Regulation and insurance risk are rising.
• Maintenance costs are inflating fast.
• Opportunity cost matters, and income-focused portfolios like Oppenfolio show there are other ways to win.

The takeaway

I’m not selling my house. I’m not against real estate.
But I’m honest about the math.

If your goal is income freedom, not just paper appreciation, Oppenfolio can outperform LA real estate on a risk-adjusted, after-tax, yield-on-capital basis.

I encourage anyone considering a $500k+ real estate move to do the same exercise I did. Run the full costs. Be honest about yield. And compare to what you could do with a carefully managed yield strategy in public markets.

Sometimes the old answers aren’t the best answers anymore.

Closing

This is why I run Oppenfolio the way I do. Not because I dislike real estate, but because I like choices. And I like cash flow that actually buys me freedom.

You can always reach me at [email protected] if you want to go deeper.

Disclaimer: This post is for informational purposes only and reflects personal opinions, not financial advice. Oppenfolio is not an investment advisory service. See site disclaimer for full details.