The Landlord's Tax

Summary

A 30-year backtest of a 1–4 unit owner-operated rental against a passive S&P 500 position, with the landlord's labor priced at six hourly rates from $20 to $150. The primary 24-cell sensitivity grid finds the retail landlord underperforming the index at every tested combination. A multi-benchmark robustness check over a different window reverses the finding: RE wins in 92 of 96 cells.

The direction is window-dependent, not benchmark-dependent. Over the 30-year Shiller window starting in 1994, compound equity growth overwhelms the labor drag. Over the 23-year window starting at the dot-com peak, RE wins even at $50/hr labor pricing.

Primary finding · 1994–2024

Index wins at every tested cell

Ratio = Path A (RE, labor-adjusted) / Path C (passive index). Values below 0.95 are “Index wins”. The $50/hr column is the NAA internal-consistency anchor.

Robustness · 2000–2024 · Multi-benchmark

RE wins when the equity entry shifts to the dot-com peak

Same comparison, different window: 23 years starting 2000-07. S&P 500 CAGR drops from 10.07% to 7.30%. Equity terminal wealth drops 3.5×; RE drops only 1.5×. 92 of 96 cells flip to “RE wins”.

Entry point · six start dates

It's not the asset class. It's when you start.

Same labor rate ($50/hr), same unit counts, same terminal date. The six mini-charts below change only one variable: the year the investor entered the market. The result flips. A 1994 entry reproduces the paper's primary finding — Index wins at every unit count. A 2000 entry (dot-com peak) reverses it — RE wins. The intermediate years fill in the arc.

Benchmark envelope · 2000–2024

Which index would you have bought?

The robustness finding isn't an artifact of one benchmark. Across all four major US equity indices, retail RE beats the passive index at the $50/hr anchor over the 23-year dot-com-peak window. The band below shows the range of outcomes; toggle individual benchmarks to see how each one compares.

Wealth divergence · 1994–2024

You thought RE was winning. Then you priced your time.

Three trajectories over a 30-year hold, all starting from the same initial equity. Path C compounds passively in the S&P 500. Path A pre-labor shows the RE outcome if the landlord's time were free. Path A post-labor subtracts the cumulative imputed labor cost at the chosen hourly rate. The shaded region between them is the landlord's tax— the wealth the landlord would have had if they weren't working Saturday mornings.

Generational wealth · threshold heatmap

At what point does either strategy make you wealthy enough to stop?

Retail RE held from the entry year through early 2024, with the landlord priced at the given hourly rate. Toggle the unit count to scale the portfolio, and move the threshold to test different definitions of “generational wealth.” At 1 unit and $1M, no entry year crosses; at 4 units, the 1994 entries cross at every labor rate — portfolio scale is what makes this strategy generational, not the strategy itself.

Wage progression · interactive

How much of the answer is your labor rate?

The landlord's hours/month aren't a fixed fact — they scale with portfolio size, and retail data disagrees on the shape. The Hemlane US rule-of-thumb says ~8 hrs/month at 1 unit; the Pegasus UK panel reports ~15. The NAA institutional floor is 3.91 hrs/month per unit, flat. Drag the anchor points below to change the curve and watch the RE / index ratio move in real time for each portfolio size.