Near the end of 2022, about 9 months ago, I shared that my net worth had plummeted a whopping $1.7 million! The losses were primarily attributed to a terrible year for stocks, with the Nasdaq down roughly 33% and the S&P down 20%. Going into 2023, I kept my expectations low due to the Fed’s aggressive rate hike plan and stubbornly high inflation. However, this year has proved to be one heck of a turnaround! In this post, I’ll share how much my net worth has recovered and what I’m doing with both stocks and real estate.

Net Worth

A couple of weeks ago, I was shocked to see our net worth hit an all-time high, roughly $200K higher than the previous record. It’s down from that high at the time of writing, but I’m not sweating it. After all, I’ve been down a lot more not too long ago!

Moreover, over the past year, we easily spent over $500K outside our normal budget, which means that our net worth recovery was largely due to investments recovering and not from a large influx of earned income. All in all, our net worth has jumped roughly $2.1 million since bottoming out last December!

My Stock Portfolio

Had I invested in stocks that are deemed as “safer,” like those in the Dow Jones index, I would have fared better during the 2022 stock market downturn. However, I stayed true to my long-term belief that tech is the future. So I certainly took larger losses than a conservative investor last year, but remaining calm and patient with tech stocks has proved a successful strategy this year. Of my 2 largest stock accounts, one grew a whopping 50% year-to-date, and the other rose 37%, outperforming even the Nasdaq’s 33% gain.

Seeing those gains has certainly made me nervous because such astronomical returns usually mean my investments are risky. Am I panicking? No, of course not. But I have been trimming some of my high-risk positions with long-term capital gains to reduce risk and increase my cash position.

While I am not 100% allocated to tech stocks, they currently account for over 50% of my portfolio. So it’s a good idea for me to closely monitor their performance and % allocation over the next 6-12 months.

Real Estate Activity

The real estate market has been very different these past 12 months compared to the decade prior. With sky-high interest rates, fewer people are willing to sell their homes for fear of buying a home with an interest rate that’s 2-3x higher. And as a buyer, fewer people can buy a home because interest rates are so high. Overall, the market has flatlined in most areas, and homes have dropped in value in areas previously red hot just 12 months ago.

As far as my real estate portfolio goes, it’s not worth nearly as much as my stocks. It comprises of the following (excluding primary residence):

1 Airbnb (will touch on the issues I’m having with this property below)
2 house flips (3rd one sold a couple months ago)
1 long-term rental multifamily
2 new constructions investment properties (pending completion)

House Flipping

My house flipping business has not fared as well as I would’ve liked. After scooping up 2 flips at the beginning of this year, one of them sold for a small profit. But the other one still has not sold! There are many problems for a house flipper when the home isn’t sold quickly:

Bleeding money due to holding costs: 9% interest-only hard money loan, special building insurance called builders risk insurance, pool maintenance, yard maintenance, and utilities
Hard money loans typically have a 6-month term. Upon expiration, a balloon payment is demanded or the loan needs to be extended with a price tag of 1 point. In lender’s terms, 1 point is 1% of your loan balance, which is several thousand dollars. The loan extension usually stretches for an additional 3 month period.
Long days on market: The handful of buyers that are buying homes this year will start to question the quality of the home if the home sits for too long on the market.

Overall, this flip is taking way too long to sell and is starting to look like a break-even or minor loss. I’ll let you all know what happens in a future post!

Airbnb

In 2021, I converted a flip into an Airbnb in the city of Dallas. The 1st year was breakeven due to high set-up costs (e.g. furniture, decor, etc.). However, the 2nd year did not rake in as much as the first, plus demand softened dramatically.

The short-term rental market got overly saturated when real estate went through the roof during the COVID boom. People made tons of money from stocks and scooped up rentals, including short-term ones. Many also decided to work remotely, creating a huge demand for Airbnbs so they could travel while working or simply work in a more luxurious home. However, demand for remote work has plummeted over the past year, reducing demand for short-term rentals.

With a huge supply of short-term rentals and a lack of demand for them, Airbnbs have struggled recently. However, every local market is different. For my property in Dallas, demand has dropped significantly, resulting in negative cash flow. Additionally, the city of Dallas voted this year to ban them outright throughout the city! They won’t even grandfather existing ones. So I’m not sure what to do with the home yet. Some investors are cashing out now, while others are taking the wait-and-see approach to determine if the city is legally allowed to ban them outright.

Multifamily and New Constructions

My out-of-state multifamily rental property has been the most consistent, stable rental investment thus far. It has had positive cash flow since year 1 and hasn’t had too many headaches since it was built 7 years ago. So my current plan for this property is to do nothing different. As they say, “Don’t fix it if it ain’t broke.”

My 2 new construction properties in the greater Dallas region are still under construction. Honestly, I hope the home builder keeps having delays so that I assume ownership when interest rates are a bit lower!

What’s Next?

In the short-term, I will continue trimming my high-risk stock positions that qualify for long-term capital gains. I do believe that AI will be a significant growth driver for tech and chip stocks for the next few years, so I may increase my positions in AI-related stocks during any market dips. At the same time, I will continue to fatten up my index fund holdings to further stabilize and diversify my portfolio.

For my dwindling Airbnb property, I am waiting to see if the city of Dallas will be legally allowed to halt existing Airbnbs by the end of the year. I am open to selling it, but I know that I won’t be making much (perhaps a slight loss) if sold this year since the real estate market has been weak all year.

Long-term, I continue to invest several thousand dollars per week using automatic investments. They go straight into index funds without my having to think or stress about it. In addition to investing in stocks, I am interested in buying more long-term rental properties. Being on the selling side of the real estate market this year has made me realize that perhaps it’s better to be a buyer in this trying market. While interest rates are terrible right now, rates won’t stay this high forever. So I may bleed some cash in the short-term, relatively speaking, but I may come out on top once rates drop and I get a chance to refi into a lower interest rate!

How My Investments Are Faring in 2023