First, let’s talk numbers. They’re not terrible.
- February 19: Our net-worth hit an all-time high of $2,585,214.
- March 16: Less than a month later, it was down to $2,280,151, a paper loss of $305,063.
- March 30: It has since recovered to $2,353,069, down $232,145 from that all-time high.
If we were pure index investors, our numbers would be worse. The S&P 500 is down 26.9% from its all-time high and we’re only down 9%. I’m not hurting quite as bad because over half of our portfolio is in real estate. While I know that real estate will take a hit, it’s difficult to know how much.
- Elevated Living Estates (Trailer Park): Out of almost 50 spots in our property, it’s normal to have 1 or 2 renters that are late making payments every month. Surely this will go up in the coming months. We also had plans to build out four new lots. We may not proceed with that now.
- Rental home: We have a rental home here in Longmont and had big plans to Airbnb it over the summer. Now, we’ll look for stability in a longer-term renter. Before the virus showed it’s ugly little ass, home sales were on fire here. Now, not so much.
- Syndication deals: We have 7 syndication deals. in 2019, 2 of them were struggling which is quite terrifying. The thought I had back then was this: “If these deals are struggling now, what happens when the economy takes a big dump.” I’m about to find out! One positive is that when interest rates are low, cap rates compress. When cap rates compress, income-generating properties become more valuable. As long as they keep generating income…
- Coworking space: Space is a luxury for most. If members have a loss in income and are feeling pain, their membership will be one of the first expenses to be cut. So far, we’ve only lost one member, but we’ll lose more before this is over.
Because real estate is a lagging indicator and these investments are cash flow plays, our portfolio will suffer in the months to come, even if the stock market has recovered.
We’ve been deploying dollars to the front-line as fast as they come in:
Usually, we keep a little bit of cash sitting around, but dollars under the mattress aren’t working. With Mr. Market beaten down, the dollars have more work to do.
We’re aggressively throwing money into the fire because of two beliefs:
- The economy was strong before COVID-19 seized it by the neck. The last recession was caused by flaws in the financial system while this one is caused by an external circumstance.
- COVID-19 will pass.
The market recovery time will depend on how long COVID sticks around. A prolonged infection will do a lot of damage and recovery could take years. If social distancing measures start to work soon, a fast recovery is possible.
I do believe we haven’t seen the worst of it yet.
Four Random Observations
1. More cash
Because Mindy works and her job covers basic expenses, we’ve been incredibly aggressive with our dollars. We have $0 in bonds and have always kept very little cash. Whenever we’ve made a big purchase like the coworking space or our most recent home, we’ve sold stocks to raise funds. This is how I envisioned we’d continue to invest for the rest of our lives. Pedal to the metal at all times.
Now, I’m not so sure. Having a cash buffer would provide a lot of comfort in a time like this.
2. Science is where it’s at
It’s ridiculous that here in the states, the virus has devolved into a political issue. One side is like:
And the other side:
Shouldn’t we all just listen to the scientists?
3. I still don’t understand the TP frenzy
4. Peak FIRE
Some in the FIRE community have published articles with scary, click-bait titles about how the movement is over. I have the opposite view. Times like this are when FIRE really matters.
To understand, consider a worst-case scenario where the market crashes by 80% for an extended amount of time. We’d still have enough money to live for many years. There is the possibility that I’d have to go back to work, but I would have lots of time to prepare for it. In the meantime, I wouldn’t have to worry about not being able to buy food or losing my home.
This is not the end of FIRE. This is an affirmation.
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