Should I buy bond?

Right now most of my assets are in stocks, real estate, and cash. I am considering diversifying into bonds, but it just does not look that attractive to me.

The advantages of bond is that it is fix income. Usually you get pay out twice a year. Also bond is a different asset class from stocks. Unlike real estate which tend to move along with the stock market. Therefore it is a good form of diversification from the stock market. Currently there are 2 types of bond that I am considering. Municipal and treasury bond. Municipal bond has the advantage of giving tax free yield. Treasury bond because it is one of the safest instrument.

I am not that excited about bonds because two other investments seem to provided better return. I can get 5-7% return in peer to peer lending. Albeit with higher risk. Also P2P lending is less liquid than bond. Alternatively I can just stick with dividend yielding stocks which pays 2%. Not too shabby when compared to the treasury bond return. Given I still have steady income and have a long investment horizon, my stocks will ultimately out perform my bond return.

For now I am going to focus on stocks and P2P lending. I like to explore some high return dividend stocks and corporate bonds, but will not jump into them yet.

Captial Deployment into a Downward Stock Market

Currently I have $100,000 of my SEP-IRA sitting in the money market. Yes, yes, I hesitated to dollar cost average all my IRA money that's why I have the excess fund. In reality I missed out on the big market up turn with all that money sitting on the sideline. No point in regretting. All I can do now is to devise a strategy to get back to full investment. I am 44 y/o. I still have a 21 year time line so logically I should be fully invested.

First of all I have to credit Financial Samurai for getting me to think about this subject. I am employing his idea of investing in 5 tranches during market downturn.

Here's my plan to invest $100,000 based on the prediction that the market may drop 20% from peak

S&P 500 drop 4% from peak (2044) - Invest $15,000
S&P 500 drop 8% from peak (1959) - Invest $20,000

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

S&P 500 drop 12% from peak (1874) - Invest $30,000

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

S&P 500 drop 16% from peak (1789) - Invest $20,000
S&P 500 drop 20% from peak (1704) - Invest $15,000

More than 20%drop I will look up excess non IRA money to invest. Or may the country is at war, and it's time to find shelter in the mountains.

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#commentsS&P 500 drop 4% from peak (1704) - Invest $15,000

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/#comments

SP500 4% drop (2044) – 15,000
SP500 8% drop (1959) – 20,000
SP500 12% drop (1874) – 30,000
SP500 16% drop (1789) – 20,000
SP500 20% drop (1704) – 15,000 - See more at: http://www.financialsamurai.com/develop-an-investing-game-plan-for-the-stock-market/comment-page-1/#comment-258305

Real Estate Seller's Checklist

http://www.hgtv.com/design/real-estate/real-estate-survival-guide-sellers-checklist

Current Real Estate Goal

By the end of 2015 I would like to have all of my real estate expense paid for through the combined income from all my properties. that means all the mortgage, property tax, HOA fees, utility will be paid by my rental income.

1031 Exchange with Multiple Owners

Yesterday I had a discussion with a realtor friend about doing a 1031 exchange to a larger property.  Currently I own a condominium with my 2 siblings. One of our goal was to sell the condo and exchange it for a larger rental unit. With 1031 exchange we will not incur any capital gains tax as long as we acquire an equivalent or larger property in a specified time.

After the discussion with my friend I learned a few things.

1 - It is perfectly OK to do a 1031 exchange from a single unit condominium to a multi unit apartment since both are rental properties. Our condo has been rented out for several years. You can also exchange one unit for multiple units.

2 - When multiple owners are involved it may be easier to take out a commercial mortgage for a larger income property.  In this case it will have to be a property with 5 units or more. A commercial loan is based on the down payment and the cash flow. Therefore, documentation for personal income need not be submitted which can be complicated when 3 people are involved.

Here's a link to Biggerpockets on investment property loans..

Investment-property-loans

3 - With 1031 exchange you have 45 days from the time of closing to identify a new property, and a total of 180 days from the closing to acquire the replacement property. Therefore, you usually need to delay the sale of your property until you identify the property you want to purchase.