Can you buy a piece of a shopping mall?
See question No. 3
Real estate is an important component of the U.S. and global economies. For many Americans, homeownership doubles as a first investment. Beyond a primary residence, investors also can buy into the commercial real-estate market: Office buildings, multifamily housing, hospitals, parking lots, storage facilities, retail properties, call centers, distribution hubs, hotels and restaurants form a sector with its own economic ups and downs.
In 2016, the S&P 500 recognized real estate as its own sector, separating it from financial services where it had been buried for years—a move some view as a portent of more real-estate investment to come and that others view with indifference. Currently, real estate accounts for less than 5% of the S&P 500 by market cap.
How much do you know about real estate—and real-estate investing?
1. What foreign country’s investors are buying the most U.S. commercial real estate?
ANSWER: B. Canada, according to research from JLL Research and Real Capital Analytics. During the first half of 2017, Canada accounted for 30% of all foreign investment in U.S. commercial real estate, followed closely by China (21%), Singapore (15%) and Germany (7%).
2. How do investors participate in the real-estate sector?
A. Mutual funds and ETFs
C. As direct owners/landlords
D. All of the above
ANSWER: D. Many investors inadvertently own real estate. Broad-themed mutual funds typically allocate a portion of their holdings to real estate. They own it directly, too, sometimes in the form of an exchange-traded fund. You can buy stock in home builders or REITs. You also can buy investment properties for income, and in some cases you can carry these properties within an IRA. Some argue that owning a primary home makes the average investor “overweight” in real estate, so portfolio allocations to real estate need not comprise a large percentage of holdings.
3. What is a REIT?
A. Real-estate investment trust
B. Real-estate investment tax
C. Real-estate insurance tariff
D. Real-estate investor trade
ANSWER: A. Real-estate investment trusts are investment vehicles that contain securitized portfolios of commercial properties such as office buildings, apartment buildings, retail sites, hotels, storage facilities, parking garages, data centers, even cannabis farms. You can buy shares (typically called units) in a REIT, or invest in REITs indirectly since REIT units are often found within mutual-fund portfolios or inside target-date funds.
4. Which commercial real-estate subsector is least prosperous now?
A. Multifamily housing
ANSWER: D. Retail real estate ranks last among six commercial categories both in terms of its investment and development prospects, according to a joint report on the 2018 commercial real-estate market from PricewaterhouseCoopers (PwC) and the Urban Land Institute. Headwinds in the retail category stem from department-store obsolescence, changes in apparel spending, consumer demographics and the impact of e-commerce and other technology on shopping experiences.
5. What were typical residential mortgage terms before the creation of the Federal Housing Administration (FHA) and the Federal National Mortgage Association (Fannie Mae) in the 1930s?
A. 3.5% down with a 30-year payoff
B. 20% down with a 20-year or 30-year payoff period
C. 50% down with a 10-year payoff
D. 0% down, interest-only loans with a 30-year payoff period
ANSWER: C. Before the creation of the FHA and Fannie Mae, it was hard for the average American to come up with a 50% down payment and then pay off the remaining 50% of a home’s value in only a decade; at that time, the homeownership rate was below 49% (versus the current rate of 63.9%, according to U.S. Census data). When the FHA and Fannie Mae were created, insurance against defaults became available to borrowers and banks loosened loan terms to 20% down with a longer payoff. In the ensuing decades, borrowers could make much lower down payments—as little as 0% or 3.5%.
6. How did real estate contribute to the most recent financial crisis and related recession?
A. Lenders relaxed standards and underwrote loans that wouldn’t fly today
B. Banks knowingly and unknowingly sold mortgage securities containing unsound assets, and ratings firms failed to accurately rate real-estate debt sold to the secondary market
C. Investors speculated on housing and homeowners
D. All of the above
ANSWER: D. of the above. You can read all about it in the Financial Crisis Inquiry Commission’s 2011 report. For a more fun look at what happened, watch the movie “The Big Short.”
7. During the real-estate bubble, which economist was known as “Dr. Doom”?
A. Robert Shiller, author of “Irrational Exuberance” and co-developer of the Case-Shiller Home Price Index
B. Nouriel Roubini, NYU professor, formerly an economist advising the White House Council of Economic Advisers
C. Karl Case, the late professor/researcher who co-developed the Case-Shiller Home Price Index
D. Ben Bernanke, former Fed chairman, now a Brookings Institution economist
ANSWER: B. Nouriel Roubini, a global macroeconomist, boasts the title “Dr. Doom” for his prognostications about the 2008 real estate and credit-market meltdowns. He is predicting more economic drama.
8. What U.S. city has the lowest rate of apartment vacancy?
A. New York
C. San Francisco
ANSWER: A. New York has a 1.9% vacancy rate, tightest in the U.S., followed by Boston (2.6%), San Francisco (2.8%), Los Angeles (2.9%), Seattle (3%) and Washington, D.C. (3.8%), says National Real Estate Investor.
9. Which commercial real estate approach isn’t recommended in 2018?
A. Take advantage of demand for new housing
B. Bet on property price appreciation
C. Invest in “experiential retail”
D. Senior housing
ANSWER: B. Investors are advised to look at cash flow from income as a source of benefit rather than property-value appreciation, according to the PwC-Urban Land Institute report on commercial real estate. “Rent recoveries have matured in many markets and across property types. Cap rates have been compressed, but are leveling off,” the report says. “Appreciation is likely to be muted even in secondary and tertiary markets. That means focusing on cash flow and asset management in the immediate and midterm future.”
The article “How Well Do You Know Real Estate? Time to Find Out” first appeared in The Wall Street Journal.
During these winter months, when you cannot go outside and work on your home’s exterior or plant in the garden, you can nevertheless make use of your time inside, especially in the kitchen. Perhaps your faded kitchen needs a new and creative touch. Many homeowners don’t even like to spend time in the kitchen because it’s so gloomy, but they have limited time and finances to make improvements. Fortunately, kitchen renovations do not have to drain your budget, take a lot of time, or create a total upheaval in your kitchen. Try one or all of the following tips for a quick kitchen renewal.
1. Try Painting
Paint works wonders on everything. A dull room can be transformed into a vibrant, clean atmosphere with just a few strokes of a brush and a gallon of paint. If your old wood-tone cabinets fail to catch your eye, try spray-painting them with a very glossy white or hand-painting them with an oil-based paint in creamy white. For only a few dollars, you can paint your cabinetry, creating a dramatic improvement very quickly. After painting the cabinets, repaint the walls with a latex, satin enamel in a soft sheen or with no sheen. Use another color to contrast your new-looking cabinets.
2. Replace Pulls, Hinges, and Knobs
New hardware can give even the worst cabinetry a handsome new look. Consider vintage hardware for a unique décor. Expensive pulls can totally change the look and feel of your kitchen.
3. Remove a Few Doors
Examine your kitchen cabinets and consider which doors could be removed to expose the shelving within. Open shelving not only makes a room look larger, but also displays your favorite dishes, cookbooks, glasses, or anything else. This is an easy way to create an impressive new look for your kitchen. Take this idea one step further by painting the inside of your newly exposed shelving. You can use the same color as the cabinets for consistency, or a bright, complementary color to create a contrast.
4. Replace Solid Doors with Glass Fronts
By replacing solid cupboard doors with glass fronts, you open up the room and have an opportunity to display dishes, glassware, silver, or anything else. The glass can be clear or frosted. With a slightly larger investment, you can get vintage doors that are mastered to fit. You can also hang a sheer fabric behind the glass fronts. If you’re already considering removing a few doors to open up shelving, glass fronts can be a beautiful complement.
5. Change the Lighting
Wire Suspension Lights: Make any space look contemporary and new. Track Lights: Brighten up any kitchen. Paper Lanterns: Add life, character, and originality. Halogen Bulbs: Make a box or rectangle of lights to make a small kitchen feel larger.
6. Tile a Countertop
Tiling your countertops is a great way to get new countertops in just one day. If you have a small kitchen, this project brings added benefits, since you can opt for a more expensive tile and still not have to pay a lot of money, because there won’t be much surface area to cover.
7. Replace the Flooring
Changing your old flooring does not have to be difficult or expensive. Today there are countless patterned, self-stick tiles that can be laid quickly and easily. Another alternative is to paint the floor black or another dark color. Then tie in the wall or cabinet color by using a ragging or faux finish over the dark color.
8. Finish the New Look with Faucets
You will be amazed to see how much of a difference a new faucet can make in your kitchen. The small amount of money you put into a new faucet and pull-out spray can make your kitchen sing with new style.
9. Add a Reflection
One of the easiest and best ways to make a space feel larger without expanding the room is to add a framed mirror at the end of a galley kitchen. This adds dimension to the room. Plus, the mirror reflects already existing light, which will brighten up your kitchen.
10. Change the Window Treatment
Curtains fade and, over time, begin to feel like furniture or part of the wall. We forget that changing them can easily upgrade the feel and look of the room. A matchstick blind cut to size can add texture and light control.
Once in a lifetime opportunity to purchase a special home on an amazing lot. Most homes in this area are passed down from generation to generation and rarely come on the market! A rare find with water-front property in Metro Denver. Two acres with the Big Dry Creek running through your backyard. Located less than 5 minutes to shopping, restaurants, and award winning Littleton Public schools. The home consists of 4 bedrooms and 3 bathrooms. 2200 Square feet above ground and 750 Square feet in the finished basement. Once you turn on Franklin St you feel like you are in the country. One of the few lots in this special enclave of homes on acreage in the middle of the city. Only a couple of blocks and you will be on the Highline Canal trail with access to 71 miles of continuous trails. Franklin is a dead-end street at the Highline Canal which leads to a quiet street with mostly foot traffic, bikes and horses. Located within walking distance to Goodson Recreation Center, the brand-new Gudy Gaskill Elementary School (opening Fall of 2022), and the brand-new Franklin Pool. With a neighborhood pool within walking distance, there will be plenty of summer fun with a summer swim team, slides, diving board and splash park. deKoevend Park is one of the loveliest parks in all of Denver Metro and it is only a few minutes away. Completely updated with a new kitchen including a large island featuring honed granite and gas cooktop. Main floor is very open with a great room, eating space and kitchen for enjoying family time together. Primary bath has a soaking tub and large shower. The Primary bedroom has access to a large deck overlooking the creek which includes an electric awning over the deck. Very private and quiet. Two washer/ dryer connections - one upstairs and one in the finished basement. Office with two built-in desks (great to work from home) and cabinets so you have somewhere you can drop backpacks, coats, etc. as you enter from the garage. Storage abounds with plenty of cabinets throughout the home. Enjoy the large oversized two car garage with additional storage in attic. Shed for additional storage outside. Additional upgrades include: reclaimed hard wood floor, new paint, newer HVAC and water heater. Wood burning fireplace with brick wall. Natural Gas grill included. Covered front porch and covered back patio. Many fruit trees already bearing fruit. If you want to own chickens, bees, or garden - there are endless opportunities. Or let the pasture remain natural and have very little maintenance. Live in the home as-is or build your forever dream home on this one in a lifetime lot!
6071 S Franklin St. Centennial, CO 80121
You've done the work to clean up your credit score, scrape together a down payment and pry a preapproval letter from your mortgage lender. Cheers!
Getting preapproved is a smart move, especially in a seller's market characterized by tight inventories and, in some regions, bidding wars. Having a lender's letter in hand signals to sellers that you're a legit buyer whose offer merits serious consideration.
Even so, a preapproval letter is just a conditional commitment. It can be withdrawn if your financial situation changes in a way that makes your lender nervous.
The best advice? "Maintain the status quo," says Scott Schang, branch manager at BuyWise Mortgage in Anaheim, California.
There are a few surefire ways to get rejected after you've been preapproved. Among them:
Quitting your job
There's nothing wrong with leaving a job to take a similar or better-paying position at another company, so long as you remain a full-time employee who gets a W-2 form at the end of the year.
If you're going from a W-2 job to a W-2 job, that's fine. However, taking a significant pay cut will raise red flags. So will switching from a salaried job to a position where you're compensated mostly on commission. And quitting your job to launch a new venture is a no-no, at least when it comes to keeping your mortgage approval.
Lending guidelines are much stricter for self-employed borrowers, and lenders typically want to see a two-year track record of self-employment income.
The best play: Wait until after you've closed on your house and started paying your mortgage to quit your job and pursue your entrepreneurial dream.
Loading up on debt
This is an obvious bit of advice, but one well worth heeding. In the weeks or months after you get preapproved and before you close on your home, keep your spending impulses on lockdown. That means no new credit cards, no car loans and no big-ticket purchases of any kind. Ignoring this rule of thumb is likely to bring scrutiny from your lender.
Running up a balance on a new credit card will lead your lender to re-examine your debt-to-income ratios, Carson warns. If you were on the borderline before your shopping spree, the new bills could kill the deal.
Paying down old debt
Say you have a preapproval letter but realize you could get a better mortgage rate with a higher credit score. Don't make the mistake of trying to be a hero -- it's likely to backfire.
Paying off delinquent debt, settling up with creditors who have charged off an old debt, canceling credit cards -- all might seem like responsible moves, but they'll hurt your credit score.
That's one of the backwards things with the credit scoring system. If you cancel a card, that will drop your credit score significantly for 60 to 90 days before it starts to creep up.
It's unclear exactly how much your score will fall if you cancel a card, but the hit could amount to as much as 40 points. Paying down an old balance presents a similar quandary. You think you're cleaning up your finances but your lender just sees more available credit, Carson says, and you could be jeopardizing your credit score.
And when it comes to credit scores, not all debt is created equal. Before you close on a home -- and ideally before you seek preapproval -- you'll need to pay off any liens, old tax bills or current debts in collection. However, if a debt has already been charged off -- that is, the creditor isn't expecting any more payments -- paying it will vault your old debt to a "current" status and actually lower your credit score.
So the rule of thumb for retiring charged-off debt is the same as the guideline for taking on new debt: Wait until after you've closed on your home.
Moving large sums of money
Down payments are a challenge for first-time buyers, and many hit up relatives for help. However, receiving any sum that amounts to more than half your regular paycheck is likely to draw scrutiny from your lender, Carson says.
Banks want to make sure you aren't laundering money. They also want to be certain any sudden windfalls are in fact gifts and not loans. If money is moving around, that's going to be a red flag for an underwriter, and they're going to pull out the magnifying glass.
The good news is that receiving a gift doesn't need to kill your preapproval. But your bank likely will require you to provide a paper trail that includes a letter stating the money is a gift and two months of bank statements from the gift giver.
The bottom line
Keep in mind credit scores are based on complex calculations, and every borrower's situation is different. In general, though, your overall financial situation matters.
If you have a gold-plated credit score and enough income to comfortably afford your loan, a new store credit card probably won't kill your deal. But if you have a borderline credit score and you're stretching to qualify, even a small hiccup could hurt your chances.