Articles

Calculate the Level of Liquidity the Real Estate Investment will have - Lets say you need cash right away. The Investments Level of Liquidity will be measured by your ease or ability to quickly convert the investment into cash, with still maintaining your original level of principal. Take a savings account for example that is highly liquid. In contrast, real estate is considered to have low liquidity because of the unpredictability of the market value at the time you are ready to sell and the time it takes to sell the property. The greatest real estate fortunes have been lost by those who overextended themselves and didn't have enough liquidity to weather the natural ebbs and flows in the real estate market.

Establish the Investments Level of Marketability - marketability is the ability to convert an investment into cash quickly, at any price. For example, stocks can be sold anytime on an organized stock exchange at the prevailing market value. However, the price at which the stock is sold can produce a loss for the investor who is selling the stock. With real estate, not only will you need to deal with market conditions, there will be real costs to consider whenever you sell a property such as marketing fees, brokerage fees and taxes. Those looking to invest in Northern Virginia Condos for Sale should try to invest with a business plan and avoid the marketability risks associated with real estate speculation.

Establish the Investments Impact of Leverage - Leverage is when a purchaser borrows funds to finance a portion of the purchase price of an investment. The ratio of borrowed funds to the total purchase price is known as the loan-to-value (or LTV) ratio. A low LTV would result in low leverage, while a high LTV would result in high leverage. Leverage plays a bigger role in real estate investment than any other form of investing. Sometimes, mortgage debt results in 'negative leverage'. In this case, you should avoid mortgage debt or sell the investment. Other times, mortgage debt results in 'positive leverage' and can enhance your rate of return on investment. When buying a home in Northern Virginia, you should avoid the trap of negative leverage while maximizing the benefits positive leverage.