Various Articles

Determine Level of Liquidity - liquidity is the ability to quickly convert an investment into cash, without losing any of the principal that you've invested. Take a savings account for example that is highly liquid. By contrast, one of the least liquid investments is real estate because of the unpredictability of the market value at the time you are ready to sell. Some real estate fortunes have been lost by those who overextended themselves and didn't have enough liquidity to weather the ups and downs in the real estate market. You should consider strategies to maintain high levels of liquidity to be able to weather the storms in the marketplace and take advantage of profitable investment opportunities.

Determine Level of Marketability - When it comes time to sell your real estate investment, will you have a buyer that will convert the investment into cash for you at a fair price. This is the measure of marketability Take the example of stocks, stocks can be sold anytime on a stock exchange at the market value. 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 Homes for Sale should try to invest with a business plan and avoid the marketability risks associated with real estate speculation.

Determine the Impact of Leverage - using borrowed funds to finance a part of the purchase price is called leverage. The ratio of borrowed funds to the total purchase price is known as the loan-to-value (or LTV) ratio. A low loan-to-value would result in low leverage, while a high loan-to-value would result in high leverage. Real estate investments can be more leveraged than most other types of investments. 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.