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Determine Level of Liquidity - You want to determine how easy or difficult it would be to be able to convert the investment into cash without losing any of the principal that you have invested. This is called the liquidity of the investment. For example, a savings account is highly liquid. By contrast, one of the least liquid investments is real estate because of the time it takes to sell the property and 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.

Research the Level of Marketability the Real Estate Investment will have - 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 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 brokerage fees and marketing fees. 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 - 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. 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.