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3 key level to monitor as a Real Estate Investor.
By robertearl | May 12, 2008
Establish the Investments Level of Liquidity - liquidity is the ability to quickly convert an investment into cash, without losing any of the principal that you’ve invested. For example, a savings account 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. The greatest 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.
Research the Level of Marketability the Real Estate Investment will have - 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 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.
Robert Earl - Founder of The Earl of Real Estate Team is a Real Estate Entrepreneur serving the Northern Virginia Real Estate Market. The Earl of Real Estate Team loves working with Burke VA Real Estate, Condos, Townhomes & Homes for Sale
Topics: Northern Virginia Real Estate, Robert Earl |