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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 unpredictability of the market value at the time you are ready to sell and the time it takes to sell the property. Some 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 brokerage fees and marketing fees. 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.

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 high LTV would result in high leverage, while a low LTV would result in low 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.