3 key level to monitor as a Real Estate Investor.
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. Consider a savings account. It 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 natural ebbs and flows 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 - 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.
Research the Impact of Leverage the Real Estate Investment will have - leverage is the use of borrowed 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.
Robert Earl - Founder of The Earl of Real Estate Team is a Real Estate Entrepreneur & Real Estate Coach based in the Northern Virginia. The Earl of Real Estate Team works with Vienna VA Real Estate, Condos, Townhomes & Homes for Sale
- Robert Earl The Earl of Real Estate
