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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. In contrast, real estate is considered to have low liquidity 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. Before you invest, consider strategies to establish high levels of liquidity.

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. 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 brokerage fees, marketing 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.

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 high loan-to-value would result in high leverage, while a low loan-to-value 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.