Simply speaking, liquidity means the degree of the effortlessness that enables an individual or a company to convert its assets into money to fulfill instant and temporary requirements. In fact, compared to investments in long term bonds, owing real estate property and mortgages, funds comprising savings accounts, chequing accounts, and short term guaranteed investment certificates are usually considered to be very liquid in this sense. In business, liquidation is frequently mentioned as the capability to translate assets into money. Liquidation sale is a suitable example to describe the issue.
On the other hand, liquidity in incomings and outgoings of cash is especially significant to ensure the persistence of an investment in real estate business. Here it is important that the person investing in real estate business should be capable of fulfilling the cash requirements of firm vis-à-vis the operating expenditures occurring in present as well as in the future. At the same time, it is important that the market value of the asset or real estate property remains the same or at parity. Since, the investor intends to sell the property at some time in the future, the incoming cash from the income generated by the sale remains a vital fraction of the earnings.
In order to assess the profitability in one real estate property over a different one, investors focus on scrutinizing the incoming and outgoing cash as well as the discounted cash flows that is also known as the current worth of the expected pattern of income and expenses. Normally, investment in real estate or owning a property is not considered to be a very liquid asset, cautious selection of real estate endowment as well as discreet prediction regarding the pattern of income and expenses the real estate investment can create will help to deal with its liquidity as well as the earnings on it.