Title

Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period

Publication Type

Journal Article

Publication Date

2004

Abstract

Real estate investments are typically characterized by high degrees of leverage and long-loan tenures. In perfect capital markets, leverage has no impact on the investment decision apart from tax considerations. However, the mortgage financing market is imperfect in many countries. In the presence of market imperfections, an optimal holding period exists for real property investments. We provide a simple rule to calculate the optimal holding period to compare the required rate of return with the leveraged rate of return on equity.

Keywords

mortgage financing, real estate, financial leverage, optimal holding period

Discipline

Finance | Real Estate

Research Areas

Applied Microeconomics

Publication

International Real Estate Review

Volume

8

Issue

1

First Page

71

Last Page

97

ISSN

1029-6131

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://ideas.repec.org/a/ire/issued/v07n012004p71-97.html

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