Publication Type
Journal Article
Version
publishedVersion
Publication Date
12-2004
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
7
Issue
1
First Page
71
Last Page
97
ISSN
1029-6131
Identifier
10.2139/ssrn.662102
Publisher
Asian Real Estate Society
Citation
KOH, Winston T. H. and NG, Edward H. K..
Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period. (2004). International Real Estate Review. 7, (1), 71-97.
Available at: https://ink.library.smu.edu.sg/soe_research/438
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://www.um.edu.mo/fba/irer/papers/past/Vol7/vol7_page71_97.htm