Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2005
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 is 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
Volume
03-2005
First Page
1
Last Page
28
Publisher
SMU Economics and Statistics Working Paper Series, No. 03-2005
City or Country
Singapore
Citation
KOH, Winston T. H. and NG, Edward H. K..
Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period. (2005). 03-2005, 1-28.
Available at: https://ink.library.smu.edu.sg/soe_research/822
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in International Real Estate Review, 2004, 7 (1), 71-97.