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

Winston Koh and Edward H.K. Ng ()
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Edward H.K. Ng: Department of Finance and Banking, NUS Business School, National University of Singapore, 10 Kent Ridge Crescent, Singapore 117592

International Real Estate Review, 2004, vol. 7, issue 1, 71-97

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 (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2004
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Related works:
Working Paper: Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period (2005)
Working Paper: Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period (2005)
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