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

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Author Info
Winston T.H. Koh () (School of Economics and Social Sciences, Singapore Management University, 469 Bukit Timah Road, Singapore 259756)
Edward H.K. Ng () (Department of Finance and Banking, NUS Business School, National University of Singapore, 10 Kent Ridge Crescent, Singapore 117592)

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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.

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File URL: http://www.umac.mo/fba/irer/papers/past/Vol7_pdf/71-97.pdf
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Publisher Info
Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 7 (2004)
Issue (Month): 1 ()
Pages: 71-97
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ire:issued:v:07:n:01:2004:p:71-97

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Web page: http://www.asres.org/

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Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Web: http://www.asres.org/

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Find related papers by JEL classification:
L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
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  1. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402. [Downloadable!] (restricted)
  2. Patric H. Hendershott & David C. Ling, 1984. "Trading and the Tax Shelter Value of Depreciable Real Estate," NBER Working Papers 1267, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. George W. Gau & Ko Wang, 1990. "Capital Structure Decisions in Real Estate Investment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 501-521. [Downloadable!] (restricted)
  4. Andrew H. Chen & David C. Ling, 1989. "Optimal Mortgage Refinancing with Stochastic Interest Rates," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 278-299. [Downloadable!] (restricted)
  5. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-69, June. [Downloadable!] (restricted)
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  6. Michel Glower & Donald R. Haurin & Patric H. Hendershott, 1998. "Selling Time and Selling Price: The Influence of Seller Motivation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 719-740. [Downloadable!] (restricted)
  7. Gau, George W & Wang, Ko, 1994. "The Tax-Induced Holding Periods of Real Estate Investors: Theory and Empirical Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 8(1), pages 71-85, January.
  8. Roger G. Ibbotson & Laurence B. Siegel, 1984. "Real Estate Returns: A Comparison with Other Investments," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 219-242. [Downloadable!] (restricted)
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This page was last updated on 2009-12-3.


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