Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period
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.
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| Length: | 29 pages |
| Date of creation: | Feb 2005 |
| Date of revision: | |
| Publication status: | Published in SMU Economics and Statistics Working Paper Series |
| Handle: | RePEc:siu:wpaper:03-2005 |
| Contact details of provider: | Postal: 90 Stamford Road, Singapore 178903 Phone: 65-6828 0832 Fax: 65-6828 0833 Web page: http://www.economics.smu.edu.sg/ More information through EDIRC
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