The article shows that a standard DCF modelling framework is not adapted to offer sufficient insight into the mechanics leading to optimal holding periods for real estate portfolios. A richer framework is offered that enables the portfolios terminal value to behave according to a simple diffusion process. The findings of the article show that optimal holding periods for real estate investment portfolios exist within very precise conditions, which are determined by the investor’s cost of capital, the portfolio’s net initial yield and the cash flow growth rate.
BARONI, M., BARTHELEMY, F. et MOKRANE, M. (2007). Optimal Holding Period for a Real Estate Porfolio. Journal of Property Investment and Finance, pp. 603-625.