Optimal holding period for a real estate portfolio

Michel Baroni, Fabrice Barthélémy, Mahdi Mokrane, Hanna Kaleva
2007 Journal of Property Investment & Finance  
This paper considers the use of simulated cash flows to determine the optimal holding period in real estate portfolio to maximize its present value. The traditional DCF approach with an estimation of the resale value through a growth rate of the future cash flow does not let appear this optimum. However, if the terminal value is calculated from the trend of a diffusion process of the price, an optimum may appear under certain conditions. Finally we consider the sensitivity of the optimal
more » ... period to the different parameters involved in the cash flow estimations. This methodology may be applied in commercial valuation and enables to get an optimal holding period for a given portfolio.
doi:10.1108/14635780710829306 fatcat:fiwqmxak3jftznty7gqmusdus4