Holding Property How long you hold property depends on what your

overall strategy for real estate investing is. In a perfect world you

would be able to follow your plan exactly and liquidate your property

at will. Most investors have different holding times based on their

exit strategy for a particular transaction. However, exit strategies

can change due to self imposed objectives and/or market conditions. It

is not uncommon to have market conditions change negatively or

positively during your holding period. I can think of a recent property

that we were going to do a quick 鈥渇lip鈥?on. We purchased it for $30,000

with short term money and the property needed about $40,000 in

rehabilitation. This place was in condition 0 on a scale of 1 to 10.

The only reason we bought it was because it had some nice architectural

features. We believed with the rehabilitation it would be worth about

$115,000. I was able to pull comps for that value. Unfortunately,

we took too much time doing the rehabilitation (we got distracted) and

6 months later I am still working on the property. My note was due and

the values in the area had softened considerably. The retail value was

now closer to $90,000 if I was lucky. Due to our procrastinating we

lost a good chunk of cash. We decided to sell it to another investor

who put long term financing on it and sold it on a lease option. What

was a profitable deal going in, turned out break even at best because:

1. The market turned

2. We got distracted

3. We held it too long

Even experienced investors make occasional mistakes. There were other

extenuating circumstances in that particular transaction too, but the

point I want to make is that it is wise to have more then one exit

plan. We managed to get out without much loss, but it wasn’t according

to our original plan. If you purchase residential property, intending

to fix it up and sell it, don’t hold it any longer than it takes to get

it ready to sell again. On the other hand, if your plan is to rent the

property out, you may be holding for a long time. If you are after

monthly cash flow and asset appreciation, then you want to develop a

long-term holding strategy for your properties and work at reducing

your mortgage balance or even using equity to leverage into more deals.

On the other hand, if you are looking for cash accumulation, then you

will turn your properties over more quickly, holding them for as short

a time as possible. These strategies are obviously impacted by your

area’s current market. Are you in a highly appreciating area or are you

in a flat or declining market?

In holding property you can have many objectives, both short-term and

long term. Opportunities range from immediate positive cash flow to

break-even and even negative cash flow, with future appreciation. It

all depends on your goals and preferred strategies.