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 “flip” 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.