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Glossary / Property

Minimum hold period

The minimum hold period is the number of years a property must be held for its income and growth to cover the round trip transaction costs, below which the purchase cannot pay for itself.

It is not a rule of thumb, it is an output. Divide the round trip cost by the annual net yield plus expected growth, and the answer is the number of years before you are level.

In a market rising fifteen percent a year the period is short enough to ignore. In a flat market it is the whole investment case.

Where people get it wrong

Setting it by intention rather than arithmetic. A plan that required an exit inside three years does not become viable because that was the plan.

The framework behind it Transaction cost drag and the minimum hold sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Transaction cost drag Transaction cost drag is the round trip cost of buying and selling an asset expressed as an annual percentage, calculated by dividing the total cost by the number of years held. Net rental yield Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, which makes it the only yield figure that describes money actually reaching the owner.

Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.