Posted by Ronald * Starr(in No CA) on July 09, 2003 at 19:45:51:
I do not recommend having holding periods of two to five years. Either resell as soon as possible or hold forever.
I don’t think it is a good idea to plan to hold for two to five years. Slumping markets can hurt you too much. That is why you should not plan to do that. If you invest as I suggest, you don’t worry about changes in property values.
The only reason I can see to hold two to five years is to get some tax benefits which are available to those who hold properties for investment or production of income. If it weren’t for the tax issues, you would follow my suggestion of doing a quick turnover of the property. When you do quick turn over you don’t have to worry about the direction of prices.
If you do a quick turnover you will get your profit out sooner. You will have taxes to pay. But then you can take your remaining cash and invest it again one or more times during the two to five year period that you propose for holding the initial investment.
I suspect that if you make some reasonable assumptions you will see that you make a whole lot more money doing several quick turnovers in the two-five year period, paying the income taxes, than you will holding the one deal for two to five years and not pay taxes because you exchange out or perhaps do an installment sale.
Nope, I still don’t see any sense at all in planning to hold properties for two to five years. Unless maybe you are going away to prison for that time and and want to wait until you get out before you sell. No, that doesn’t even sound like a good reason to hold two to five years. How are you going to do a good job managing the properties when you’re in the big house? Nope. Either quick resale or hold forever.
The new tax brackets just make it better to do quick reselling. Less taxes to pay for quick turnover properties.
Good InvestingRon Starr***