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Valuing Depreciable Real Estate: A New Methodology

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  • David C. Ling
  • Michael J. Whinihan

Abstract

The same factors that determine the current market price of a property also determine the price of a future investor will pay for that property. Previous researchers had no means available to endogenize future resale prices and future optimal holding periods. Using dynamic programming, we simultaneously determine both a price path and the corresponding optimal holding periods for all owners during the economic life of an income‐producing property. The model can be extended to the problem of estimating real rent patterns from observed patterns of used property prices.

Suggested Citation

  • David C. Ling & Michael J. Whinihan, 1985. "Valuing Depreciable Real Estate: A New Methodology," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(2), pages 181-194, June.
    • Handle: RePEc:bla:reesec:v:13:y:1985:i:2:p:181-194
    DOI: 10.1111/1540-6229.00349
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    Cited by:

    1. Winston T.H. Koh & Edward H.K. Ng, 2004. "Investing in Real Estate: Mortgage Financing Practices and Optimal Holding Period," International Real Estate Review, Global Social Science Institute, vol. 7(1), pages 71-97.
    2. Pellechio, Anthony J., 1988. "Taxation, Rental Income, and Optimal Holding Periods for Real Property," National Tax Journal, National Tax Association, vol. 41(1), pages 97-107, March.
    3. Pellechio, Anthony J., 1988. "Taxation, Rental Income, and Optimal Holding Periods for Real Property," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(1), pages 97-107, March.

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