text: Property Investment
  
  # Holding period return formula example and calculator
  
  Holding period return measures the performance of a property investment over a particular holding period. It is a useful formula that helps real estate investors determine whether their investment is working, and if it is, how much is the  expected rate of return.
  
  In this article we don’t only discuss the formula to work out the rate of return, we have also provided a useful calculation tool immediately below to help you work out your numbers. The explanation of the formula that the calculator uses, read the rest of the article below.
  
  There are several instances that an investor may want to estimate this investment performance measure. The most common is the case of a property that has been acquired some time ago and the investor estimates periodically the return achieved by the particular investment as a part of the performance monitoring process. In this case, the generic formula for calculating such a return is the following:
  
  RHP = (Vehp – PP – SC + NOIhp) / PP (1)
  
  where:
  
  RHP = Holding period return
  PP = Purchase Price
  Vehp = Property Value at the end of the holding period
  NOIhp = Net Operating Income received over the holding period
  SC = Sales Cost
  
  In such a case, we may want to annualize the estimated return in which case we can use the formula:
  
  ARHP = (1 + RHP)(1/n) – 1 (2)
  
  Where:
  
  ARHP = Annualized holding period return
  n = number of years within holding period
  
  ## Example
  
  Purchase Price (PP): 200,000
  
  Holding Period (n): 2.5 years
  
  Appraised Value at the end of 2.5 years: 220,000
  
  NOI received over holding period: 35,000
  
  Sales Cost: 5% or 220,000 × 0.05 = 11,000
  
  Therefore, the holding period return can be calculated as:
  
  RHP = (220,000-200,000-11,000+35,000)/200,000
  
  RHP = (220,000-200,000-11,000+35,000)/200,000
  
  RHP = 0.22
  
  Furthermore, we can annualize this performance measure by applying formula (2) as follows:
  
  ARHP = (1 + 0.22)(1/2.5) – 1
  
  ARHP = (1.22)(1/2.5) – 1 = 1.08279 – 1 = 8.3%
  
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explanation: The document provides an explanation of the holding period return formula and includes an example calculation. It describes the formula for calculating the holding period return and the annualized holding period return, and then applies these formulas to a specific example. The document contains a question and an answer, as it presents the problem (calculating the holding period return and annualized holding period return) and provides the solution.
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distilabel_metadata.content: Property Investment
  
  # Holding period return formula example and calculator
  
  Holding period return measures the performance of a property investment over a particular holding period. It is a useful formula that helps real estate investors determine whether their investment is working, and if it is, how much is the  expected rate of return.
  
  In this article we don’t only discuss the formula to work out the rate of return, we have also provided a useful calculation tool immediately below to help you work out your numbers. The explanation of the formula that the calculator uses, read the rest of the article below.
  
  There are several instances that an investor may want to estimate this investment performance measure. The most common is the case of a property that has been acquired some time ago and the investor estimates periodically the return achieved by the particular investment as a part of the performance monitoring process. In this case, the generic formula for calculating such a return is the following:
  
  RHP = (Vehp – PP – SC + NOIhp) / PP (1)
  
  where:
  
  RHP = Holding period return
  PP = Purchase Price
  Vehp = Property Value at the end of the holding period
  NOIhp = Net Operating Income received over the holding period
  SC = Sales Cost
  
  In such a case, we may want to annualize the estimated return in which case we can use the formula:
  
  ARHP = (1 + RHP)(1/n) – 1 (2)
  
  Where:
  
  ARHP = Annualized holding period return
  n = number of years within holding period
  
  ## Example
  
  Purchase Price (PP): 200,000
  
  Holding Period (n): 2.5 years
  
  Appraised Value at the end of 2.5 years: 220,000
  
  NOI received over holding period: 35,000
  
  Sales Cost: 5% or 220,000 × 0.05 = 11,000
  
  Therefore, the holding period return can be calculated as:
  
  RHP = (220,000-200,000-11,000+35,000)/200,000
  
  RHP = (220,000-200,000-11,000+35,000)/200,000
  
  RHP = 0.22
  
  Furthermore, we can annualize this performance measure by applying formula (2) as follows:
  
  ARHP = (1 + 0.22)(1/2.5) – 1
  
  ARHP = (1.22)(1/2.5) – 1 = 1.08279 – 1 = 8.3%
  
  Be Sociable, Share!
  
  Previous article
  
  Next article
distilabel_metadata.role: user
distilabel_metadata.raw_output_q_a_detector_0: The document provides an explanation of the holding period return formula and includes an example calculation. It describes the formula for calculating the holding period return and the annualized holding period return, and then applies these formulas to a specific example. The document contains a question and an answer, as it presents the problem (calculating the holding period return and annualized holding period return) and provides the solution.
  
  Label: question-and-answer