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H OLDING S TRA TEGIES AND E XIT S TRA TEGIES

Short Term or Long Term?

The first thing you have to do is to take into account the nature of
the investment. If, for example, you’re investing in a stable residential
location, you want to buy it and hold on to it. That’s a long-term in-
vestment since in all likelihood it will always do well and throw off a
steady income that will keep up with any inflation that may occur. If,
on the other hand, you’re buying something that has a questionable
life cycle, such as a strip mall without long-term leases or large an-
chor tenants, I would view that as a short-term investment, and
would try to sell it quickly if vacancies are likely to occur and ade-
quate replacements might be problematical. If you choose to invest in
a retail or commercial or industrial property with a long-term lease
with a financially stable tenant, think long term.

Real Estate Cycles

Any real estate investor whether large or small must acknowl-
edge the fact that the real estate market runs in cycles that have
unpredictable timing and duration. When the interest rates for
mortgages are high, the sale of homes or apartment units will drop.
Increases intherateofunemployment or a recession will also pro-
duce negative effects.
There are some aspects of real estate I think you can bank on.
One is that the cost of construction will rise as time goes on. An-
other is that there is a limited supply of real estate for any worth-
while use. Although it is difficult to predict any real estate cycle
with a reasonable degree of accuracy, there are many sources that
track trends and report their findings. Government sources are the
least reliable because they are not specific as to area. Reports created
by local reputable real estate brokers, local banks, or financial insti-
tutions are a far better source to rely on. The best research advice I

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