Which statement defines holding period return?

Which statement defines holding period return?

• A. The total return earned on an investment over the holding period, expressed as a percentage of initial investment.
• B. The annualized return on equity.
• C. Net operating income divided by initial investment.
• D. Total sale proceeds divided by initial investment.

Answer: (C)

Holding period return is about all the money you earn from an investment during the entire holding period, expressed as a percentage of what you initially invested. For real estate, this means combining the income you receive over the period (like net operating income) with any change in the property's value when you sell, and then dividing the total by the initial investment to get the return rate. The statement that uses only net operating income divided by initial investment measures the operating yield, not the total return over the holding period. It ignores any capital gain or loss from selling the property, which is a key part of holding period return.

Holding period return is about all the money you earn from an investment during the entire holding period, expressed as a percentage of what you initially invested. For real estate, this means combining the income you receive over the period (like net operating income) with any change in the property's value when you sell, and then dividing the total by the initial investment to get the return rate.

The statement that uses only net operating income divided by initial investment measures the operating yield, not the total return over the holding period. It ignores any capital gain or loss from selling the property, which is a key part of holding period return.