Hold Period: The Underwriting Assumption That Drives Everything
Hold period determines how much NOI growth the deal has to absorb exit cap risk — and how much patience LPs need to see returns.
Typical Hold Periods by Strategy
- Core: 7–10 years
- Core-Plus: 5–7 years
- Value-Add: 3–5 years
- Opportunistic / Development: 2–4 years
The Cap Rate Risk Compounding Effect
A 50 bps cap rate expansion at exit costs approximately 8% of property value. On a 3-year hold, that's about 250 bps of IRR drag — material. On a 10-year hold, NOI growth at 3–4% annually often absorbs the entire cap shift. Long holds are more forgiving; short holds are more exposed.
See the Hold Period IRR Matrix
Stress-test IRR across hold period and exit cap shifts in one institutional-grade matrix.
Open Hold Period Sensitivity →Frequently Asked Questions
What is a hold period in CRE?
The hold period is the projected duration from acquisition close to disposition (or refinance-and-recap). It is one of the most consequential modeling assumptions because exit cap rate risk compounds over time, while NOI growth has more time to offset it.
What is a typical CRE hold period?
Core: 7–10 years. Core-plus: 5–7 years. Value-add: 3–5 years. Opportunistic/development: 2–4 years. Shorter holds mean less NOI growth to absorb cap rate expansion at exit.
How does hold period affect IRR?
A 50 bps cap rate expansion at exit costs ~8% of property value. Over a 3-year hold, that translates to roughly 250+ bps of IRR drag. Over a 10-year hold, NOI growth often absorbs most of it. Hold period determines whether cap rate risk is fatal or manageable.