What Is Build-to-Sell?

You develop a project with the intention to:

• Complete it

• Sell it

• Close the capital cycle

Profit comes from:

The spread between construction cost and selling price.

However, this model only works when margins are healthy.

What Is Build-to-Hold?

You develop a project with the intention to:

• Keep it

• Lease it

• Generate recurring income

Returns come from:

Rental cash flow + long-term appreciation.

Here, the critical metric is not gross margin — it is net yield after taxes over time.

Numerical Example

Land: 600 sqm
Construction cost: €2,300 / sqm
Total investment: €1,380,000

Selling price: €4,000 / sqm
Total exit value: €2,400,000

Gross margin: €1,020,000
(before taxes, marketing, financing)

Scenario A – Build-to-Sell

✔ 2–3 year cycle
✔ Liquidity upon completion
✔ Capital redeployment

Risk factors:

• Market conditions at delivery

• Price compression

• Sales absorption speed

This model carries short-term but concentrated risk.

Scenario B – Build-to-Hold

Assume net yield of 4.5%:

€2,400,000 × 4.5% = €108,000 annual net income

✔ Stable cash flow
✔ Long-term value preservation
✔ Less dependency on exit timing

Risk factors:

• Long-term capital lock-up

• Ongoing management

• Liquidity constraints

This model carries lower volatility but longer exposure.

The Tax Factor: The Decisive Variable

Before tax, both models may appear comparable.

After tax, the structure changes completely.

Taxation in Build-to-Sell

• Corporate tax on profit

• Possible VAT structure

• Capital gains implications

• Transaction costs

Example:

From the €1,020,000 gross margin,
assume net profit after expenses = €400,000.

At 25% effective taxation:

€400,000 × 25% = €100,000 tax

Net retained profit: €300,000

This is a one-time tax impact.

The cycle closes.

Taxation in Build-to-Hold

• Annual rental income tax

• Property tax (ENFIA)

• Ongoing operational expenses

• Capital gains tax upon eventual sale

Example:

Annual income: €108,000
Effective tax at 25%:

€108,000 × 25% = €27,000 tax

Net annual income: €81,000

Over 10 years:

€270,000 cumulative taxation
(excluding appreciation tax upon exit)

Here, taxation is recurring and cumulative.

Over 15–20 years, it significantly affects IRR.

Which Model Is More Tax Efficient?

Build-to-Sell:

• Higher but one-time tax

• Faster capital recycling

• Clear exit

Build-to-Hold:

• Lower annual tax burden

• But recurring

• Long-term capital lock

The longer the holding period, the more structural taxation shapes total return.

So Which Model Is Truly Safer?

Build-to-Sell is safer when:

• The market is strong

• Margins are robust

• Liquidity is a priority

• Timing risk is acceptable

Build-to-Hold is safer when:

• Long-term wealth is the goal

• The asset quality is high

• Net yield after tax is sustainable

• Capital lock-up is acceptable

The real difference:

Build-to-Sell depends on exit timing.
Build-to-Hold depends on asset quality.

If the asset is mediocre, holding becomes a trap.
If margins are thin, selling becomes speculation.

How Sophisticated Investors Approach It

Experienced investors often combine both:

• Sell part of the development

• Retain premium units

• Lock profit

• Maintain long-term income

This hybrid strategy balances:

✔ Liquidity
✔ Tax exposure
✔ Market risk
✔ Asset accumulation

The Role of Poli Real Estate

At Poli Real Estate, every development project is evaluated based on:

• Margin stress testing

• Tax structure modeling

• Exit planning

• Liquidity management

• Long-term asset resilience

Because safety is not ideological.

It is structural.

Conclusion

Build-to-Sell:

• Higher intensity

• Faster capital turnover

• One-time taxation

• Shorter exposure

Build-to-Hold:

• Stability

• Recurring taxation

• Long-term value

• Extended exposure

The safer model is not universal.

It depends on:

• Your capital structure

• Your time horizon

• Your tax positioning

• Your true risk tolerance