CRE Tool Hub

IRR Calculator

Calculate Internal Rate of Return & Equity Multiple for multi-year hold periods.

📉 Investment Details

$

Total equity contributed at closing (negative cash flow).

Annual Cash Flows

$

Net profit from sale in the final year (added to that year's cash flow).

📊 Analysis Results

Internal Rate of Return

0.00%

Annualized Return

Equity Multiple

0.00x

Total Profit

$0

Note: Equity Multiple measures total cash returned divided by total cash invested. IRR measures the time-adjusted return.

Understanding Internal Rate of Return (IRR)

The Internal Rate of Return (IRR) is the single most important metric for professional real estate investors. Unlike Cap Rate, which is a snapshot in time, IRR calculates the annualized return on equity over the entire holding period, taking into account:

  • Initial Equity Investment
  • Annual Cash Flows (and the timing of them)
  • Sale Proceeds (Reversion Value)

Why is XIRR tricky?

IRR cannot be calculated algebraically. It must be computed iteratively (guessing the rate until the Net Present Value equals zero). This tool uses the Newton-Raphson approximation method to solve for IRR instantly.

Frequently Asked Questions

IRR vs Cap Rate?
Cap Rate measures a single year's return (NOI / Price) without considering debt or time. IRR measures the total return over the entire holding period, accounting for debt, cash flow, sale proceeds, and the time value of money.
What is a good IRR?
For commercial real estate value-add deals, investors typically target 13% - 18% IRR. For stabilized core assets, 7% - 10% is common. Higher risk should demand a higher IRR.
Difference between Equity Multiple and IRR?
Equity Multiple tells you 'how much' money you made (e.g., 2.0x means you doubled your money). IRR tells you 'how fast' you made it (annualized percentage). A high Equity Multiple over 10 years might have a low IRR.