FREE Internal Rate of Return (IRR) Real Estate Calculator
Internal Rate of Return (IRR) is a financial metric used to estimate the profitability of potential investments. It's the discount rate that makes the net present value (NPV) of all cash flows equal to zero.
Real Estate IRR Calculator
This calculator helps real estate investors determine the Internal Rate of Return (IRR) of an investment. IRR accounts for the time value of money and is especially useful when comparing investments with different timelines.
Investment Details
Please enter a valid investment amount
Please enter a valid holding period (1-30 years)
Please enter a valid exit value
Cash Flows
Enter the annual cash flows (rental income minus expenses):
Results
Internal Rate of Return (IRR)
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Total Profit
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About Internal Rate of Return (IRR)
What is IRR?
Internal Rate of Return (IRR) is a financial metric used to estimate the profitability of potential investments. It's the discount rate that makes the net present value (NPV) of all cash flows equal to zero. In simpler terms, it's the annual growth rate that an investment is expected to generate.
Why is IRR important for real estate investors?
IRR is particularly valuable for real estate investors because it accounts for the time value of money, considering both the amount and timing of cash flows. This allows for proper comparison between different investment opportunities with varying timelines, investment sizes, and cash flow patterns.
How to interpret IRR results?
Generally, a higher IRR indicates a more profitable investment. Many real estate investors look for IRR values between 15% and 20% for value-add investments, while stabilized properties might target 8% to 12%. However, what constitutes a "good" IRR depends on your investment goals, risk tolerance, and market conditions.