Irr calculator

Free irr calculator: enter equity, annual cash flows, and exit proceeds to get IRR and equity multiple — built for CRE investors sizing hold-period returns.

Initial Equity Investment — $

Total equity invested at close (down payment + closing costs + any upfront capex). Entered as a positive number.

Terminal Value (Sale / Exit Proceeds) — $

Expected net sale proceeds at exit (sale price minus selling costs minus mortgage payoff). Added to the final year's cash flow.

Annual Cash Flows (Year 1 onward)

Enter each year's net distributable cash flow (NOI minus debt service, before taxes). Add or remove years to match your hold period.

Year 1$

Year 2$

Year 3$

Year 4$

Year 5$

IRR (Annualized)

13.46%

This deal returns a 13.46% annualized IRR on $1,000,000 of initial equity over a 5-year hold, with a 1.75x equity multiple. IRR assumes all distributions are reinvested at the IRR rate — pair with the equity multiple for a more complete picture.

Equity Multiple: 1.75x$1,750,000 total distributions / $1,000,000 initial investment
Hold Period: 5 yearsNumber of annual cash-flow periods entered
Total Distributions: $1,750,000Sum of all positive annual cash flows + terminal value (sale proceeds)

IRR (Annualized)

13.46%

Equity Multiple: 1.75x$1,750,000 total distributions / $1,000,000 initial investment
Hold Period: 5 yearsNumber of annual cash-flow periods entered
Total Distributions: $1,750,000Sum of all positive annual cash flows + terminal value (sale proceeds)

Where AI changes the answer

Internal Rate of Return is the single most-cited deal metric in CRE underwriting — and the most misunderstood. IRR is not a property characteristic. It is a function of three lever pulls: how much equity you put in, how much cash you collect each year, and what you sell for at exit. Move any one of those three, and the IRR shifts — sometimes dramatically. This irr calculator solves IRR iteratively from your exact inputs, but the real question is how AI changes your analysis before and after you hit calculate. **Where AI changes the IRR answer:** **1. Exit cap rate sensitivity — the most dangerous assumption in any IRR model.** IRR is more sensitive to your exit cap rate assumption than to almost any other input. A 25bps move in your assumed exit cap on a $2M NOI property changes the sale price by roughly $1–2M — which can shift IRR by 100–300bps depending on your hold period and leverage. AI can model exit scenarios across a cap-rate range in seconds: 50bps wider cap = X% lower IRR; 50bps tighter cap = X% higher IRR. Any range shown is an ESTIMATE based on illustrative cap-rate sensitivity — not a market quote. Verify with current comparable transaction cap rates for your asset class and submarket. **2. Hold period: the reinvestment assumption trap.** IRR implicitly assumes that every cash flow you receive during the hold period is reinvested at the IRR rate itself. In reality, interim distributions are often redeployed at lower rates — the risk-free rate, another deal's cash-on-cash, or into reserves. This makes IRR overstate the true annualized return when cash flows are large and early. Equity multiple corrects for this: it tells you the total money-on-money return in nominal dollars, with no reinvestment assumption. A deal with a 20% IRR over 3 years and a 1.4x equity multiple is weaker than a deal with a 15% IRR over 7 years and a 2.0x equity multiple — despite the higher headline IRR. AI can surface both metrics simultaneously and explain the trade-off for your specific hold horizon. **3. Cash-flow timing and IRR manipulation.** Because IRR is a time-weighted metric, deals structured to concentrate early cash flows — through upfront fees, above-market management fees, or aggressive first-year refi distributions — can show high IRRs that do not reflect economic value to the LP. AI flags when early cash flows are disproportionately large relative to the underlying NOI, which is a signal to re-weight toward equity multiple and preferred-return coverage in your analysis. **4. What a good IRR looks like in CRE (ESTIMATE — ranges vary by cycle and risk).** Value-add multifamily: target IRRs typically range 12–18% (ESTIMATE). Core-plus acquisitions: 8–12% (ESTIMATE). Opportunistic / development: 18–25%+ (ESTIMATE). These are decision-support benchmarks — not guarantees or market quotes. IRR requirements also vary by LP profile, fund mandate, preferred-return hurdle, and leverage. Confirm with current market data before pricing a deal. This calculator is decision-support for CRE investors modeling hold-period returns. It does not substitute for a full pro-forma, lender underwriting, or investment advisory services.

Questions real estate teams ask

What is IRR in real estate and how is it calculated?

IRR (Internal Rate of Return) is the annualized rate of return that makes the net present value of all cash flows — including your initial investment (negative) and all future distributions plus the sale proceeds (positive) — equal to zero. It is solved iteratively, not with a simple formula. For example: invest $1,000,000, collect $80,000–$100,000 per year for 5 years, and sell for $1,300,000. The IRR is the single annual rate that discounts all those future cash flows back to exactly $1,000,000 today. A higher IRR means a better risk-adjusted return — but compare it alongside equity multiple because IRR ignores reinvestment risk.

What is equity multiple and how does it differ from IRR?

Equity multiple (EM) = total positive distributions / initial equity investment. A 1.70x EM means you received $1.70 for every $1.00 invested in total nominal dollars. IRR tells you the annualized rate of return (time-weighted); equity multiple tells you the total money-on-money return (not time-weighted, no reinvestment assumption). Use both together: a 20% IRR over 2 years with a 1.3x EM is weaker than a 15% IRR over 7 years with a 2.0x EM. LP investors typically set minimum thresholds on both: e.g. 12%+ IRR AND 1.5x+ EM before committing capital.

What is a good IRR for a CRE investment?

IRR benchmarks vary by risk profile and market cycle. As rough ESTIMATES: stabilized core assets typically target 6–9% IRR; core-plus 8–12%; value-add multifamily or light industrial 12–18%; opportunistic, development, or distressed assets often require 18–25%+ to attract institutional capital. These are illustrative ranges — not market quotes. Actual required IRRs depend on the LP's cost of capital, preferred-return hurdle (typically 6–8%), leverage profile, and current risk-free rates. Any IRR below your blended cost of capital and preferred-return hurdle is a deal you should walk away from. Always confirm current return expectations with your capital partners before pricing an acquisition.

How do exit cap rate and hold period affect IRR?

Exit cap rate is often the single largest driver of IRR variance in a CRE model. A 25bps move in your assumed exit cap on a property with $200,000 NOI changes the implied sale price by $500,000 — which flows directly to IRR. On a 5-year hold with 70% leverage, that $500,000 delta can shift IRR by 150–250bps (ESTIMATE — actual sensitivity depends on leverage, cash-flow size, and hold period). Hold period matters because IRR is time-weighted: a 2.0x equity multiple in 5 years generates a much higher IRR than the same 2.0x multiple in 10 years. Stress-test your model at exit caps 50–100bps wider than your base case before committing to an acquisition price.

Why does IRR assume reinvestment at the IRR rate, and why does it matter?

IRR is mathematically defined such that every interim cash flow is assumed to be reinvested at the IRR rate itself. If your model projects a 16% IRR but your interim distributions are redeployed at 5% (savings account) or 8% (another deal), the true compound return is lower than 16%. This is called the reinvestment rate assumption problem. The equity multiple avoids this problem entirely — it is a simple ratio of total dollars in versus total dollars out, with no reinvestment assumption. For deals with large early distributions (refinance proceeds, promote fees), use equity multiple as your primary return metric and treat IRR as a secondary, directional indicator.

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