Free Calculator

IRR Calculator Internal Rate of Return

See what you actually make over the hold. Not just year-one cash flow.

Model Your Investment

$

Total equity invested at closing

1 year 10 years
$

Average annual operating cash flow (distributed each year)

$

Net proceeds after selling costs (added to final year)

Your IRR

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Enter your numbers to calculate IRR

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Equity Multiple
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Total Profit

Target IRR by Strategy

Core (Stabilized) 6% - 9%
Core-Plus 9% - 12%
Value-Add 12% - 18%
Opportunistic 18%+

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What is IRR?

IRR tells you what you earn on your money over the whole deal. A 2x return in 3 years is very different from 2x in 10 years. Cap rate and cash-on-cash don't show you that. IRR does.

// IRR Definition
IRR = the discount rate where NPV = 0
NPV = Σ [Cash Flowt / (1 + IRR)t] = 0

Investment Strategy Profiles

Core (6-9% IRR)

Stabilized, Class A assets in primary markets. Long-term credit tenants. Lowest risk, lowest return.

Core-Plus (9-12% IRR)

Stabilized with minor value-add. Below-market rents or light repositioning potential.

Value-Add (12-18% IRR)

Significant capital investment, repositioning, or operational improvements required.

Opportunistic (18%+ IRR)

Ground-up development, distressed acquisitions, or speculative plays with execution risk.

Example Calculation

You invest $1,000,000 in a multifamily property. It generates $80,000/year in cash flow for 5 years, then sells for $1,400,000.

Year 0: -$1,000,000 (investment)
Years 1-4: +$80,000 each
Year 5: +$80,000 + $1,400,000 = $1,480,000

IRR = 15.24% | Equity Multiple = 1.80x | Profit = $800,000

IRR vs. Other Metrics

  • Equity Multiple: Total cash returned ÷ cash invested. Ignores timing—2x in 3 years is better than 2x in 10 years.
  • Cash-on-Cash: Single year's cash flow ÷ equity. Snapshot metric that ignores appreciation and exit.
  • Cap Rate: NOI ÷ Property value. Entry metric only, ignores growth and leverage effects.

Frequently Asked Questions

What is a good IRR for commercial real estate?

Target IRRs vary by strategy: Core (6-9%), Core-Plus (9-12%), Value-Add (12-18%), and Opportunistic (18%+). According to NCREIF, the average 10-year return for institutional CRE was approximately 8.5% through Q3 2024.

What's the relationship between IRR and equity multiple?

Both matter but measure different things. A 2.0x equity multiple over 10 years produces ~7% IRR, while the same 2.0x over 5 years produces ~15% IRR. Sophisticated investors evaluate both: IRR for time-adjusted returns, equity multiple for absolute profit.

Why do institutions use IRR?

IRR allows apples-to-apples comparison across investments with different holding periods, cash flow profiles, and exit timings. It's the basis for promote structures in most LP/GP arrangements and the standard metric for fund performance reporting.

What are IRR's limitations?

IRR assumes reinvestment at the IRR rate, which may be unrealistic. It can also be manipulated by timing: delaying investments or accelerating exits. That's why sophisticated investors also look at equity multiple, cash-on-cash, and NPV at a required hurdle rate.

Model deals faster

IRR calculations are only as good as your inputs. Primer extracts rent rolls and T12s automatically—so your models start with accurate data.

Book a demo