The metric institutional investors actually use
Calculate internal rate of return accounting for cash flow timing, growth, and exit proceeds. See how your deal compares to institutional hurdle rates.
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Internal Rate of Return
12.22%
Solid — competitive with typical real estate returns
Equity Multiple
1.70×
Total distributions ÷ cash invested
Cash Flow Timeline
Free — includes projections, scenarios & lender reports
Three different return metrics. Three different questions answered.
Time-weighted annual return
Accounts for when cash flows occur. The gold standard for comparing investments with different hold periods and cash flow patterns.
Total profit ÷ cash invested
Simple total return including all profit sources. Doesn't account for timing — a 100% ROI over 3 years and 10 years look the same.
Annual cash flow only
Only counts cash hitting your bank account each year. Ignores appreciation, principal paydown, and exit proceeds entirely.
Use all three together: CoC tells you if the deal cash flows today, ROI tells you total profit, and IRR tells you if the risk-adjusted return justifies your capital and time.
IRR is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. In plain English: "What annual return does this investment actually deliver, accounting for when I get my money back?"
NPV = Σ CF(t) / (1 + IRR)^t = 0
Find the rate that makes the sum of discounted cash flows equal zero.
Total Distributions ÷ Total Cash Invested
How many times your invested capital is returned. 2.0× means you doubled your money.
Purchase Price: $300,000
Cash Invested: $82,500
Hold Period: 5 years
Year 1 Cash Flow: $4,800
CF Growth: 2%/year
Appreciation: 3%/year
Cash Flows:
Yr 0: −$82,500
Yr 1: $4,800
Yr 2: $4,896
Yr 3: $4,994
Yr 4: $5,094
Yr 5: $5,196 + sale proceeds
IRR ≈ 13.2%
Equity Multiple: 1.73×
The IRR tells you this deal is equivalent to earning 13.2% compounded annually on your capital — competitive with most alternative investments.
| Strategy | Target IRR | Risk Profile |
|---|---|---|
| Core / Stabilized | 6–8% | Low risk, trophy assets, long hold |
| Core Plus | 8–12% | Light value-add, stable markets |
| Value-Add | 12–18% | Renovation, reposition, lease-up |
| Opportunistic / Development | 18–25%+ | Ground-up, entitlement risk, heavy capex |
| Buy-and-Hold (individual) | 10–15% | Residential rental, 5–10yr hold |
IRR is one piece of the analysis. A complete underwriting also includes sensitivity testing, downside scenarios, and lender metrics — all of which DealForge calculates automatically.
IRR (Internal Rate of Return) is the annualized rate of return that makes the net present value of all cash flows equal to zero. Unlike simple ROI, IRR accounts for the timing of cash flows — receiving $10,000 in year 1 is worth more than $10,000 in year 5. It’s the most widely used metric by institutional investors and developers.
Target IRR depends on the strategy and risk profile. Core stabilized assets: 6–8%. Value-add: 12–18%. Opportunistic / development: 18–25%+. For individual buy-and-hold investors, 10–15% IRR typically represents a strong risk-adjusted return in 2026’s rate environment.
ROI tells you total return as a percentage of invested capital, but ignores when cash flows occur. IRR discounts future cash flows by their timing — front-loaded returns produce a higher IRR than the same total return spread evenly. A 5-year deal with 80% total ROI and a 3-year deal with 60% total ROI might have the same IRR if the 3-year deal returns capital faster.
The equity multiple is total distributions divided by total cash invested. A 2.0× equity multiple means you received $2 back for every $1 you invested. It’s a simpler measure than IRR and useful as a sanity check, but it doesn’t account for timing.
Institutional investors compare capital deployment opportunities across different asset classes and hold periods. IRR normalizes returns to a time-weighted annual rate, making it possible to compare a 3-year development project against a 10-year hold or a stock portfolio. It’s the standard language for investment committees and fundraising.
Yes. IRR assumes interim cash flows are reinvested at the IRR rate, which may be unrealistic for very high IRRs. Short hold periods can produce inflated IRRs that look impressive but deliver modest total profit. Always pair IRR with equity multiple and total profit to get the complete picture.
Explore other metrics with these focused investment tools.
IRR is one metric. DealForge gives you the full picture: cash flow projections, sensitivity analysis, scenario modeling, and lender-ready reports — all in one platform.
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