IRR (Internal Rate of Return)
IRR is the annualized, time-weighted return on equity — the discount rate that sets the deal's net present value to zero. The headline number for levered real estate returns.
IRR (internal rate of return) is the annualized, time-weighted return on your equity — the discount rate at which the net present value of all cash flows (the initial outlay, periodic distributions, and the sale) equals zero.
Why it matters: IRR is the headline return metric for levered real estate because it accounts for when cash comes back, not just how much. Earlier distributions and a faster exit lift IRR; a back-loaded deal can show the same total profit at a lower IRR.
Read it alongside the equity multiple: IRR rewards speed, the multiple measures total dollars returned. A 30% IRR over one year can return less cash than a 15% IRR over five. A stabilized income deal (like NNN IOS) typically shows a modest IRR — that's expected for a yield play.
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