IRR Calculator
What is my annualized return over the full hold? Internal rate of return across the whole hold, including the exit.
Internal rate of return over 5 years
10.1%
Money in, at year zero
Every dollar that left your account to acquire the property. Loan proceeds are not yours and are not here.
Set to 100 for an all-cash purchase
Spent before the first tenant pays
The loan
Sets the payoff at the exit. The down payment above decides how much is borrowed.
A shorter term amortises faster, so more of the sale is yours
Money out, each year
Annual cash flow after operating expenses and debt service. Build it on the cash flow calculator and bring the annual total here.
Annual, pre-tax, after the mortgage
Rent rises faster than fixed expenses, so this usually exceeds rent growth
The exit
On a hold of a few years the sale is usually most of the return, so these three fields move the answer more than anything above.
Applied to the purchase amount, compounding
Commission, title, transfer tax, post-inspection concessions
Used for net present value only. What the next-best use of this money earns.
Internal rate of return over 5 years
10.1%
The annual rate at which $88,825 turns into $136,756 over the hold.
- Equity multiple
- 1.54x
- Profit over the hold
- $47,931
Clears your hurdle, but the exit is carrying it
10.1% over 5 years, worth $4,147 against your hurdle. Note where it comes from: $103,956 of the $136,756 arrives at the sale and only $32,799 from rent. That return depends on selling at a figure nobody has agreed to pay yet.
Where the money comes back
- Rent over the hold24%
- Return of your capital65%
- Gain at the sale11%
Money in, at year zero
- Purchase amount
- $274,500
- FinancedNot your cash
- − $205,875
- Down payment
- $68,625
- Closing costs
- + $8,400
- Rehab and make-ready
- + $11,800
- Cash out at year zeroThe single negative that makes the rate solvable
- $88,825
The exit
- Sale price in year 5Purchase amount compounded at your appreciation rate
- $321,322
- Selling costs
- − $24,099
- Loan payoffBalance still owed after the hold, from the amortisation schedule
- − $193,267
- Net sale proceeds
- $103,956
What the series produces
- Cash out at year zero
- $88,825
- Operating cash flow over the hold
- $32,799
- Net sale proceeds
- $103,956
- Total distributions
- $136,756
- Profit over the hold
- $47,931
- Equity multipleTotal distributions over cash invested. Blind to how long it took.
- 1.54x
- Net present value at 9.0%Dollars this deal beats your hurdle by, in today's money
- $4,147
The cash flow series, year by year
This is the array the rate is solved against. Year zero is the only negative; the sale lands entirely in the final year.
| Year | Rent | Sale | Net flow | Cumulative |
|---|---|---|---|---|
| 0 | — | — | -$88,825 | -$88,825 |
| 1 | $6,240 | — | $6,240 | -$82.6K |
| 2 | $6,396 | — | $6,396 | -$76.2K |
| 3 | $6,556 | — | $6,556 | -$69.6K |
| 4 | $6,720 | — | $6,720 | -$62.9K |
| 5 | $6,888 | $103,956 | $110,844 | $47.9K |
If you held it longer, or sold sooner
The whole series re-solved at each length. A shorter hold usually raises the rate and lowers the money; a longer one collects more rent and pays down more principal. The multiple and the profit are the correction for a rate that looks good over eighteen months.
| Hold | IRR | Multiple | Profit |
|---|---|---|---|
| 3 yr | 4.1% | 1.12x | $10,620 |
| 4 yr | 8.0% | 1.33x | $28,955 |
| 5 yryours | 10.1% | 1.54x | $47,931 |
| 7 yr | 12.0% | 1.99x | $87,912 |
| 10 yr | 12.8% | 2.73x | $153,392 |
How this is calculated
Internal rate of return is the one discount rate at which a deal’s cash flows are worth exactly what they cost. Everything on this page is built from one series, indexed by year:
year 0 = −(down payment + closing costs + rehab)year 1..n = annual cash flow, grown at your rateyear n also = sale price − selling costs − loan payoff
The sale price is purchase × (1 + appreciation)ⁿ. The payoff is the balance still owed after n × 12 payments, taken from the same amortisation used everywhere else in the suite — which is why the proceeds rise faster than the appreciation alone: every payment your tenant made bought a slice of that final cheque. Loan proceeds never appear as an inflow, because they were never yours; the loan enters at the exit, as the amount that has to be repaid.
IRR is then the rate that solves NPV(rate) = 0, found by bisection over a bracketed range rather than by Newton-Raphson. Newton converges faster and diverges on exactly the shape a real deal produces — one large negative, several small positives, one large positive — and when it diverges it returns a confident number that is wrong by orders of magnitude. Bisection either converges or reports that it could not.
IRR is undefined for a series that never changes sign, and this calculator says so rather than inventing a number. If nothing goes out at year zero, or if every period including the sale is negative, there is no rate at which the present value is zero and the shared irr() returns NaN, which reaches the screen as a dash. A result of 0% would be a claim that the deal breaks even, which is a statement about the deal rather than a report that the question has no answer.
Net present value is Σ flow ÷ (1 + discount rate)ʸ with year zero undiscounted. It is shown beside the IRR because the two answer different questions: IRR is the rate the deal earns, NPV is how many dollars it beats your hurdle by. The equity multiple — total distributions ÷ cash invested — is there because IRR is blind to size and to time in opposite directions, and a high rate on a short hold can return less money than a lower one over a longer one.
Common questions
Why is my IRR so much higher than my cash-on-cash return?
Because IRR counts the exit and cash-on-cash does not. On a five-year hold, most of the money usually arrives in one payment at the end: the sale proceeds carry the appreciation and every dollar of principal your tenant paid down over the hold. Cash-on-cash sees none of that. The gap between the two is a useful diagnostic on its own — if it is very wide, the return depends on selling at a figure nobody has yet agreed to pay, which is a different kind of bet from collecting rent.
What does it mean when the IRR shows no answer?
It means the series has no sign change, so no discount rate makes the present value zero and there is genuinely nothing to solve for. The usual cause is an initial investment of zero — nothing went out, so there is no rate at which the outflows and inflows balance. It can also happen when every year including the sale is negative. This calculator shows a dash rather than a number in that case. A tool that prints zero percent there is telling you the deal breaks even, which is a claim about the deal rather than a report that the question has no answer.
Can IRR mislead me?
Regularly, in two ways. First, it assumes every dollar it hands back is reinvested at the IRR itself until the end of the hold, which is optimistic for a high figure — a 22% IRR quietly assumes you have somewhere to put the rent at 22%. Second, it says nothing about size: a 30% IRR on eleven thousand dollars over eighteen months and a 15% IRR on four hundred thousand over seven years are not comparable, and the first will lose to the second in absolute money every time. Read it next to the equity multiple and the total profit.
What discount rate should I use for NPV?
Your own hurdle — the return you can get on the next-best use of the same money at a similar risk, not a market index and not the loan rate. If net present value is positive at that rate, the deal beats your alternative; if it is negative, it does not, even when the IRR looks respectable in isolation. Setting the discount rate to your IRR always produces a net present value of zero, which is a useful way to check that both figures are working from the same series.
How sensitive is this to the sale assumptions?
Very. On a typical five-year hold the sale is most of the money, so an appreciation assumption that is a point or two optimistic moves the IRR far more than a rent assumption that is off by the same margin. The hold-period table below re-solves the whole series at several lengths for that reason: a shorter hold concentrates the return into fewer years and usually lifts the IRR, while a longer one collects more rent and lets more principal amortise. Run the exit at a flat sale figure as well before you rely on the result.
Should selling costs be a percentage?
It is the convenient way to model them and it is roughly right, because commission is the largest component and is quoted that way. But transfer taxes, title, attorney fees and the repairs a buyer negotiates after inspection do not scale cleanly with the sale figure, and on a cheaper property the fixed portion is a larger share. If you know the line items, work out the dollar total and convert it back to a percentage of your expected sale figure rather than reaching for a default.
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Run these numbers on a real deal
Every off-market listing on the marketplace carries the figures this calculator asks for, so you can price a deal without retyping it.
Browse off-market dealsThis calculator estimates results from the numbers you enter. It does not know the property, your lender’s terms, local taxes or the rules of your state, and it is not financial, tax or legal advice. Nothing here has been reviewed by a lawyer. Confirm every figure with your lender, title company and your own professionals before you rely on it.