IRR Calculator
Estimate internal rate of return for a commercial real estate investment over a defined hold period.
Internal rate of return is the annualised return that sets the present value of all cash flows to zero. It accounts for timing, which is why it is the standard measure for a real estate hold — and why it can be flattered by an early distribution.
Your total cash invested
Net cash flow after debt service
Expected annual growth in cash flow
Expected investment duration
Expected sale price at exit
Remaining loan balance at sale
Broker fees, transfer taxes, etc.
Enter your inputs and click "Run the Numbers" to see results.
What to watch
- IRR is highly sensitive to the exit assumption. On a typical five-year hold, most of the return sits in the terminal value, so the exit cap rate does more work than the cash flow projection.
- Read IRR alongside equity multiple. A high IRR on a short hold with a small absolute profit can look better than a lower IRR that returns considerably more money.
- IRR assumes interim distributions are reinvested at the same rate, which rarely holds. That is why sponsors and LPs often look at multiple as the reality check.
- Levered IRR reflects your capital structure. Comparing a levered IRR to an unlevered one, or across deals with different leverage, is comparing different things.
Frequently asked questions
What is the difference between IRR and equity multiple?
IRR is a time-weighted annualised rate — it cares when you get paid. Equity multiple is total distributions divided by total invested, ignoring timing. A deal can show a strong IRR and a modest multiple if capital comes back quickly, so experienced investors look at both.
Why is my IRR so sensitive to the exit cap rate?
Because on a typical hold the sale proceeds are the largest single cash flow, and value equals NOI divided by the exit cap. A small change in the rate moves the terminal value substantially, which moves IRR more than any plausible change in operating assumptions.
Is a higher IRR always better?
No. IRR ignores scale and can be inflated by a short hold or an early return of capital. Judge it alongside equity multiple, absolute profit, hold period, and the risk taken to produce it.
Go deeper
The CRE Capital Stack Explained: Priority, Cost, and Control
Senior debt, mezzanine, preferred equity, and common equity each sit in a defined place in the payment waterfall. Position determines cost, and cost is only half of what each layer takes.
Read the articleThis calculator produces estimates from the assumptions you enter. It is not investment, tax, or legal advice, and actual lender terms, pricing, and outcomes will differ. Confirm anything you intend to rely on with advisers engaged on your specific facts.
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