Internal Rate Of Return (Property) Calculator

Work out internal rate of return (property) instantly with clear inputs, formula shown and shareable results.

About Internal Rate Of Return (Property) Calculator

The internal rate of return is the discount rate at which the present value of all cash flows equals zero. With an initial equity outflow, level annual cash flow and a terminal sale, there is no closed form solution, so the rate is found by bisection. Net present value at ten percent is shown alongside as a sanity check against a target hurdle.

Formulas

IRR

The rate r where -equity + sum of cash flow / (1 + r)^t = 0

Equity multiple

Multiple = total cash returned / equity invested

Worked example

With the default values below, Internal Rate Of Return (Property) Calculator returns Internal rate of return of 17.474%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Initial equity investmentminimum 0.01: 5,000,000
Annual net cash flowminimum 0: 450,000
Net sale proceedsminimum 0: 8,000,000
Holding periodaccepts 1–100 years: 5 years

Results

Internal rate of return: 17.474% %
Total cash returned: $10,250,000.00
Equity multiple: 2.0500
Net present value at 10 percent: $1,673,224.63

Step by step

1Values used
2IRR
3Equity multiple
4Internal rate of return= 17.474 %
5Total cash returned= 10,250,000.00
6Equity multiple= 2.0500
7Net present value at 10 percent= 1,673,224.63

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or fees or charges into account.
Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is the Internal Rate Of Return (Property) figure worked out?

The rate r where -equity + sum of cash flow / (1 + r)^t = 0. The internal rate of return is the discount rate at which the present value of all cash flows equals zero.

Why can IRR be misleading?

It assumes interim cash flows are reinvested at the IRR itself, which is rarely achievable. It also rewards short holds disproportionately, so it should always be read with the equity multiple.

What values do I need to enter?

This calculator takes 4 inputs: Initial equity investment, Annual net cash flow, Net sale proceeds, Holding period. The pre-filled defaults are a realistic worked example — replace them with your own site or project figures.