Free Real Estate IRR Calculator (No Signup)

$85,000 in returns $169,743 over 7 years, a 10.2% annual rate. With cash flow at −$924 a year, the sale carries the entire return.

Cash out at purchase, cash back each year and at the sale

7 years

The math, with your numbers

Year 0−$85,000Cash invested at purchase

Years 1 to 7−$6,468Annual cash flow × years−$924 × 7

Net sale proceeds$176,211Sale price × (1 − selling costs) − loan payoff$522,700 × (1 − 7%) − $309,900

Equity multiple2.00×Total returned ÷ cash invested$169,743 ÷ $85,000

IRR10.17%The rate that makes the present value of every cash flow sum to zero

Check$0Present value of all 8 cash flows at 10.17%

IRR assumes each year of cash flow is reinvested at the IRR itself. The sale price is a forecast, and on a leveraged rental it usually carries most of the result.

How this calculator works

IRR is the discount rate at which the net present value of every cash flow equals zero. It has no closed-form solution, so it is found by iteration: the calculator tries rates until discounted inflows match the initial outflow. The inputs are the cash out at purchase, each year of cash flow, and the net proceeds at sale.

Timing is the entire point of the metric. A dollar in year one and a dollar in year seven are not the same dollar, and IRR is the only common real estate measure that prices the difference. Hold length moves IRR less than it moves profit: on the duplex, a 5-year hold returns 9.3% and 1.57x the cash, a 7-year hold 10.2% and 2.00x, a 10-year hold 10.2% and 2.71x.

Key insights

On most leveraged rentals, IRR is dominated by the sale assumption. When annual cash flow sits near zero, as it does on this duplex at 80% leverage, nearly the whole return lives in the exit price, and IRR becomes a forecast of that price rather than a measurement of the property.

IRR assumes interim cash flows are reinvested at the IRR itself, which is rarely available. That assumption inflates the figure on deals with large early distributions, and it is the reason MIRR exists as an alternative.

A higher IRR is not automatically more money. A 20% IRR over eighteen months on a small basis and a 14% IRR over eight years on a large one produce very different dollar outcomes, and IRR alone cannot rank them. Equity multiple is the companion number that shows size.

More than one sign change in the cash flow stream can produce multiple mathematically valid IRRs. A deal with a large capital call in year four is the ordinary case, and the output stops meaning what it appears to mean.

Frequently asked questions

What is a good IRR for a rental property?›

The figure is only interpretable alongside the holding period, the leverage, and how much of the return depends on the exit assumption. An IRR built mostly from a projected sale price is a forecast wearing the clothes of a measurement.

What is the difference between IRR and ROI?›

ROI totals the gain and divides by the cash invested, ignoring when anything happened. IRR discounts each cash flow by its timing. The same deal produces different figures, and the gap widens as the holding period lengthens.

Does holding longer raise or lower IRR?›

Either, depending on how fast the property grows relative to the IRR itself. A longer hold pushes the sale further out, where it is discounted harder, but also gives appreciation more years to compound. On the duplex the two nearly cancel: 10.2% at seven years and 10.2% at ten, while the equity multiple rises from 2.00x to 2.71x.

What is equity multiple and why is it quoted with IRR?›

Equity multiple is total cash returned divided by cash invested, with no time weighting. Quoted together, IRR gives the rate and multiple gives the magnitude, which is what keeps a fast small deal from outranking a large one on the strength of its speed alone.

Can IRR be negative?›

Yes, whenever total distributions including the sale come to less than the cash invested. A leveraged deal that sells flat after several years of negative cash flow is the common path to it.

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