Glossary · RETURNS

IRR

Internal Rate of Return - the annualized return that makes a project's net present value equal to zero, accounting for all cash flows over the hold period.

IRR accounts for the timing and magnitude of all cash flows: initial investment, periodic cash flows, and exit proceeds. Unlike CoC, it captures the full-cycle return including principal paydown, equity at sale or refinance, and the time value of money. A typical seller-financed acquisition might show a modest first-year CoC of 10% but an IRR of 22-28% over a 7-year hold when equity appreciation and balloon refi proceeds are included. IRR is the most comprehensive single return metric for comparing deals with different hold periods and cash flow profiles.

Related Terms

Cap Rate

Capitalization rate - the ratio of NOI to property value, used to price and compare income-producing

Cash-on-Cash Return

Annual pre-tax cash flow divided by the total cash invested, expressed as a percentage.

Equity

The owner's stake in a property - the difference between the current market value and all outstandin

Refinance

Replacing an existing loan with a new loan - typically to pay off a seller note, lower the rate, or

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