JB PARCELIRR Calculator
Cash-on-cash tells you about one year. IRR tells you what the entire hold earned, including the sale, and it accounts for when the money arrived rather than just how much.
How this calculator works
IRR is the discount rate that makes the net present value of all your cash flows equal zero. In plain terms, it is the annualized return that accounts for both how much money came back and when. A dollar returned in year two is worth more than a dollar returned in year seven, and IRR is the only common real estate metric that captures that.
The cash flow series is what drives it. Year zero is negative, the cash you put in. Years one through the end are your annual cash flow, growing over time because rents rise while the mortgage payment stays fixed. The final year also includes net sale proceeds: sale price minus selling costs minus loan payoff. If you want an after-tax IRR, use after-tax sale proceeds.
Read it alongside equity multiple, which is total dollars back over total dollars in. IRR can flatter a short hold: turning $50,000 into $65,000 in eleven months is a spectacular IRR and $15,000 of actual money. Doubling $50,000 over seven years is a lower IRR and twice the profit. Neither number is wrong, they answer different questions, and you should see both before you decide.
The most common way IRR gets abused in real estate is the exit assumption. Most of the profit in a five-year hold typically arrives in the sale, so the whole calculation rests on the price you assume you will get. Stress it. Drop the sale proceeds fifteen percent and see whether the deal still clears your hurdle. If it only works at the optimistic exit, it is a bet on the market rather than on the property.
Worked example: five years on a Tennessee rental
$88,150 in, $3,780 of first-year cash flow growing six percent a year, sold in year five with $148,000 of net proceeds after payoff and costs.
| Year 0 | -$88,150 |
|---|---|
| Year 1 | $3,780 |
| Year 2 | $4,007 |
| Year 3 | $4,247 |
| Year 4 | $4,502 |
| Year 5 (with sale) | $152,772 |
| IRR | 14.86% |
| Equity multiple | 1.92x |
| Total profit | $81,158 |
Just under fifteen percent, and only about 26 percent of the profit came from cash flow. The rest came from the sale. That mix is worth noticing: this is largely an appreciation and paydown story, which means the exit assumption is carrying the return. Knock the sale proceeds down to $126,000 and the IRR falls to 11.59 percent. Same property, same rent, one changed guess about the future.
Questions investors ask
What is a good IRR for a real estate deal?
Depends on risk and hold. Stabilized rentals commonly underwrite to 10 to 15 percent. Value-add multifamily and syndications typically target 13 to 20. Ground-up development and heavy repositioning want 20 percent and up because the risk of losing money is real. What matters is whether the IRR compensates you for the specific risk, not whether it beats a number you read somewhere.
IRR versus cash-on-cash, which should I use?
Both, for different questions. Cash-on-cash tells you what year one pays you, which matters for whether you can afford to hold. IRR tells you what the entire hold earned including the sale, which matters for whether the deal was worth doing. A property with weak cash-on-cash and strong IRR is an appreciation play, and you should know that going in.
Why does IRR seem high on short holds?
Because it annualizes. Making 15 percent in eleven months annualizes to a very large IRR even though the dollars are modest. That is mathematically correct and practically misleading, because you cannot necessarily redeploy that capital into another equally good deal the next day. Always look at equity multiple and total profit next to IRR on anything under two years.
What is equity multiple?
Total dollars returned divided by total dollars invested. A 1.92x multiple means you got back $1.92 for every dollar in. It ignores timing entirely, which is exactly why it pairs well with IRR: one tells you how much, the other tells you how fast. Syndications quote both for that reason.
Should I use before-tax or after-tax numbers?
Be consistent and label it. Before-tax IRR is the standard for comparing deals and is what sponsors quote. After-tax IRR is more useful for your own decision, especially in real estate where depreciation shelters cash flow and recapture hits at sale. If you want after-tax, use after-tax cash flows and net sale proceeds after the tax from the capital gains calculator.
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Screening a real property? Pull its appraised value, assessed value, acreage, land use, and last recorded sale off the JB PARCEL parcel map and drop the real numbers into this calculator instead of guessing. Coverage runs across every county we carry.