IRR Calculator (Internal Rate of Return)
Calculate the Internal Rate of Return for any real estate investment using custom cash flows.
Internal Rate of Return (IRR) is the annualized return that makes the net present value of all cash flows equal to zero — the gold-standard metric for comparing real estate investments held over different time periods. Enter your initial investment, annual cash flows, and projected sale price to calculate IRR over any hold period. Compare the result to your cost of capital to decide if the investment clears your hurdle rate.
Inputs
Your upfront cash outlay (enter as negative)
Results
IRR
18.33%
NPV at 10% Discount Rate
$18,628
Total Return
$55,000
Understanding This Calculator
Learn what internal rate of return means, how it accounts for the timing of every cash flow, and how to use it as a hurdle-rate test.
How the math works
IRR is the annual discount rate that makes the net present value of all cash flows equal zero — the single rate at which your upfront investment exactly balances everything you get back, given when you get it back.
The cash-flow series here is: the initial investment (negative) in year 0, the annual net cash flow in each year of the hold, and the sale proceeds added to the final year. There is no closed-form formula; the calculator solves for the rate iteratively. Because IRR weights early dollars more heavily than late ones, it captures what simple ROI misses: a dollar received sooner is worth more than one received later.
Worked example
Using the defaults: invest $50,000 today, receive $5,000/year for 5 years, plus $80,000 in sale proceeds at the end of year 5.
- Total cash returned = (5 × 5,000) + 80,000 = $105,000 on $50,000 invested
- The rate that discounts those flows back to exactly $50,000 is about 18% — the IRR
Check it: at 18%, five years of $5,000 is worth ~$15,600 today and the $80,000 sale is worth ~$35,000 today — together roughly the $50,000 you put in. The NPV output shows the same deal valued at a 10% discount rate instead.
How to read the result
Compare IRR to your hurdle rate — your cost of capital or the return you could earn elsewhere at similar risk. Common real estate reference points: 8–12% for lower-risk stabilized rentals, 10–15% for typical buy-and-hold deals, 15–20%+ for value-add projects and syndications.
Caveats: IRR assumes interim cash flows are reinvested at the IRR itself, which flatters high-IRR deals; it also says nothing about scale (a 25% IRR on $10,000 earns less than 12% on $200,000). Use it alongside total profit and cash-on-cash, and remember projected sale prices are guesses — test pessimistic exits too.