IRR Calculator for Commercial Real Estate
Calculate levered IRR and equity multiple from your equity, the annual cash flow, its growth and the net sale proceeds. Shows every year of the series it solved, so the answer can be checked rather than believed. Free, no signup.
The equity position
Your cash in at closing — down payment plus costs, not the purchase price.
Whole years, 1 to 15.
Cash flow after debt service, before tax.
Applied to cash flow each year. Enter 0 for a flat hold.
Sale price less costs and loan payoff, received in the final year.
Levered IRR
13.13%
The annual rate at which every cash flow, discounted back, sums to the equity you put in. Unlike a cap rate it accounts for when the money arrives — which is why a later exit at the same price returns less.
- Equity multiple
- 1.74x
- Total profit
- $1,855,644
- Total distributions
- $4,355,644
- Year 1 cash-on-cash
- 7.20%
- Net sale proceeds
- $3,400,000
The series it solved
| Year | Cash flow |
|---|---|
| 0 | ($2,500,000) |
| 1 | $180,000 |
| 2 | $185,400 |
| 3 | $190,962 |
| 4 | $196,691 |
| 5 | $3,602,592incl. sale |
IRR is only as good as the exit
Most of the return in this series arrives in one number — the net sale proceeds — and that number rests on an exit cap rate nobody can observe today. Move the exit cap 50 basis points and the IRR moves further than any operating assumption on this page. Treat it as the thing to stress, not the thing to assume.
What IRR actually measures
Internal rate of return is the annual rate at which every cash flow from a deal, discounted back to today, sums to the equity you put in. Put differently: it is the rate that makes the net present value of the whole series exactly zero.
What makes it worth computing is the thing a cap rate cannot tell you — when the money arrives. A cap rate is a snapshot of one year at one price. IRR reads the whole hold. Two deals that return the same total dollars can have very different IRRs if one exits in year three and the other in year seven, because capital returned earlier can be put back to work.
It also has a well-known blind spot, and it is worth naming rather than discovering later: IRR rewards speed. A quick flip returning a modest absolute profit can post a spectacular IRR, while a long, genuinely profitable hold posts a modest one. That is why equity multiple sits beside it in the results above — the multiple ignores time entirely, and reading the two together is the only way to see the shape of a return rather than one projection of it.
Levered or unlevered — which one this calculates
Unlevered IRR measures the property, stripped of financing. It is the right number for comparing two assets, because it is not distorted by who borrowed what.
Levered IRR measures your equity position, debt included. It is the right number for deciding whether to write the cheque, and it is what this calculator computes. So the cash flows you enter should be after debt service, and the net sale proceeds should be after the loan is paid off and selling costs are taken out.
Leverage cuts both ways, which is the part that catches people. Debt amplifies the return when the property out-earns its cost of capital, and amplifies the loss when it does not. A deal can have a perfectly healthy unlevered IRR and a levered IRR that does not exist at all — see the DSCR question, which is the same problem looked at from the lender’s side.
What this IRR calculator includes
Levered IRR
Solved from the full equity cash flow series, including the sale, using the same solver the DealWise underwriting engine uses.
Equity multiple
Total distributions divided by equity invested — the duration-blind companion to IRR.
Growth on cash flow
One rate compounds year-one cash flow across the hold, so the series has the shape of a real deal rather than a flat line.
The series, shown
Every year it solved, including the outlay and the sale, so the result can be reconciled rather than trusted.
A real answer when there is no IRR
A deal that never returns its equity has no IRR. This says that in words instead of showing an error.
Year 1 cash-on-cash
The one-year yield alongside the whole-hold return, because the two disagree more often than people expect.
Example: $2.5M of equity, a five-year hold
Sample inputs
- Equity invested
- $2,500,000
- Hold period
- 5 years
- Year 1 cash flow
- $180,000
- Annual growth
- 3.0%
- Net sale proceeds
- $3,400,000
Cash flow starts at $180,000 and compounds at 3% — $180,000, $185,400, $190,962, $196,691, $202,592 — and the final year also carries $3,400,000 of net sale proceeds. Against $2,500,000 of equity that solves to a levered IRR of 13.13%, an equity multiple of 1.74x and a total profit of $1,855,644.
Notice where the return actually comes from. The five years of operating cash flow total $955,644 — barely half the profit. The other $1.35 million is the exit. That is typical, and it is the reason an IRR is only as trustworthy as the exit assumption underneath it.
Hold everything else constant and sell for $3,100,000 instead, and the IRR falls to 11.42%. A $300,000 move in one terminal number — well inside the range a 50 basis point shift in exit cap rate produces — takes 1.7 points off the return. No operating assumption on this page is anywhere near that powerful.
The number most worth stressing
Every IRR rests on a sale that has not happened, priced at a cap rate nobody can observe today. In the example above the exit carries more of the return than five years of operations combined, which is the normal shape of a CRE deal rather than an unusual one.
So the useful discipline is not to compute the IRR more precisely. It is to ask what happens to it when the exit cap rate moves half a point against you, and whether the deal still clears your hurdle when it does. An underwriting that only survives at the exit cap it assumes is not an underwriting, it is a hope with a spreadsheet attached.
The second question worth asking is where the operating cash flow itself came from. A cash flow projected from a stated NOI inherits whatever that stated NOI was worth. One derived lease by lease from the actual rent roll — with escalations, reimbursements and rollover in it — is a different kind of number, and it is the only kind that makes an IRR worth acting on.
Frequently asked questions
What is IRR in commercial real estate?
IRR — internal rate of return — is the annual rate at which every cash flow from a deal, discounted back to today, sums to the equity you put in. It answers a question a cap rate cannot: not just how much you make, but when you make it. Two deals returning the same total dollars have very different IRRs if one exits in year three and the other in year seven, because money returned earlier can be redeployed.
What is a good IRR for a real estate investment?
It depends entirely on risk and strategy, and any single number quoted without those is marketing. Stabilized core assets with credit tenants and modest leverage are typically underwritten in the low teens. Value-add deals — lease-up, renovation, repositioning — are usually underwritten to the high teens or low twenties to compensate for execution risk. Opportunistic and development deals target higher still. The more useful question is whether the IRR is high because the operating assumptions are strong or because the exit cap rate is optimistic.
What is the difference between IRR and cash-on-cash return?
Cash-on-cash return measures one year: annual pre-tax cash flow divided by the equity invested. IRR measures the entire hold, including the sale, and accounts for timing. A deal can show a strong year-one cash-on-cash and a weak IRR if the exit disappoints, or a modest cash-on-cash and a strong IRR if most of the return comes from appreciation. They answer different questions and neither replaces the other.
What is the difference between IRR and equity multiple?
Equity multiple is total distributions divided by equity invested — a 2.0x means you got back twice what you put in. It ignores time completely, so a 2.0x over three years and a 2.0x over ten years look identical. IRR accounts for timing but is insensitive to duration in the other direction: a quick flip can post a spectacular IRR on a small absolute profit. Read them together, which is why this calculator shows both.
Why can a deal have no IRR at all?
IRR is the rate that makes the net present value zero, and for some cash flow series no such rate exists. The common case is a deal where every flow after the initial outlay is negative — the equity is never returned, so there is no rate of return to find. Negative leverage combined with cap rate expansion at exit produces this regularly in real underwriting. This calculator says so in words rather than showing an error, because it is a fact about the deal, not about the form.
Is levered or unlevered IRR the right number to look at?
Unlevered IRR measures the property itself, stripped of financing, and is the right comparison between two assets. Levered IRR measures your equity position, including the effect of debt, and is the right number for deciding whether to write the cheque. This calculator computes levered IRR: the cash flows you enter should be after debt service, and the sale proceeds should be net of the loan payoff.
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Related guides
What is cash-on-cash return?
The one-year yield, and where it disagrees with IRR.
What is cap rate?
The unlevered return metric that sets the exit value.
What is NOI?
The income figure every one of these numbers starts from.
How to underwrite a CRE deal
The full process behind a cash flow projection.
How to analyze a CRE deal
From rent roll to decision, step by step.
Commercial real estate metrics
Every CRE metric explained in one place.
An IRR is a projection. The rent roll is the fact.
DealWise AI builds the cash flow lease by lease — escalations, reimbursements, rollover and the exit — and shows every assumption behind the return, so the IRR is something you can interrogate rather than accept.