This is Shuo. Today let’s talk about IRR, Internal Rate of Return. The Internal Rate of Return is one of the best measurements to use to compare one investment vehicle with another. It’s similar to AAR, which values return over a period of time taking cash flow distributions and proceeds from refinance or sale into consideration.
However, IRR also factors in net present value, which accounts for the fact that money loses value over time, and that’s why you see the IRR is usually a little bit lower than the AAR number and the calculation of it is also a little bit more complex. However, Microsoft Excel has a function that you can plug in to calculate your Internal Rate of Return.
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Patrick Grimes is a design engineer and CEO and Founder of Invest on Main Street, LLC. His real estate holdings include general partner ownership of a multifamily and single-family real estate portfolio valued over $146M, including 1,950+ units across the southeastern United States and Texas.
He has been active in real estate investment since 2007, including purchasing land and distressed assets, renovating them, and stabilizing them for long-term cash flow. To scale his real estate portfolio, Patrick moved from single-family to multifamily investing and founded Invest on Main Street, a private equity firm specializing in multifamily value-add projects in emerging markets.