IRR Calculator

Instantly See Your Rental Property's Estimated IRR

IRR Definition, Formula, and Example

Where:

• C₀:Initial cash investment (negative value)
• C_t:Net cash inflows at time t
• n:Total number of periods (years)
• IRR:The rate that solves the equation

IRR is the discount rate that makes the Net Present Value (NPV) of cash flows from an investment equal to zero. IRR is used to evaluate the profitability of an investment by considering all cash inflows and outflows over time. The higher the IRR, the better the investment return. IRR is useful to understand the true opportunity cost of buying a real estate.

What is a good IRR in real estate?

Generally, 15% IRR is often seen as good for real estate investors, but it depends on the specifics of the market and your investment strategy.

For short-term rental strategy, 20% IRR is considered high.

To evaluate an IRR, you also need to consider the property's appreciation factor, risks, and opportunity cost.