Question 1

What is IRR in real estate?

Accepted Answer

Internal rate of return is the annualized return that accounts for the size and timing of every cash flow — the initial equity out, the cash flow during the hold, and the proceeds at sale. Because it weights early dollars more heavily, two deals with the same total profit can have very different IRRs.

Question 2

What is a good IRR for a commercial deal?

Accepted Answer

It depends on risk and hold, but many investors target roughly 12–20% IRR on value-add commercial deals and lower on stabilized, lower-risk assets. Judge IRR next to the risk taken and the equity multiple — a high IRR on a short hold can still return little total profit.

Question 3

IRR vs cash-on-cash — what’s the difference?

Accepted Answer

Cash-on-cash is a single year’s cash flow divided by cash invested and ignores timing and sale. IRR blends every year’s cash flow plus the exit into one time-weighted return. Use cash-on-cash for year-one yield and IRR for the full hold.

Internal rate of return (IRR) calculator.

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