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What is Internal Rate of Return (IRR)?

Internal Rate of Return (IRR) is a financial metric used to estimate the profitability and expected annual return of a real estate investment over time.

How IRR Measures Investment Performance

  • Considers income, expenses, and future sale value
  • Includes the timing of investment cash flows
  • Expressed as a percentage return
  • Common in commercial and investment real estate analysis

Why Investors Use IRR

  • Helps compare different investment opportunities
  • Measures long-term profitability potential
  • Assists in risk and return analysis
  • Supports informed real estate investment decisions

IRR is one of the most important metrics in real estate investing because it evaluates the overall financial performance of a property investment over time.

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