https://lv5capital.com/assets/IRRCalculator-DzjJ3SSr.js

1import{c as f,r as a,j as e,S as x,L as c}from"./index-pnw7vN9z.js";import{a as y,C as g}from"./CalculatorLayout-CZgIWJmU.js";import{L as v}from"./LearnFAQ-S_ij0azF.js";import{C as I,b as j,c as b,a as w}from"./card-DYfi2lB_.js";import{I as r}from"./input-CU8NR_7l.js";import{L as i}from"./label-BsF_0be7.js";import"./Footer-BJxCwxzn.js";import"./button-B9_AU6ak.js";import"./calculator-BUITlVlJ.js";import"./arrow-right-BbVATkcx.js";import"./calendar-BgtdynmJ.js";import"./accordion-B4JB8Pp_.js";import"./index-CPIMHoWU.js";/**
2 * @license lucide-react v0.453.0 - ISC
3 *
4 * This source code is licensed under the ISC license.
5 * See the LICENSE file in the root directory of this source tree.
6 */const q=f("ChartLine",[["path",{d:"M3 3v16a2 2 0 0 0 2 2h16",key:"c24i48"}],["path",{d:"m19 9-5 5-4-4-3 3",key:"2osh9i"}]]),N=[{question:"What is IRR in real estate?",answer:"Internal rate of return (IRR) is the annualized rate at which the net present value (NPV) of all cash flows — initial investment, distributions during the hold, and the final capital event — equals zero. It is the most accurate single-number measure of a real estate deal's return because it accounts for the timing of every cash flow."},{question:"How is IRR calculated?",answer:"IRR cannot be solved with a closed-form formula in most cases. Spreadsheets and calculators iterate to find the discount rate that makes the NPV of the cash flow series zero. Standard inputs are: a negative Year 0 cash flow (your investment), positive interim distributions, and the final exit cash flow that includes both the last year's income and net sale proceeds."},{question:"What is a good IRR on a real estate investment?",answer:"Most multifamily syndications target a Limited Partner IRR of 14–20% over a 5–7 year hold. Stabilized core deals may target 10–14% IRR. Opportunistic and ground-up development deals often underwrite to 18–25% IRR to compensate for additional risk. Direct owners with active value-add execution can target similar or higher numbers."},{question:"Why is IRR more accurate than ROI?",answer:"ROI ignores when cash flows arrive — it treats $10K returned in Year 1 the same as $10K returned in Year 7. IRR explicitly accounts for the time value of money: early distributions improve IRR, late distributions hurt it. For multi-year hold real estate deals, IRR is the more accurate return metric."},{question:"Can two deals have the same IRR but very different equity multiples?",answer:"Yes — and this happens often. A 5-year deal returning 1.6x equity can have the same IRR as a 10-year deal returning 2.5x equity. IRR rewards speed; equity multiple rewards size. Most sophisticated investors evaluate both metrics together rather than choosing one in isolation."},{question:"What's the difference between gross IRR and net IRR?",answer:"Gross IRR (or 'asset-level IRR') is calculated on the property's full cash flows before sponsor promote/fees. Net IRR (or 'investor IRR') is what Limited Partners actually receive after the GP's preferred return, profit splits, and asset management fees are taken out. Always confirm which figure is being quoted."},{question:"What is the IRR hurdle rate in a syndication waterfall?",answer:"An IRR hurdle is a return level the General Partner must deliver to LPs before earning a higher share of profits. A common waterfall: 8% pref → 80/20 split until 14% IRR → 70/30 split until 18% IRR → 60/40 above. Hurdles align sponsor incentives with LP outcomes by gating the GP's promote on actual performance."},{question:"How does refinancing affect IRR?",answer:"A successful cash-out refinance returns equity to investors early in the hold, which boosts IRR even if the equity multiple stays the same. Returning $0.50 of every dollar in Year 3 vs. holding it until a Year 7 sale can swing IRR by 200–400 basis points. Refinances are a common tool for sponsors targeting strong IRRs."}];function z(){const[n,h]=a.useState(1e5),[l,u]=a.useState(7e3),[o,m]=a.useState(5),[d,p]=a.use

6State(165e3),s=a.useMemo(()=>y({investment:n,annualDistribution:l,holdYears:o,exitProceeds:d}),[n,l,o,d]),R=t=>new Intl.NumberFormat("en-US",{style:"currency",currency:"USD",maximumFractionDigits:0}).format(t);return e.jsxs(g,{currentPath:"/calculator/irr",children:[e.jsx(x,{title:"Real Estate IRR Calculator | Internal Rate of Return Tool | LV5 Capital",description:"Free real estate IRR calculator. Estimate the internal rate of return on a multifamily syndication or rental investment, accounting for the timing of every cash flow.",path:"/calculator/irr"}),e.jsx("p",{className:"text-primary font-medium text-sm tracking-wider uppercase mb-2","data-testid":"text-calc-label",children:"Investor Tools"}),e.jsx("h1",{className:"text-3xl md:text-4xl font-bold mb-6","data-testid":"text-calc-title",children:"Real Estate IRR Calculator"}),e.jsx("p",{className:"text-xl text-muted-foreground mb-8 font-body leading-relaxed","data-testid":"text-calc-intro",children:"Internal Rate of Return (IRR) is the gold-standard return metric in private real estate. Use the calculator below to estimate the IRR, equity multiple, and total profit on a syndication LP position or rental investment over a 1–20 year hold."}),e.jsxs(I,{className:"not-prose border-border/50 mb-10","data-testid":"card-irr-calculator",children:[e.jsx(j,{children:e.jsxs(b,{className:"flex items-center gap-2 font-heading",children:[e.jsx(q,{className:"w-5 h-5 text-primary"}),"IRR Inputs"]})}),e.jsxs(w,{children:[e.jsxs("div",{className:"grid md:grid-cols-2 gap-4",children:[e.jsxs("div",{className:"space-y-2",children:[e.jsx(i,{children:"Initial Investment ($)"}),e.jsx(r,{type:"number",value:n,onChange:t=>h(parseFloat(t.target.value)||0),"data-testid":"input-investment"})]}),e.jsxs("div",{className:"space-y-2",children:[e.jsx(i,{children:"Annual Distribution ($)"}),e.jsx(r,{type:"number",value:l,onChange:t=>u(parseFloat(t.target.value)||0),"data-testid":"input-annual-distribution"})]}),e.jsxs("div",{className:"space-y-2",children:[e.jsx(i,{children:"Hold Period (Years)"}),e.jsx(r,{type:"number",value:o,onChange:t=>m(parseInt(t.target.value)||1),min:1,max:20,"data-testid":"input-hold-years"})]}),e.jsxs("div",{className:"space-y-2",children:[e.jsx(i,{children:"Exit Proceeds at Sale ($)"}),e.jsx(r,{type:"number",value:d,onChange:t=>p(parseFloat(t.target.value)||0),"data-testid":"input-exit-proceeds"})]})]}),e.jsxs("div",{className:"mt-8 grid md:grid-cols-3 gap-4",children:[e.jsxs("div",{className:"p-4 rounded-lg bg-primary/10",children:[e.jsx("div",{className:"text-sm text-muted-foreground",children:"Estimated IRR"}),e.jsx("div",{className:"text-2xl font-bold text-primary","data-testid":"result-irr",children:s.irr!==null?`${s.irr.toFixed(2)}%`:"—"})]}),e.jsxs("div",{className:"p-4 rounded-lg bg-muted/30",children:[e.jsx("div",{className:"text-sm text-muted-foreground",children:"Equity Multiple"}),e.jsxs("div",{className:"text-xl font-bold text-foreground","data-testid":"result-equity-multiple",children:[s.equityMultiple.toFixed(2),"x"]})]}),e.jsxs("div",{className:"p-4 rounded-lg bg-muted/30",children:[e.jsx("div",{className:"text-sm text-muted-foreground",children:"Total Profit"}),e.jsx("div",{className:"text-xl font-bold text-foreground","data-testid":"result-total-profit",children:R(s.totalProfit)})]})]}),e.jsx("p",{className:"text-xs text-muted-foreground mt-4",children:"Estimates use level annual distributions and a single capital event at exit. Actual deals have lumpier cash flows (preferred-return shortfalls, refinances, partial returns of capital). Not investment advice."})]})]}),e.jsx("h2",{children:"What is IRR in Real Estate?"}),e.jsx("p",{children:"Internal rate of return (IRR) is the annualized rate at which the net present value (NPV) of every cash flow in a deal — starting with your initial investment and ending with the sale proceeds — equals zero. In plain English, it is the compounded return your money earns from the day it's invested to the day it's returned, accounting for every interim distribution along the way."}),e.jsxs("p",{children:["Unlike ",e.jsx(c,{href:"/calculator/roi",children:"total ROI"})," or simple cash-on-cash return, IRR explicitly weighs ",e.jsx("em",{children:"when"})," cash arrives. A dollar returned in Year 1 is worth more than a dollar returned in Year 7, because the Year 1 dollar can be reinvested. This makes IRR the most accurate single-number measure of a multi-year real estate investment."]}),e.jsx("h2",{children:"How IRR Is Calculated"}),e.jsxs("p",{children:["IRR is the discount rate ",e.jsx("em",{children:"r"})," that satisfies this equation across every cash flow CF in time period t:"]}),e.jsxs("div",{className:"not-prose bg-muted/30 rounded-lg p-6 my-6",children:[e.jsx("p",{className:"font-heading font-semibold text-foreground mb-3",children:"IRR Formula"}),e.jsxs("p",{className:"text-sm font-body text-muted-foreground",children:["0 = CF",e.jsx("sub",{children:"0"})," + CF",e.jsx("sub",{children:"1"}),"/(1+r) + CF",e.jsx("sub",{children:"2"}),"/(1+r)",e.jsx("sup",{children:"2"})," + ... + CF",e.jsx("sub",{children:"n"}),"/(1+r)",e.jsx("sup",{children:"n"})]}),e.jsxs("p",{className:"text-sm font-body text-muted-foreground mt-2",children:["Where CF",e.jsx("sub",{children:"0"})," is the negative initial investment and CF",e.jsx("sub",{children:"1"})," through CF",e.jsx("sub",{children:"n"})," are the positive cash distributions and exit proceeds."]})]}),e.jsxs("p",{children:["There is no algebraic closed-form solution for most real estate cash flow series. Spreadsheets (Excel's ",e.jsx("code",{children:"IRR()"}

6),"and ",e.jsx("code",{children:"XIRR()"})," functions) and calculators like this one iterate numerically to find the rate that makes the equation balance."]}),e.jsx("h2",{children:"What is a Good IRR for Multifamily Real Estate?"}),e.jsx("p",{children:"IRR benchmarks vary widely by deal type and risk profile. Here is the typical range for U.S. multifamily as of 2026 underwriting:"}),e.jsxs("ul",{children:[e.jsxs("li",{children:[e.jsx("strong",{children:"Stabilized / Core"})," — 10–14% projected IRR. Newer assets, strong markets, modest leverage."]}),e.jsxs("li",{children:[e.jsx("strong",{children:"Core Plus"})," — 12–16% IRR. Light value-add, primarily in stable secondary markets."]}),e.jsxs("li",{children:[e.jsx("strong",{children:"Value-Add"})," — 14–20% IRR. Meaningful renovations, operational repositioning, 5–7 year holds."]}),e.jsxs("li",{children:[e.jsx("strong",{children:"Opportunistic / Heavy Lift"})," — 18–25%+ IRR. Distressed assets, ground-up development, larger execution risk."]})]}),e.jsxs("p",{children:["These are ",e.jsx("em",{children:"projected"})," IRRs — the underwritten return at the time of acquisition. ",e.jsx("em",{children:"Realized"})," IRRs over the past 10 years have varied dramatically with rate cycles, regional supply, and operator skill. Always evaluate the assumptions behind a projected IRR (rent growth, exit cap rate, vacancy) before relying on the headline number."]}),e.jsx("h2",{children:"IRR vs. Equity Multiple — Why Both Matter"}),e.jsxs("p",{children:["IRR and ",e.jsx(c,{href:"/calculator/equity-multiple",children:"equity multiple"})," measure different things and can paint different pictures of the same deal. Consider two simplified examples:"]}),e.jsxs("ul",{children:[e.jsxs("li",{children:[e.jsx("strong",{children:"Deal A"})," — Invest $100K, receive $200K at the end of Year 5. IRR ≈ 14.9%. Equity multiple = 2.0x."]}),e.jsxs("li",{children:[e.jsx("strong",{children:"Deal B"})," — Invest $100K, receive $200K at the end of Year 10. IRR ≈ 7.2%. Equity multiple = 2.0x."]})]}),e.jsx("p",{children:"Same equity multiple, very different IRR. IRR rewards speed (early distributions) and equity multiple rewards size (total dollars returned). A great deal usually delivers strong numbers on both. Most LV5 Capital syndications are modeled to a 14–18% net IRR and a 1.7x–2.2x equity multiple over a 5–7 year hold."}),e.jsx("h2",{children:"Gross IRR vs. Net IRR (Investor IRR)"}),e.jsxs("p",{children:["Sponsors quote IRR two ways. ",e.jsx("strong",{children:"Gross IRR"}),` (also called "asset-level IRR" or "deal IRR") is calculated on the property's cash flows before any sponsor fees, asset management fees, or promote splits. `,e.jsx("strong",{children:"Net IRR"}),` (or "investor IRR" or "LP IRR") is what Limited Partners actually receive after the General Partner's economics are taken out.`]}),e.jsx("p",{children:"On a deal with an 8% pref and a 70/30 LP/GP split, gross and net IRR can differ by 200–400 basis points. Always confirm which figure you're being shown. The Private Placement Memorandum (PPM) for any offering will define both the waterfall mechanics and which IRR is being projected."}),e.jsx("h2",{children:"How Refinances and Hold Period Affect IRR"}),e.jsx("p",{children:"IRR is highly sensitive to the timing of capital returns. A successful cash-out refinance in Year 3 that returns 50% of investor capital can boost IRR by 200–400 basis points compared to holding the full equity until exit, even if the eventual sale proceeds are unchanged. This is why refinance-and-hold strategies often quote stronger IRRs than straight buy-and-sell strategies."}),e.jsx("p",{children:"On the flip side, extending a planned 5-year hold to 7 years can drag IRR down by 200–500 basis points if cash flows don't grow proportionally. Hold-period assumptions in the underwriting matter as much as exit cap rate assumptions when projecting IRR."}),e.jsx("h2",{children:"Limitations of IRR"}),e.jsx("p",{children:"IRR isn't perfect. It implicitly assumes you can reinvest interim distributions at the same IRR — usually unrealistic. It can be mathematically unstable when cash flows change sign multiple times (rare in real estate but possible in deal

6s with mid-hold capital calls). And on very short-hold deals, a small change in exit price can swing IRR dramatically."}),e.jsx("p",{children:"Sophisticated investors look at IRR alongside equity multiple, cash-on-cash return, debt yield, downside-case modeling, and sponsor track record. No single metric tells the whole story."}),e.jsx("h2",{children:"How LV5 Capital Underwrites IRR"}),e.jsx("p",{children:"LV5 Capital underwrites every multifamily acquisition to a base case, downside case, and upside case. The base case typically targets a 14–18% net LP IRR over a 5–7 year hold, with conservative assumptions on rent growth (3% annually), exit cap rate (50–100 bps above going-in cap), and vacancy (95% occupancy). The downside case stress-tests these assumptions to ensure the deal still returns capital under softer market conditions."}),e.jsxs("p",{children:["Want to see how a current offering's IRR is built up?"," ",e.jsx("a",{href:"https://crm.lv5capital.com/widget/bookings/jeff-dulmage-personal-calendar-fpv0anlem",target:"_blank",rel:"noopener noreferrer",children:"Schedule a call with the team"})," ","or read more about ",e.jsx(c,{href:"/learn/real-estate-syndication",children:"how real estate syndications work"}),"."]}),e.jsx(v,{faqs:N,testIdPrefix:"irr"})]})}export{z as default};