Metrics
IRR (Internal Rate of Return)
Annualized return over the full hold period, including cash flow, principal paydown, appreciation, and exit proceeds.
How it's calculated
IRR solves for the rate where the sum of discounted cash flows (including exit) equals zero.Example
Invest $80k. Collect $7k/yr cash flow for 10 years. Sell for $480k (paying off $260k mortgage = $220k proceeds). IRR ≈ 14.5%.
Why IRR (Internal Rate of Return) matters
IRR captures the FULL return story: monthly cash flow + principal paydown + appreciation + exit value, all rolled into one annualized number. It's the right metric for wealth-builders.
Related terms
Cash-on-Cash Return
Annual cash flow ÷ total cash invested (down payment + closing + rehab). Tells you how hard your mon…
Monthly Cash Flow
Rent minus operating expenses minus mortgage payment. The cash that lands in your account each month…
Appreciation Rate
Annual property value increase. Historical US average ~3.5%; varies dramatically by market.