One rate that respects time.
Cash-on-cash looks at a single year. IRR weighs every dollar for when it lands: early cash flow and a distant sale are not worth the same. Enter your deal and see the annualized return you can hold up against stocks.
The deal
Net sale proceeds is the cash you walk away with at sale, after paying off the mortgage and selling costs. Not sure of the figure? Estimate it below and we will fill it in.
Is this a good return?
The cash-flow timeline
What goes out and what comes back, year by year
Where the return comes from
Return scorecard
Year-by-year cash flow
Year 0 is your cash in as a negative outflow. Each later year is that year's cash flow, and the final year adds the net sale proceeds. The discounted column shows each amount in today's dollars at the solved IRR, which is why they sum to zero.
| Year | Cash flow | Sale proceeds | Total for year | Discounted @ IRR | Cumulative |
|---|
Hold period IRR, explained
Why IRR Beats Cash-on-Cash
Cash-on-cash measures only one year's cash flow vs initial investment. IRR captures the full investment life: cash flows year-by-year, plus sale proceeds, weighted for time value of money.
What IRR Tells You
IRR is the annualized return rate of the investment. 12% IRR means the deal grew at 12% per year compounded, directly comparable to stocks (S&P 500 ~10% historical) or bonds.
Strong vs Weak IRR
15%+ IRR = strong real estate deal. 12-15% = solid. 8-12% = market average. Under 8% = below stock market alternative. Adjust for risk and effort.
IRR Sensitivities
Most sensitive to: sale price (final cash dwarfs annual cash flows). Hold period (shorter holds with high sale price = higher IRR). Cash flow grows in importance with longer holds.
Common questions
What IRR should I target?
12-15% for typical buy-and-hold. 18-25% for value-add or BRRRR. Below 10% reconsider whether real estate beats simpler alternatives.
Does IRR include leverage benefit?
Yes, cash invested is your equity, not full purchase price. Leverage amplifies IRR (and amplifies losses).
Why is my IRR so sensitive to sale price?
Most of total return often comes from sale, not cash flow. Small sale price changes drastically impact IRR.
Does this account for taxes?
No, pre-tax IRR. For after-tax, reduce annual cash flow by your effective rate, and apply capital gains tax to sale gain.
How accurate is the calculation?
Uses Newton-Raphson iteration. Accurate to several decimal places. Manual calculation requires spreadsheet IRR function.
Estimates for planning only. This is a pre-tax IRR and appreciation is a projection, not a promise. The result leans heavily on your net sale proceeds, which no one knows until the sale closes. Real returns depend on financing, local market conditions, actual cash flow, vacancy, selling costs and time in the market. Verify every figure before you buy.