Free tool
IRR and equity multiple calculator
Enter the equity, the cash it returns each year and the sale proceeds. Get IRR, equity multiple, cash-on-cash by year and average annual return — instantly, with no sign-up.
Updated
Cash flows
After debt payoff and selling costs. Added to the final year.
IRR
12.26%
Equity multiple
1.70x
Total profit
$700,000
Avg. annual return
14.00%
| Year | Cash flow | Sale | Cash-on-cash |
|---|---|---|---|
| 0 | -$1,000,000 | — | — |
| 1 | $60,000 | — | 6.00% |
| 2 | $60,000 | — | 6.00% |
| 3 | $60,000 | — | 6.00% |
| 4 | $60,000 | — | 6.00% |
| 5 | $60,000 | $1,400,000 | 6.00% |
Illustrative, not investment advice. Annual periods with each cash flow at year end. Cash-on-cash is the year's cash flow over initial equity, excluding the sale. Average annual return is total profit over equity, divided by the years held — it ignores timing, which IRR captures. CREAssets runs real waterfalls on dated cash flows, including IRR hurdles.
IRR vs equity multiple
The internal rate of return (IRR) is the annual rate at which the present value of every cash flow — the money in and all the money out — nets to zero. It is an annualized return that accounts for when each dollar comes back. The equity multiple is total cash returned divided by equity invested: 1.70x means every dollar in returned $1.70. It ignores time.
Why you need both
Put $1,000,000 in and get $1,700,000 back in one payment. After three years that is a 19.35% IRR; after seven years it is 7.88%. The multiple is 1.70x either way. Go the other direction: a one-year deal returning $1,150,000 is a 15% IRR but only a 1.15x multiple — $150,000 of profit. IRR measures how fast the money worked; the multiple measures how much it made. Read alone, each can flatter a deal.
What drives them
- Timing. $1,000,000 returning $170,000 a year for five years plus capital back at sale is a 17.00% IRR. The same $1,850,000 paid all at the end is 13.09%. Both are 1.85x.
- Sale price and date. Usually the largest cash flow, so small changes move both numbers. Selling earlier at the same price usually raises IRR, while the multiple loses the skipped years of cash flow.
- Leverage. Debt shrinks the equity check, which magnifies both returns when the deal performs and both losses when it does not.
- Capital calls. Extra equity later in the hold is a negative cash flow; enter it as a negative number.
- Fees and the waterfall. Deal-level returns are not LP returns. Run the waterfall calculator first, then enter the LP side here.
Cash-on-cash and average annual return
Cash-on-cash is one year’s cash flow divided by the equity invested — a yield, before the sale. Average annual return is total profit divided by equity and by the years held. It ignores timing, so it usually reads higher than the IRR on the same deal: the default example above shows a 14.00% average annual return against a 12.26% IRR.
What counts as a good IRR
There is no single number. Targets depend on the strategy, leverage, hold period, market and risk of each deal. Compare an IRR with the assumptions behind it and with deals of similar risk, and always read it next to the multiple.
Annual periods vs actual dates
This calculator assumes equal annual periods with cash at year end, like Excel’s IRR. Real deals move money on specific dates, and the preferred return accrues from them. CREAssets runs real waterfalls on dated cash flows — see waterfalls and distributions, try the preferred return calculator, or read how real estate waterfalls work.
Related calculators
- Real estate waterfall calculator
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- Waterfall model in Excel (free download)
A three-tier IRR-hurdle waterfall with live formulas — pref, two promote tiers, LP and GP IRR by year. No sign-up.
- Preferred return calculator
Simple vs compounding, cumulative vs non-cumulative, with yearly distributions — pref accrued, paid and still owed.
- Cash-on-cash return calculator
Annual pre-tax cash flow over total cash invested — the yield on your equity, with monthly cash flow.
IRR and equity multiple questions
How do I convert an IRR to an equity multiple?
You cannot without the timing. The same multiple gives very different IRRs depending on when the cash comes back. If all the cash arrives at the end, multiple = (1 + IRR) raised to the number of years; with interim distributions, enter the cash flows here and read both.
What is a good IRR for real estate?
It depends on the deal: strategy, leverage, hold period, market and risk all move the target. Compare an IRR with the offering’s stated assumptions and with deals of similar risk, and read it next to the equity multiple.
Why is the average annual return higher than the IRR?
Average annual return divides total profit by equity and by the years held, so a dollar received in year five counts the same as one received in year one. IRR discounts later cash, so back-loaded deals show a lower IRR.
Why does it say there is no IRR?
An IRR needs at least one negative and one positive cash flow, and a rate where their present values net to zero. If every flow is zero or positive, or the returns are too small to solve for, no rate exists.
Is this the same as Excel’s IRR or XIRR?
It matches Excel’s IRR: equal annual periods with each cash flow at year end. XIRR uses exact dates. CREAssets runs real waterfalls on dated cash flows, so investor returns reflect when money actually moved.
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