Internal Rate of Return - IRR

Here's a simple way to think about the investment return: How much did you put into the property, when did you put it in, how much did you get out of the investment, and when did you take it out. IRR tracks every dollar in the investment for the time it is in the investment. It is a great tool for keeping score.

The formula uses these elements. IRV. I=Income, R=CAP Rate, V=Value.

Income divided by Value equals Cap Rate, or Income divided by Cap Rate equals Value.

Sample: $35,000 Income divided by $275,000 Investment equals Cap Rate 12.73%

$35,000 / $275,000 = 12.73%. Or.... $35,000 / 12.73% = $275,000.

This is a fun formula and it tells you a lot. We really will crunch some numbers when you start tracking monthly income instead of annual and they are all different. Not complicated, but you will need an HP calculator. I will refresh you on using an HP calculator in future blogs. For now we use simple math.