Member's Portal
Member's Portal

IRR – what is it and how to calculate it?

By webdev
November 19, 2019

IRR is a term widely used in real estate. But what is it?

IRR stands for Internal Rate of Return. It reflects the annualized Return On Investment (ROI) of an investment and it counts in all the profits generated by the investment from the time of acquisition until the disposition of the investment.

IRR can describe the ROI on a different type of investments and it is great for comparing investment tools as it put all types of investments on the same scale.

The IRR is presented in % per year over the invested funds. Let’s look at a couple of examples from the real estate world*:

*I have used realistic numbers that were rounded for simplicity

From this example, you can clearly see that having higher ROI doesn’t mean higher IRR. ROI doesn’t take into account the time factor on your investment and IRR does.

When you are considering different investment tools make sure you are comparing the IRR and not the ROI since your money has to work overtime…

 

If you have questions or comments, please reach out to us at info@kerra-investments.com

 

Invest your money wisely!!

 

If you would like to get notified on new investments that might generate high IRR, register to our newsletter at www.kerra-investments.com

 

Eliav Kling

Related Posts

Follow Us On

The relationship between interest rates and property value

The relationship between interest rates and property value

Let's break down how interest rates shake up the commercial real estate game. For us to do that, we will need to look at the way properties are being evaluated and the way lenders look at the risk when lending money to real estate projects.   In the commercial...

COVID-19 impact on the Real Estate markets

COVID-19 impact on the Real Estate markets

I will start by saying that what I write here is my personal opinion and should not be taken as advice or instructions. I can not see the future or predict what will happen, this is only my opinion and it should be taken as such! We all heard in the last few months...

We are proud to announce the sale of our Knox property

We are proud to announce the sale of our Knox property

The KERRA team is very proud to announce the sale of our Knox property. The Knox property was bought in April of 2018. It is a 32 units property that we have bought for a long term buy and hold. We didn’t plan on selling this property at this point in time, however,...

How can you prepare for the next recession?

How can you prepare for the next recession?

As I have mentioned in my last blog, all the signs are showing that we are getting closer to a recession. Recession could be devastating to a lot of businesses including real estate investment ones. On the other hand, a recession could mean great opportunities,...