What The IRR Metric REALLY Means For Real Estate Investors

What The IRR Metric REALLY Means For Real Estate Investors // The internal rate of return, or IRR, is one of the most widely used metrics in all of commercial real estate, but this also tends to be one of the least easily understood.

The textbook definition of the IRR is, “The discount rate at which the net present value of a set of cash flows is equal to zero,” which most likely won't mean anything to you if you're not coming from a finance background.

But if you’re looking to land an analyst or associate role in real estate private equity or brokerage, trying to raise capital from equity partners to fund your own deals, or even considering investing passively in a crowdfunding or syndication opportunity, being able to both understand and interpret this metric is extremely important in the decision-making process.

So to help make this topic a little bit more clear and to give you some context around why this metric matters so much in this industry, in this video, let’s talk through what an IRR actually represents, the applications of this metric on real estate investment analysis specifically, and how the internal rate of return can impact the entire commercial real estate market (on a very large scale).

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🕒 Timestamps 🕒
0:00 Introduction
1:18 Contribution & Distribution Timing Matters (a LOT)
4:21 Why (& How) IRR Values Impact Pricing
7:28 Be Wary of Sponsor Incentives
9:46 How To Build Your CRE Finance Knowledge

#commercialrealestateinvesting #realestatefinance

*Nothing in this video should be construed as tax, legal, accounting, valuation, or financial advice or recommendation. All information in this video is intended solely for educational purposes, and you are advised to consult with your own personal professional advisors regarding your personal investment decisions.

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