The Internal Rate of Return – Simplified

Internal rate of return is a financial metric that evaluates the profitability of an investment considering the time value of money. More specifically, IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. BLAH BLAH BLAH big words and confusing concepts, right? Here’s what you need to know. IRR is used to compare cash flow projects (not flips) with each other. Generally speaking, the higher the IRR the better. If you want to nerd out on this, click here for a more in-depth discussion and examples. Unless you are buying commercial properties to hold for awhile, you probably won’t use this. And if you’re doing that currently, you already know what it is.

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