How to use IRR for real estate investing (and why not just cash flow)
Summary
AI-generatedThis video explains how to calculate the Internal Rate of Return (IRR) for short-term rental investments, going beyond simple cash-on-cash returns. It demonstrates how to incorporate appreciation, loan paydown, and tax benefits to get a more comprehensive annualized return figure.
Key insights
The Internal Rate of Return (IRR) metric combines cash flow, appreciation, loan paydown, and other benefits into a single annualized percentage for comparison.
Mistakes to avoid
Relying solely on cash-on-cash return can be misleading as it doesn't account for other significant financial benefits like property appreciation or loan amortization, potentially undervaluing an investment.
Tools & resources
Google Sheets/Exceltool
Spreadsheet software like Google Sheets or Excel can be used to calculate the IRR of an investment.
Frequently Asked Questions
Curated by Learn STR by GoStudioM · Summary & key insights generated by AI · Reviewed by editorial