Internal Rate of Return (IRR)

In real estate, the Internal Rate of Return (IRR) is a metric used to evaluate the profitability of an investment over its lifetime and is represented as the average annual return percentage. The metric most commonly used to measure profitability of a potential real estate investment. The IRR for an investment is the percentage rate earned on each dollar invested for each period it is invested.  The IRR of an investment can be calculated forward-looking to estimate potential future returns or backward looking to measure the performance of a completed investment. Ultimately, IRR gives an investor the means to compare alternative investments based on their yield.

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