Internal Rate of Return (IRR)

Internal Rate of Return (IRR)

An average annualized rate of return of your total invested cash, sometimes also called annualized return on investment (ROI).

For a rental vehicle, the IRR takes into account the cumulative cash flow, equity accumulation and loan paydown and gives the annualized return on your invested capital for the entire time you own the vehicle.

For a flip, the IRR is a hypothetical annualized return on your invested capital based on the current flip transaction.

 

How Is It Calculated?

Rentals:
IRR = (1 + ROI)^((1/num of years) - 1)
 
Flips:
IRR = ( 12 * ROI ) / Holding Period

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