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## What is an acceptable IRR?

You’re better off getting an IRR of **13% for 10 years than 20% for one year if** your corporate hurdle rate is 10% during that period. … Still, it’s a good rule of thumb to always use IRR in conjunction with NPV so that you’re getting a more complete picture of what your investment will give back.

## What is a strong IRR?

For example, a good IRR in real estate is **generally 18% or above**, but maybe a real estate investment has an IRR of 20%. If the company’s cost of capital is 22%, then the investment won’t add value to the company. The IRR is always compared to the cost of capital, as well as to industry averages.

## What is IRR for real estate?

What is IRR: **Internal Rate of Return**? Internal Rate of Return (IRR) is a metric that tells investors the average annual return they have either realized or can expect to realize from a real estate investment over time, expressed as a percentage. Example: The IRR for Project A is 12%.

## Is 12% a good IRR?

Any time the discount rate is below the IRR, it’s a positive NPV project. So if our hurdle rate is 7% and the IRR is **12% it’s a good** project. IRR is similar to NPV, except that we have discounted the cash flows to a percentage rate where the discounting just crosses to negative, at 0.

## What does the IRR tell you?

The IRR indicates **the annualized rate of return for a given investment**—no matter how far into the future—and a given expected future cash flow. … The IRR is the rate at which those future cash flows can be discounted to equal $100,000.

## Why is NPV better than IRR?

The advantage to using the NPV method over IRR using the example above is that **NPV can handle multiple discount rates without any problems**. Each year’s cash flow can be discounted separately from the others making NPV the better method.

## What is the IRR rule?

The internal rate of return (IRR) rule states **that a project or investment should be pursued if its IRR is greater than the minimum required rate of return**, also known as the hurdle rate. The IRR Rule helps companies decide whether or not to proceed with a project.

## What is a good levered IRR?

In terms of “real numbers”, I would say (with very broad brush strokes), on a levered basis, here are worthwhile IRRs for various investment types: **Acquisition of stabilized asset – 10% IRR**. **Acquisition and repositioning of ailing asset – 15% IRR**. **Development in established area – 20% IRR**.

## Is IRR the same as cap rate?

In commercial real estate, cap rate is the **preferred measurement of value**. Cap rate is used to calculate return on investment dollars, value or net income, whereas IRR tells the investor potential yield over the holding period.

## What is the difference between cash on cash and IRR?

The biggest difference between the cash on cash return and IRR is that the **cash on cash return only takes into account cash flow from a single year**, whereas the IRR takes into account all cash flows during the entire holding period.