What Is It?
An average annualized rate of return on your total invested cash, sometimes also called annualized return on investment (ROI).
For a rental property, the IRR takes into account the cumulative cash flow, equity accumulation and loan paydown and shows the annualized return on your invested capital for the entire time you own the property.
Note that the rental IRR formula is not algebraic. Instead, IRR is calculated by solving the formula below when the net present value equals 0.
For a flip, the IRR is a hypothetical annualized return on your invested capital based on the current flip transaction.