BiggerPockets

Return on investment and IRR are not quite the same thing. I believe most people calculate ROI in the 1st year based on how much cash flow they recieved / amount of money invested, but it does not take into account any equity gained.

To get your IRR, you will have to setup cells that report net cash flow (including equity gain) such that each cell has the the net cash flow listed for that period. Any outflows (money out of your pocket) should be a negative number, and any inflows should be positive number.

Once you have that, just use the IRR function in Excel:
=IRR(<first>:<last>)

If you only have 1,2, or 3 periods, you need to enter a guess at the IRR since Excel does an iterative calculation.

I haven't seen IRR being discussed too much around here, not sure why. I think it is a valid metric that should be considered...i guess if you can find properties with the 2% rule, your IRR should be phenomenal anyways :).

Hope that helps. If you can't figure it out, send me your spreadsheet, I'll see if I can get what you want.

I realize this answer is probably not needed at this point, but for furture reference, here goes: Excel provides an IRR calculation for a series of cash flows irrespective of the time interval. If you run IRR on monthly cash flows, you need to convert the monthly IRR: (1+monthly IRR)^12-1 = annual IRR. Likewise, if you want a monthly IRR from an annual rate you would reverse this: (1+annual IRR)^(1/12)-1. IRR is just the discount rate which gives a zero NPV, there is no forumula or ability to convert to different holding periods. Don't know if it helps, but Income Property Analytics site might help.

You need an algorithm for IRR. There isn't a simple formula you can use because the process to find the IRR is iterative. What problem are you having with the baked-in IRR function?

You can build an amortization schedule to show the debt remaining on the project. This debt remaining will be used in your terminal cash flow to compute an IRR. I am happy to send you a sheet you can use to prepay the note. This will give you the remaining debt. You can use the remaining debt and all of the other cash flows to compute an IRR at each cash flow.

What is it that you are trying to do? Are you trying to find an optimal sell period? If so, are you buying the note at a discount?

BTW...You may also check out TValue:

TValue

instead of building something yourself if you are not very familiar with Excel.

Bryan,

Can you send me that spread? You've got my email.

TValue is accurate! It is very simple and I used it long ago. Looking at the IRR, IMO, is useless on one property, but is better used for a portfolio earnings at some point in time to some degree. To have a true IRR you also need an alternative invetment/cost of capital, it's hard to be accurate in RE to identify that.

As Brian asked, what are you trying to accomplish?