From a blog post: "Let's say I want to model an empty apartment building that I'm rehabbing over the course of a couple years. I purchase it for $200K, and I have to immediately (over the first two months) put in $100K to start getting it rented. In the first twelve months after rehab, my model indicates a monthly cash-flow of $2500/month. Then, after twelve months of cash-flow, I plan to sink another $100K into more renovations (which takes 2 more months), and for the next twelve months, my model indicates that I can expect a cash-flow of $6000/month. At this point, I plan to sell the building for $500K. Given that example, I take my monthly cash flows projected by my two models, and augment them based on my purchase/sale/rehab expenses, and run an IRR to get my expected return (in this case, about 25%)."