Using IRR to underwrite deals

[Jason Malabute]

Do you guys use IRR to analyze apartment deals?

I've been reading previous posts and I've noticed very few consider IRR before investing in an apartment deal. Why is that?

[Evan Polaski]

@Jason Malabute Yes.

I cannot speak to the posts that you have been reading, but IRR is one of a few metrics that I think most people look at. It is not the only metric though.

IRR is required, because the other common metrics: Cash on Cash and Equity multiple, do not account for time. Additionally, most syndications rely on IRR for GP hurdles to kick in. For the buy and hold folks, cash on cash is likely more valuable since there may never be a liquidation event to be able to calculate the IRR.