Updated over 5 years ago on . Most recent reply
Help with assessing a project - internal rate of return
Hello,
I'm looking at putting together my first project - a multifamily in Houston. I ran the numbers and came up with a 17% IRR and a 7% cap rate over a 20 year horizon. I'm trying to understand whether this project is superior to putting my capital in the stock market (which I'm assuming will return 7%). I understand the math behind the IRR number (setting NPV equal to 0) but I'm having trouble capturing the intution of how to compare that to stock market returns. Also I know that investors generally want a cap rate of 8-12%, but I think that may be arbitrary. Could someone please help me figure out how to interpret these nubmers (as oposed to putting my money in the stock market)? Thanks.