Investor Encyclopedia

IRR

IRR: a practical Canadian real estate investor guide to definition, deal math, underwriting use, common traps, and Realist.ca implementation.

Definition

Internal rate of return is the discount rate that makes all investor cash inflows and outflows equal zero over the hold period.

Formula

IRR is the discount rate where NPV of all cash flows equals zero.

Example

In underwriting, tag IRR beside the exact source input and rerun the model when that input changes. The point is not a pretty metric; it is a better buy, hold, refinance, or walk decision.

Why It Matters

IRR changes what a disciplined buyer can pay, how much debt the asset can safely carry, and whether the return is coming from operations or fragile assumptions.

Investor Interpretation

Use it to kill bad deals quickly. If the back-of-envelope version does not survive conservative assumptions, do not spend five hours making it look alive.

Realist Tie-In

Realist.ca can make IRR searchable as an encyclopedia entry, link it to property underwriting, and show it beside listings, saved analyses, market pages, and investor lead magnets.