IRR (internal rate of return)

IRR (internal rate of return) — the annualized return implied by the entire dated cash-flow series: cash invested, each year’s net flow, and the exit proceeds net of ~8–9% friction. It’s the one number that lets a leveraged building compete honestly against a UCITS fund’s expected return or MP2’s rate, because it prices when money moves, not just how much. Compute it yourself (=IRR() on the dated column); never accept a seller’s IRR whose assumptions you haven’t rebuilt.

First used in: 3.4 · Underwriting: the Gallinelli math