From the course: Real Estate Analysis Foundations

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Internal rate of return

Internal rate of return - Microsoft Excel Tutorial

From the course: Real Estate Analysis Foundations

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Internal rate of return

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- How would you compare an apple with an orange? You might say that they're both fruit or maybe they're both sweet, but when you're looking at investment opportunities that would be the equivalent of saying well, they're both investments or they're both real estate. Not very helpful, right? So how would you be able to compare investment opportunities on an apples to apples basis even if they're not exactly alike? Now we saw with our example of the discounted cash flow and net present value, that's one of the ways we can do that. But another way that is very popularly used by professional investors is the concept of something called the internal rate of return. What is that? Definition, if you find it somewhere, Wikipedia or Investopedia or other places, here's one definition, the percentage rate earned on each dollar invested for each period it is invested. What? That sounds like a mouthful, right? Well, it's actually quite simple. Imagine an investment where you put some money in and…

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