IRR vs. Equity Multiple explained

THE DIFFERENCES BETWEEN EQUITY MULTIPLE AND INTERNAL RATE OF RETURN (IRR)

Investors often ask about an internal rate of return (IRR) versus an equity multiple —the multiple on invested capital (MOIC). The IRR is a metric used in financial analysis to estimate the profitability of potential investments. IRR is the discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. Understanding that it includes cash flow during the holding period, a return on your equity, and a return on your equity without a time value of money (TVM) component is key. In other words, a dollar earned in year one is worth more than that in year five.

An equity multiple or MOIC also includes cash flow earned during the holding period.  For example, if you invest $1 million with BAM Capital and we were to deliver approximately $2.6 million to you during a 3.5-year holding period, this would equal a 2.6 equity multiple.

BAM Capital offers its family of investors access to premier real estate investment opportunities, transparent stewardship of capital, a means to achieve portfolio diversification, and tax-advantaged, long-term wealth creation. We’re a top-accredited investor company for HNWIs looking to offload stress and seek passive income from real estate investing. We have a proven track record and have worked with over 1,400 (and growing) accredited investors just like you.

No investment is without risk. Before making financial decisions, consult your investment advisor or speak to a member of the BAM Capital investment team.

Schedule a call with BAM Capital and invest today if you’re an accredited investor who wants to enjoy passive income and all the other benefits of being in multifamily syndication.