Insights

At RealData, we’ve seen an uptick in interest about expense reimbursements, aka pass-throughs or recoverable expenses. If you’re in commercial real estate—whether as an investor, broker, property manager, or tenant rep—then you know that such reimbursements can make or break a deal. That’s why I’m giving away a FREE eBook: “Understanding Real Estate Expense Reimbursements.”

Internal Rate of Return (IRR) is the metric of choice for many, if not most, real estate investors. But there are a few issues with IRR that can cause you some vexation: If you expect a negative cash flow at some point in the future, then the IRR computation may simply fail to come up with a unique result; and with your positive cash flows, IRR may be a bit too optimistic about the rate at which you can reinvest them.

For these reasons, a variation on IRR, called Modified Internal Rate of Return (MIRR), can be a useful tool. Let’s see how it works, and see how it gives you the opportunity to deal with IRR’s shortcomings.

Internal Rate of Return (IRR) is arguably the most widely used metric in commercial real estate, and for good reason. It’s often called the gold standard for evaluating long-term investment performance. In this post, I’ll unpack what IRR really means, how to calculate it, where it excels, and where it doesn’t.

Most real estate investors learn about capitalization rate (cap rate) early on—and for good reason. It’s a useful, at-a-glance measure of a property’s income in relation to its market value.

But cap rate has its limitations: it reflects only a single year of net operating income (NOI), ignores financing, and says little about long-term performance. It looks at a property at a point in time, not over the long term.

If you’re serious about evaluating income-producing real estate—especially in a competitive or uncertain market—you need to go deeper. In this article, I’ll walk you through five advanced metrics that provide a more comprehensive and strategic view of a commercial investment’s potential. Ready for that deeper dive?