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?
I’ve just re-launched an updated version of my e-book, “10 Commandments for Real Estate Investors,” and you now can get it free on Amazon Kindle & Apple Books!
Real estate investing can be an excellent way to build wealth or to provide a cushion for your retirement; but it can also be a snare for those who lack preparation, planning, and realistic expectations.
In this brief series of essays, I guide you through some investment principles you can live by.
Many of my articles here on RealData Insights have focused on the front end of income property investing — projecting cash flows and weighing the metrics that separate a potentially strong investment from one that falls short. It is easy to get wrapped up in the metrics of this process and to forget that eventually you’ll have to engage in the human and sometimes demanding business of actually managing the property you buy.
How you fulfill that task can go a long way toward determining the financial success of your investment. Property management can be a complex subject, but if you observe some basic principles you can maximize your long-term profit and minimize some of the burden.
If you’re going to be serious about real estate investing, it’s imperative that you understand the numbers behind your deals.
That’s why I’ve always stressed my mantra, “First do the math, then do the deal.” I’m glad to help you simplify that task with my books, my online video courses, and my Excel-based software.
But maybe you’d like to just put a toe in the water first.
In Part 2 of our discussion of real estate expense recoveries, we looked at several different methods that property owners use to recover some of their operating costs from tenants:
Expense recoveries (aka reimbursements or pass-throughs) serve as a customary ingredient in leases for non-residential property. In part 1 of this article, I discussed some of the typical ways such an arrangement might play out.
If you’ve gotten involved as a landlord or tenant with non-residential real estate, such as retail or office buildings, then you have probably encountered a phenomenon that may go by any of several names: expense recoveries, expense reimbursements, pass-throughs, or common area maintenance (CAM) charges. What exactly is this phenomenon and how does it work?
When you’re getting into real estate investing, especially if you’re starting out, there’s one big question to tackle early on: Should you go for value-add or turnkey properties? Both strategies have their pros and cons, their benefits and challenges, and this guide will help you figure out which is the better fit for your goals, budget, and experience.
I had a question recently about a metric called Yield on Cost, aka Return on Cost and also sometimes called Development Yield. So what is it and when and how might it be useful?