Getting a better understanding of IRR

[Nick Ruffini]

Hi All,

I'm trying to get a better idea of IRR. I'm not trying to figure out how IRR is calculated, but I'm looking to understand what that means in terms of returns.

For example, I had a conversation with someone yesterday who said they held a property for 5 years and the investors received an IRR of 18%. Does this mean that taking cashflow + proceeds from the sale equal 18% TOTAL returns on cash invested or 18% per year?

For example, If I invested $30K, after 5 years would that $30K be $68,632.73 (18% Annually) or $35,400 (30,000 X 18%)

Does this make sense? Basically, I want to try to calculate how much I invest and what the returns would be in dollars and cents. 

Thanks!