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Updated about 5 years ago on . Most recent reply

Zak Thompson's profile image
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Zak Thompson
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  • Member since Apr 5, 2020
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Zak Thompson
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Zak Thompson
  • Michigan
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Commercial Real Estate Investing

Monthly vs Annual IRR Calculation

Zak Thompson
  • Michigan
Posted

Hello, my project is calculating a monthly irr = 13.87% and an annual irr = 14.77%. Can someone tell me if these two should equal the same value?

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Greg Scott
  • #2 Managing Your Property Contributor
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Greg Scott
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Greg Scott
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Greg Scott
#2 Managing Your Property Contributor
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  • SE Michigan
Replied

The math is as follows

13.87% annualized monthly rate is  .1387/12 = .0011558 or 1.1558% per month

The formula for compounding this monthly rate over 12 months is 1.011558 to the 12th power or 1.14786 which is 14.79% annually (with a rounding error)

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