Understanding Internal Rate of Return

[Gabe Goudreau]

Hey BP Community, 

Recently I've been trying to wrap my head around what exactly IRR is, and how to compute when underwriting a deal. From my understanding, it is the rate of return that an investment offers based on the NPV and takes into account the time value of cashflows, appreciation, and potential sale - Is this a correct understanding? Is this number more applicable for syndicated deals, or can it be applied to regular multifamily, commercial, and development deals? I would appreciate some input, thank you in advance.