(Simply Explained) Most common return metrics

[Justin Goodin]

Let's break down these common return metrics in the most basic terms👇

1. Cash on Cash Return:
The cash distributions you receive on a quarterly basis.

2. IRR:
Internal rate of return. Annualized, time-weighted return of your investment.

3. Equity Multiple:
How many times you are multiplying your money when it's all said and done.

4. AAR:
Average annual return based on the hold period.

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Keep in mind, when a sponsor shows a potential investment:

- These are always projected returns, NEVER guaranteed.
- Returns are based on the assumptions in the underwriting model (trust but verify)

Which of these return metrics is most important to consider for a real estate deal?