How Is IRR/XIRR Affected By Refinancing & Selling?

[Gabe Goudreau]

Hey Everyone, 

I've been building an Excel financial model that can quickly analyze potential value-add multifamily projects and I've run into an issue that I wasn't expecting - when calculating the returns, do you take into account both the refinance and sale proceeds, along with the cash flow? Or just one of the capital events along with the cash flow?  

Currently, when I include both refinance and sale proceeds, I get an unrealistic XIRR of 49%, while the average cash flow throughout the investment (7-year hold period) sat around 8%, and this seems incorrect to me. 

Please let me know some feedback, I can elaborate more if needed. Thank you!