Basic finance questions about IRR

[Ron Vered]

Hello!

I'd like to ask the following general investment questions regarding real estate investment. This is while I am trying to analyze my potential first real-estate deal.

Please correct me if I am wrong, but it seems to me that IRR is this wonderful single number which I can use to compare my RE investment to investing in the stock market or any other type of investment. It basically gives me the annualized interest rate of my investment. So, if in this world I'd invest in this opportunity and there was a parallel universe where I invested in the same amount of money in something else entirely, I can easily compare the 2 investments based on their IRR. Furthermore, if the 2 investments had the same cash flow at the same time, from the time of investment until the time of sale, then they shall have the same IRR.

However, of course, as I cannot predict the future and since I also cannot even predict taxes, I thought of estimating IRR without taxes, hoping it will not be that different from an alternate stock market investment. Alternatively, a real-estate professional has given me some estimated numbers for taxes, for a revised IRR (which is lower).

I also understand that forecasting exact expenditures + their timing is hard yet can impact the IRR's accuracy. Perhaps not enough to obscure the picture.

Q1: Is it correct to do an IRR estimation and compare it to the stock market performance? The exact number is not exact, but close enough estimation?

Q2: When you do CoC calculation, especially for the next 10+ years, you omit growth in equity (property appreciation + reduction in loan balance). Why then do it? How do you compare it to other, non real-estate investments?

Q3: What are good and realistic IRR values to aim for?

Thanks,

Ron.