Rates of Return and Underwriting

[Kris Bennett]

Cap rate, cash-on-cash, NPV, equity multiple, IRR...

Can anyone recommend a good source of information on using these rates of return when underwriting deals? I've found a few but I wanted to know if there is a good website or book or program that covers all these in a way that's easy to understand and applied to a real deal?

Has anyone had experience with coaching programs that cover these financial terms? Do you feel they did a good job explaining them or did their explanations stir up more questions than they answered?

Any help or guidance is appreciated!

[Evan Polaski]

@Kris Bennett  I am trying to figure out what you are looking for with this question.

If you want to report what investors look for, you will typically report: Going in and exit cap rate, average annualized cash on cash, gross and/or net equity multiple to LP and gross and/or net IRR.

If you looking for what a deal should output to be considered good, the answer is not that easy, as a core deal will generally have a lower cap rate, CoC, multiple and IRR than a Core+, Value-add, opportunistic.

These numbers are all comparisons against other deals, not a hard and fast rule.  If you have three deals, you would look at these measures and compare them to the risks associated with the project.  Lower risk will have lower values of each of these measures. 

If you are looking for what these numbers mean, https://www.investopedia.com/financial-ratios-4689817 or just googling Investopedia and the term will yield some great explanations.  

If you need help with any of them, please feel free to message me directly with questions, and I can help talk through or provide more resources.