Need help calculating IRR

[Michael Baradell]

Hey BP!

IRR is a relative new calculation for me. I understand the basic concept, but am struggling on how to this one up properly.

My deal is a little more complicated, and I’d love some clarity on how to plug this in.

This is an 18 unit complex that is livable, but attracting lower end tenants due to deferred maintenance and condition.

ARV in the current market is around $1.3. This is a seller financed deal at $850kpp, 30 year am, 5% interest rate, 5 year balloon, with an NOI of $80k. Current rents are $800, but after renovations, will be $900. The plan is to renovate units as the come available and increase rents.

Another moving piece of this deal is I am bringing in partners that will contribute around $200k up front, that will include 10% down payment, closing costs, reserves, and remaining will go towards renovating the first few units.

My struggle is projecting the renovations as well as calculating the preferred return for the investors.

I’m sure I’m missing a ton of info needed, but hopefully this can at least get the conversation started.