How to calculate IRR for a condominium project?

How to calculate IRR for a condominium project?

Ho Chi Minh, Ho Chi Minh · Member since 2016 · 3 posts · 1 vote

I have a project to build a condominium: three buildings in three years (each building A, B, C for each year 1, 2, 3). I have projected revenue, gross profit and net profit for building A in year 1, building B in year 2 and bulding C in year 3. How do I calculate the IRR for the whole project A, B, C?

Please note cost of sales for each building is equal to the development cost of each building (gross profit = revenue - cost of sales)

So when I put the data in Excel, to calculate IRR, the development cost should be the first number (negative), then in the next cell, the cash flow should be net profit + development cost (since net profit is the result of revenue minus cost of sales, if we do not add back development cost (equal to cost of sales) to the cash flow, we would calculate it twice - one from the first negative number and one from the result of net income from revenue). Is that IRR calculation correct?

Does BiggerPockets have a calculator to calculate this kind of project? 

Thank you. 

0Reply
19 views

1 Reply

Jump to latestLatest
  • Investor · North Richland Hills, TX · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    @Luan Nguyen, you need to put all your net cash flows for each years to the IRR formula. If you sold a building, you use the entire sales proceeds to calculate IRR, not just the profit part of it.

    Y1: -(development cost)
    Y2: +(sales proceeds)
    Y3: +(sales proceeds)
    etc...

    IRR assumes that you sell everything in the last year

Join the conversationCreate a free account to reply, vote on answers and follow this thread.