I notice a lot of talk about the ROI of a real estate deal to assess the viability. In my line of work I was taught to calculate the Internal Rate of Return (IRR) when reviewing various ways in which to pursue a project. The IRR is a good way to assess which project option would be more profitable. Due to learning this I have been reviewing properties with their particular IRR. I wouldn't have thought that the two would be much different but I've noticed the IRR is much more conservative than the ROI calculation.
The reason I am asking this question is because I have been using the IRR calculation, with a goal of 15% - 20% to settle on a purchase price to submit to sellers. I feel it is continuously giving a low ball price that no one would accept. I also used the BP rent calculator and my IRR calculator to get a relative reference. The BP calculator gave me a 10% ROI while my IRR calculator was 1%.
More than likely I am way too deep in the weeds but I was curious if anyone else has ran into this issue and may be able to shed some light on the subject or have an opinion about this subject.
