What is Rental Pro Forma & IRR?
A pro forma projects a rental's performance across your whole hold, not just year one. This calculator grows rent and expenses, builds equity through appreciation and loan paydown, and models the sale at the end — then rolls it all into an internal rate of return (IRR) and equity multiple.
IRR is the number that lets you compare a real estate deal against any other investment on equal footing: it's the annualized return on your invested cash across the entire hold, counting both the cash flow along the way and the profit at sale.
Formula
IRR = the discount rate that makes the net present value of all cash flows (yearly cash flow + net sale proceeds) equal to your initial cash invested. Equity multiple = total cash returned ÷ total cash invested.
How to read it
- IRR blends every year's cash flow with the lump-sum proceeds at sale into one annualized return — many long-term investors target low-double-digit IRRs or higher.
- Equity multiple tells you how many times your invested cash comes back in total (e.g. 2.0x = you doubled your money); IRR tells you how fast.
- The exit assumptions — appreciation, hold length, and selling costs — swing IRR hard, so model them conservatively.
Frequently asked questions
- What is a good IRR for a rental property?
- It depends on risk and market, but many buy-and-hold investors look for a low-double-digit IRR (roughly 10–15%+). Compare it against your other options for the same capital rather than a fixed target.
- What's the difference between IRR and cash-on-cash return?
- Cash-on-cash measures one year's cash flow against your invested cash. IRR spans the entire hold and includes appreciation, loan paydown, and the profit at sale — so it captures the full return, including the exit.