Investment Return (IRR) Calculator
The formula
What the investment return (irr) tells you
Exactly what investment return (irr) earned: total return, the annualised CAGR that makes it comparable, and the split between price gain and income.
Calculation: Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1. Enter your inputs and every substitution is shown below the result.
Reading the result
Compare with the boring alternative over the same window — the verdict bands anchor to long-run market returns; income-heavy gains are usually steadier than price-only ones.
Rules of thumb: Long-run real equity return sits near 6–7 % nominal CAGR plus inflation; bonds run 2–4 points lower.
Limitations and best practice
Ignoring the timing of income (reinvested vs spent) can overstate a CAGR by a few tenths; dividends spent as cash belong outside the ending value.
This calculator gives an estimate based on standard formulas; it is not professional financial, medical, legal or engineering advice. Verify anything you plan to act on with a qualified professional and your own records.
Frequently asked questions
Why does CAGR differ from average yearly return?
Are taxes included?
Source & methodology
Time-weighted return arithmetic per CFA Institute conventions.
Investment Return (IRR) explained: formula, worked example and honest limits
Capital decisions deserve better than a gut feeling — this page gives you the arithmetic to defend one. There are plenty of pages about Investment Return (IRR); almost none of them show the working. This one does: the formula, every input, a fully computed example, and a sensitivity analysis calculated live from this engine’s own defaults.
In Real Estate & Property the same quantity is often quoted under two or three different conventions. The formula printed above fixes one convention and applies it consistently, which is what makes results from this page comparable with each other.
Property numbers are big, slow and full of embedded opinions — which makes a mechanical Investment Return (IRR) genuinely valuable. Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1 removes sentiment, and the result 87.72% speaks to whatever the market claims about Real Estate Investment.
What makes a calculation page trustworthy is that its copy is derived from its own arithmetic: here total return = 87.72%, recomputed every time a field changes, and the sensitivity section ranks the inputs that move the result — Buy price / invested first, at ≈23.8 % of the headline for a ten-percent error either way in that input. Read the sections in order and you will be able to reproduce every figure by hand.
Inside the Investment Return (IRR) calculation: formula and every input
Here is the complete model this tool runs — Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1 — with each input explained below. If a competitor’s page gives you a different answer from the same inputs, this is the text that settles which of you is right.
Buy price / invested ($) (example value 14,250) is a numeric input whose unit is fixed by the label; a wrong unit is a wrong answer wearing a plausible disguise. If your source quotes a figure before and after some deduction, decide which one the formula wants and be consistent for every field.
Sell price / value now ($) (example value 25,750) is a quantity rather than a category — precision here is cheap and worth having. Keep every money input in the same currency; mixing systems quietly corrupts the comparison.
Holding period (years) (example value 5) is a quantity rather than a category — precision here is cheap and worth having. Use the value as of today, not as of the last time you looked — time fields drift silently.
Income received over the hold ($) (example value 1,000) is a plain measured quantity — the unit shown in the label is the unit the formula expects. If your source quotes a figure before and after some deduction, decide which one the formula wants and be consistent for every field.
Investment Return (IRR) with real numbers, step by step
Rather than describe the calculation, here it is end to end — every substitution in order, starting from the inputs above. Starting figures: Buy price / invested ($), Sell price / value now ($), Holding period (years), Income received over the hold ($). The computed total return comes out at 87.72%, which the interpretation band labels “Strong annualised gain — well above broad-market history”.
- Ending value incl. income = $25,750.00 + $1,000.00 = $26,750.00
- Total return = (26,750.00 − 14,250.00) ÷ 14,250.00 = 87.72 %
- CAGR = (26,750.00 ÷ 14,250.00)^(1/5.0) − 1 = 13.42 % a year
Annualised (CAGR) — 13.42%. Compare it against the main result of 87.72% before drawing conclusions.
Net profit — $12,500.00. Read next to the headline, this is the figure that shows the shape of the trade-off.
Value multiple — 1.88 ×. Read next to the headline, this is the figure that shows the shape of the trade-off.
Income share of gain — 8.0%. Read next to the headline, this is the figure that shows the shape of the trade-off.
Keep this worked example open while you enter your own figures: matching the shape of the substitution is the fastest way to spot a unit or convention mistake.
Scenario table: Investment Return (IRR) at ±10 % and ±20 % of the key input
The honest version of any estimate is a corridor, and this one is cheap to produce: Investment Return (IRR) was recomputed at 5 points along the dominant input, with every other field left untouched.
| Buy price / invested setting | Total return |
|---|---|
| 80 % of the example value | 134.65% |
| 90 % of the example value | 108.58% |
| example inputs | 87.72% |
| 110 % of the example value | 70.65% |
| 120 % of the example value | 56.43% |
The corridor runs from 56.43% to 134.65% across that band — which is the range worth planning inside rather than the single 87.72% point estimate. Reproduce it in the form above by editing Buy price / invested alone; the substitution steps will follow your figures exactly.
The levers behind Investment Return (IRR), ranked by effect
Generic advice says “it depends on your inputs”; this section says exactly how much. Each field was perturbed by ±10 % in isolation and the total return recomputed, so the ranking below is measured rather than asserted. It is the fastest honest answer to “what matters most in Investment Return (IRR)?” — and it is specific to these defaults, because sensitivity moves with the starting point.
- Nudge Buy price / invested by ±10 % and Investment Return (IRR) lands between 70.65% and 108.58% (sensitivity ≈23.8 %)
- Sell price / value now: ten percent up gives 105.79%, ten percent down gives 69.65% — ≈20.6 % of the total return either way
- Income received over the hold: ten percent up gives 88.42%, ten percent down gives 87.02% — ≈0.8 % of the total return either way
Buy price / invested is the dominant lever here: ten percent either way moves the result by about 23.8 %, from 70.65% to 108.58%. Measure that input from a document rather than from memory, and treat Sell price / value now as the second priority (≈20.6 % per ten percent). Everything below that can stay approximate, which is a licence to stop chasing data that would not change the decision.
Reading the result: bands, zones and thresholds
The value above only becomes useful the moment you know what it is being measured against. On the example inputs the band reads “Strong annualised gain — well above broad-market history”; your own figures place you on a different rung of the same ladder. The sensitivity list shows how far a modest input error moves you along that ladder: for Buy price / invested, ±10 % covers 70.65% to 108.58%. The practical reading rules: compare against your own history before comparing against other people; treat band boundaries as zones, not walls — one point on the wrong side of a threshold rarely changes a real outcome; and when a companion output contradicts the headline, believe the pair.
Where Investment Return (IRR) sits next to similar measures: this tool answers “how much is the Investment Return (IRR)”, while the related calculators answer “what do I do about it”. Reading the result alone tends to over-weight a single snapshot; pairing it with the companion tools above turns the number into a decision.
The errors that quietly break an Investment Return (IRR) figure
Ignoring the timing of income (reinvested vs spent) can overstate a CAGR by a few tenths; dividends spent as cash belong outside the ending value. This calculator gives an estimate based on standard formulas; it is not professional financial, medical, legal or engineering advice. Verify anything you plan to act on with a qualified professional and your own records.
Confusing a large number with an important one. Investment Return (IRR) can be dominated by one input whose absolute value looks unimpressive, which is why this page ranks influence separately from magnitude.
One mistake is specific to this engine: assuming every input matters equally. The computation above shows Buy price / invested dominating — a careful figure there beats false precision everywhere else.
A final trap is presentation: reporting Investment Return (IRR) to more decimal places than the inputs support. The tool prints what the arithmetic gives; you should quote only what your least precise field justifies.
Six things to confirm before acting on Investment Return (IRR)
- Compare the output against one published benchmark or a colleague’s independent estimate.
- Verify each input against its original source document, not memory.
- Re-verify Buy price / invested against a source document — ten percent of error there moves the headline by ≈23.8 %.
- Check that every field the formula needs actually arrived from a document, not from recollection.
- Recompute once with the dominant input deliberately set low, and see whether the decision changes.
- Run the ±10 % stress on the top two levers and check that your conclusion survives both.
A routine for decision-grade Investment Return (IRR)
The tool does the arithmetic; the routine below is what makes the arithmetic trustworthy. Five steps, a minute total — and afterwards you will know not just what the number is, but which assumption produced it.
Step 1 — gather before you type. Investment Return (IRR) depends on buy price / invested ($), sell price / value now ($), holding period (years), income received over the hold ($). Collect them from a source document — a statement, a report, an invoice, a log — rather than from memory, because recalled inputs are the single largest cause of wrong results. One decimal place more than your data supports is one decimal place of fiction.
Step 2 — start from the case you can defend. Enter pessimistic-but-honest figures first; the optimistic run is a ceiling, not a plan. A conclusion that holds on conservative inputs holds everywhere. Precision is a promise you make about your data; make sure your inputs can keep it.
Step 3 — isolate your variables. Change one field, observe, revert. The live sensitivity list does the ranking for the default inputs; verify it against your own, because dominance shifts when the starting point shifts. The input you reach for first is usually the one you measured longest ago.
Step 4 — ask what would have to be true. Take the result you want and work backwards through the inputs until you find the assumption that produces it; then decide honestly whether that assumption is defensible. One decimal place more than your data supports is one decimal place of fiction.
Step 5 — write the one-line memo. “Total return = 87.72% on this date, from these inputs.” That line is the entire deliverable; everything else on this page is how you earned the right to write it. Say the answer out loud before you save it; if it sounds wrong, the model did not change, your understanding did.
Who actually uses Investment Return (IRR) — and when
Numbers earn their keep in conversations, and Investment Return (IRR) is no exception. In Real Estate & Property discussions around Real Estate Investment, this figure decides whether an option stays on the table: it converts an opinionated debate into an arithmetic one, and arithmetic is the only referee both sides accept. Write the figure down before moving on; memory flatters whichever number you saw last.
The audience for this page is investors and founders comparing opportunities on equal terms. In professional Real Estate Investment practice the pattern is always the same — screen with Investment Return (IRR), then invest slow analysis only in whatever survives the screen. The input you reach for first is usually the one you measured longest ago.
Treat Investment Return (IRR) like a smoke alarm rather than a painting — its value is in being tested periodically, not in being admired once. When in doubt, prefer the boring input: the interesting one is usually the one you misread.
Quick answers: what searchers ask about Investment Return (IRR)
What affects Investment Return (IRR) the most?
Measured on this engine, Buy price / invested is the dominant lever: moving it ±10 % shifts the total return across 70.65% to 108.58% — about 23.8 % of the headline, with Sell price / value now next at ≈20.6 %. The ranked list in the sensitivity section is computed live, not asserted from a template.
Which matters more: sell price / value now or buy price / invested?
For Investment Return (IRR), Buy price / invested wins the head-to-head (≈23.8 % against ≈20.6 % per ten-percent change). Knowing which input dominates is the difference between careful work and merely slow work.
What is a typical Investment Return (IRR)?
On the worked example above Investment Return (IRR) comes out at 87.72%. Treat that as one point on a distribution rather than a norm: the bands, the companion outputs and the sensitivity ranking tell you how wide the plausible range really is.
How do I calculate Investment Return (IRR) by hand?
Use the stated model — Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1 — and substitute in the order the tool prints (it starts from Ending value incl. income = $25,750.00 + $1,000.00 = $26,750.00). On the example inputs the hand route lands on 87.72%, exactly what the calculator shows. A spreadsheet reproduces it in two or three cells; doing it once by hand is what makes the automated answer trustworthy.
What happens to Investment Return (IRR) if buy price / invested changes by 10 %?
The engine was re-run with that field moved by ten percent while everything else stayed fixed: the total return goes across 70.65% to 108.58%, a swing of roughly 23.8 % around the 87.72% baseline. That ratio is the practical definition of how much this input matters.
Is the Investment Return (IRR) result of 87.72% good or bad?
Good and bad are comparisons, so the honest test is three questions: where does your own Investment Return (IRR) sit against the 87.72% reference above, how far would a plausible input error move it (≈23.8 % per ten percent on Buy price / invested), and what does the alternative option compute to?
Is 87.72% good for this property?
Goodness is comparative: run the same Investment Return (IRR) across several candidates and rank. Absolute thresholds exist by region and product type, so pair the verdict band here with a quick survey of the Real Estate Investment comps you can actually access.
Is Investment Return (IRR) accurate?
The arithmetic is exact: Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1 is evaluated with full floating-point precision and every substitution is printed in the worked example. What limits accuracy is input quality and the model’s assumptions, so treat the 87.72% result as the correct answer to the question you typed — and check the assumptions section before acting on it.
Why does CAGR differ from average yearly return?
CAGR compounds — it is the single steady rate that turns the start into the end, while arithmetic averages flatter volatile paths.
Are taxes included?
No, this is the pre-tax picture; subtract tax drag on gains and income before comparing with a tax-sheltered alternative.
Is my data private on this page?
Yes — computation happens locally in your browser, with no account, no tracking of your inputs and nothing sent to a server. The printed formula is the whole story of what happens to your figures.
Glossary for Investment Return (IRR)
- Annualised (CAGR)
- 13.42% on the example inputs — a companion figure printed beside the headline of Investment Return (IRR) so that no result is read in isolation.
- Net profit
- $12,500.00 in the default Investment Return (IRR) calculation — one of the secondary figures an experienced reader checks before trusting the primary number.
- Value multiple
- 1.88 × for the Investment Return (IRR) worked case; it sits next to the main result because it carries context the headline leaves out.
- Total return
- The primary output of this tool: 87.72% for the default inputs, computed exactly from Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1.
- Worked example
- The step-by-step substitution printed above, so the arithmetic can be re-derived by hand or in a spreadsheet.
- Verdict band
- The plain-language label — here “Strong annualised gain — well above broad-market history” — mapping the computed figure onto experience-based ranges for Real Estate & Property.
- Sensitivity (±10 %)
- How far the Investment Return (IRR) moves when a single input is nudged ten percent either way; the ranked list on this page is computed live from this engine.
Method, sources and what this tool cannot tell you
There is no black box on this page — the engine evaluates Total return = (sell + income − buy) ÷ buy; CAGR = ((sell + income) ÷ buy)^(1/years) − 1. Source of record: Time-weighted return arithmetic per CFA Institute conventions. Where a professional version of this calculation differs, it differs in inputs and jurisdiction-specific coefficients, not in the algebra — which is why re-checking your inputs beats hunting for a second calculator.
Nothing here replaces a qualified professional, and nothing here is approximate either — the arithmetic is exact, and the honesty is in the inputs you supply. The promise to the reader is narrow and testable: same inputs, same output, no silent rounding, and no figure presented without the formula that produced it.
What to do with your Investment Return (IRR) next
Pair this figure with the companion outputs above — the headline sizes the prize, the companions describe the risk.
This page was written for investors and founders comparing opportunities on equal terms, and the promise is that nothing above required trust. Bookmark the tool, re-run it whenever an input moves by more than a few percent, and keep the date with the number.