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Testimonials |
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"I just used your software to purchase a huge complex. The
sellers did not know what to say except that I must have used a
very expensive software package."
Jeffrey P.,
Clinton,
IL
"I liked your software so much that I ordered a copy for my
friend."
Chet V.,
Ozark, AL |
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Definitions
Internal Rate
of Return
Modified Internal Rate of
Return (MIRR)
Net Operating Income (NOI)
Loan to Value Ratio
(LTV)
Cash on Cash Return
Capitalization Rate
Gross Rent Multiplier
(GRM)
Debt Coverage Ratio
(DCR)
Real Estate Terms |
Modified Internal rate of Return (MIRR)
The significant problem with the
Internal Rate of Return (IRR)
calculation is that the formula assumes that you are reinvesting the annual
cash flow at the same rate as calculated by the IRR. As a result, when you
have a property that generates significant cash flow, the calculated IRR
will overstate the likely financial return of the property. The MIRR allows
you to enter a different rate that is applied to the property's annual cash
flow. This rate used is generally a bank or savings rate. Using the MIRR
will more closely mimic reality as you rarely are able to reinvest the cash
flow at the same rate of return as determined by the IRR formula.
The finance rate is the annual interest rate that you would pay to
cover any negative cash flows incurred during the life of the investment.
The reinvestment rate is the interest rate that you would earn on
cash that the investment generates during its life.
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