Deal terms and returns
Equity Multiple vs IRR vs Cash-on-Cash Return
The short answer
An equity multiple is the total cash an investment returns divided by the cash you put in, so $168,000 back on $100,000 is 1.68x. IRR turns the same cash flows into a yearly rate that accounts for timing, and cash-on-cash return is one year's cash distributions divided by the cash invested. Each answers a different question, so compare all three.
- Equity multiple ignores time. 1.5x in three years is a 14.47% IRR; the same 1.5x in five years is 8.45%.
- IRR favors speed. In Relli's example, an 18.32% IRR beats 10.41% only if its cash is reinvested above 7.39% a year.
- Leverage cuts both ways. With 65% debt, a 15% gain lifts IRR from 8.53% to 13.48%; a 10% drop cuts 4.16% to 1.37%.
- Ask what kind of IRR it is. Gross or net, levered or unlevered, projected or realized: one example's gross-to-net gap was 1.6 points.
In this guide · 11 sections
- Equity multiple vs IRR vs cash-on-cash: what is the difference?
- What is an equity multiple?
- What is a good equity multiple?
- What is IRR in real estate?
- What is a good IRR for real estate?
- IRR vs equity multiple: which matters more?
- How is cash-on-cash return calculated?
- Cash-on-cash vs IRR: why do the numbers differ?
- Levered vs unlevered IRR: what changes?
- Why can projected IRRs in syndications mislead?
- Does the equity multiple include your capital, and is it the same as MOIC?
Three numbers
Equity multiple vs IRR vs cash-on-cash: what is the difference?
Equity multiple measures how much money comes back, while IRR measures how fast it comes back. Cash-on-cash return measures how much cash arrives in a single year. A sponsor's offering will usually quote all three, and each one hides something the others show.
| Metric | Formula | Answers | Ignores |
|---|---|---|---|
| Equity multiple | Total cash back / cash in | How much in total? | How long it took |
| IRR | Rate that sets NPV to zero | How fast, per year? | How big the profit is |
| Cash-on-cash | One year's cash / cash in | How much cash now? | The sale |
The preferred return guide has a $100,000 example where the investor received $6,000 a year and $138,000 at sale. That works out to a 6% cash-on-cash return each year, a 1.68x equity multiple and an 11.98% IRR. Same deal, three different-looking numbers.
The multiple
What is an equity multiple?
An equity multiple is all the cash an investment pays you, including your original capital, divided by the cash you put in. A 1.0x multiple means you got your money back and nothing more; 2.0x means you doubled it. CFA Institute calls it "a clean expression of total return" that "does not take time... into consideration."
The term is about the metric. EquityMultiple is also the name of an investment platform, covered in the guide to EquityMultiple, the platform.
What is a good equity multiple?
A good equity multiple depends on how many years it takes. The same multiple is a strong result over three years and a weak one over ten. The table shows the multiple each IRR produces when all the cash comes back at the end of the hold.
| IRR | 3 years | 5 years | 7 years | 10 years |
|---|---|---|---|---|
| 8% | 1.26x | 1.47x | 1.71x | 2.16x |
| 12% | 1.40x | 1.76x | 2.21x | 3.11x |
| 15% | 1.52x | 2.01x | 2.66x | 4.05x |
| 18% | 1.64x | 2.29x | 3.19x | 5.23x |
Yearly distributions pull the multiple down for the same IRR, because cash paid early has more time to count. With 6% paid out each year, a five-year 12% IRR comes to about 1.68x instead of 1.76x. So read any multiple next to its hold period. Be wary of a long-hold deal whose multiple looks large only because the money is tied up for a decade.
The rate
What is IRR in real estate?
IRR (internal rate of return) is the discount rate that makes the net present value of all of an investment's cash flows equal zero. In plain terms, IRR is the yearly rate your money earned, counting when each dollar went in and came out. CFA Institute calls it "the most common return metric" for commercial real estate equity.
What is a good IRR for real estate?
A good IRR for real estate is one that pays you for the risk, the debt and the years your money is locked up. No regulator or index sets a "good" IRR. Three reference points, all dated, help you judge a projection.
- The 10-year Treasury yielded 5.09% on October 16, 2026 (FRED), with no property risk at all.
- The NCREIF Property Index, which tracks unlevered institutional properties, returned about 4.9% to 5.0% over the four quarters to June 30, 2026.
- An 8% preferred return is the most common hurdle before sponsors share in profits. A projection near 8% leaves little room for the sponsor's promote.
Riskier strategies target higher IRRs because more can go wrong. The guide to core, value-add and opportunistic strategies lists the target ranges commonly cited for each.
When they disagree
IRR vs equity multiple: which matters more?
IRR and equity multiple matter equally, because either one can point to the better deal. A high IRR on a short deal or a high multiple on a long deal can win, depending on what you do next with the money. The example shows how they can point in opposite directions.
Worked example
Two deals each take $100,000. Deal A returns $140,000 at the end of year 2. Deal B returns $200,000 at the end of year 7. Nothing is paid in between.
| Measure | Deal A | Deal B |
|---|---|---|
| Profit | $40,000 | $100,000 |
| Equity multiple | 1.40x | 2.00x |
| IRR | 18.32% | 10.41% |
| Value today at an 8% discount rate | +$20,027 | +$16,698 |
| Value today at a 5% discount rate | +$26,984 | +$42,136 |
Deal A wins only if you can reinvest its $140,000 at more than 7.39% a year for the five years Deal B is still running.
Timing moves IRR more than most investors expect. The same 1.5x multiple is a 14.47% IRR if it takes three years and an 8.45% IRR if it takes five. A sponsor who extends a hold lowers your IRR even when the multiple does not change.
Cash each year
How is cash-on-cash return calculated?
Cash-on-cash return is the year's pre-tax cash distributions divided by the equity you invested. The calculation takes three steps:
- Start with the cash the property produces in a year before debt payments: $300,000 on a $5,000,000 property, for example.
- Subtract the year's loan payments, here $178,750 of interest on a $3,250,000 loan at 5.5%, to get $121,250 of cash for the owners.
- Divide by the equity: $121,250 / $1,750,000 = 6.93%.
Cash-on-cash return is a yearly snapshot, so it changes as rents, expenses and the loan change, and it says nothing about the sale. The cap rate guide covers cap rate vs cash-on-cash, which differ mainly by the loan.
Cash-on-cash vs IRR: why do the numbers differ?
Cash-on-cash return counts only the cash paid during a year, while IRR also counts the sale and when every payment arrives. Income-focused deals pay much of their return as yearly cash, so their cash-on-cash and IRR sit closer together. Value-add and development deals may pay little cash early and depend on the sale. That is why a low cash-on-cash return can sit next to a high projected IRR.
Watch for a third label, "average annual return." Many offering decks use it for total profit divided by the number of years, which ignores timing. On the $100,000 example above, that is $68,000 / $100,000 / 5 = 13.6% a year, well above the true 11.98% IRR.
The loan
Levered vs unlevered IRR: what changes?
Unlevered IRR measures the property's return before any loan, and levered IRR measures the owners' return after it. MIT's real estate finance course describes levered IRR as "sensitive to financing." Debt raises the levered IRR when the property earns more than the loan costs and lowers it when the property earns less.
Worked example
The same $5,000,000 property produces $300,000 a year before debt for five years. Bought with cash, the owners invest $5,000,000. Bought with a $3,250,000 interest-only loan at 5.5% (65% of the price), they invest $1,750,000 and receive $121,250 a year. Here are three sale prices at the end of year 5.
| Sale price | Change | Unlevered IRR | Levered IRR |
|---|---|---|---|
| $5,750,000 | Up 15% | 8.53% | 13.48% |
| $5,000,000 | Flat | 6.00% | 6.93% |
| $4,500,000 | Down 10% | 4.16% | 1.37% |
The loan adds about 5 points of IRR when the price rises 15%, and takes away nearly 3 points when it falls 10%.
Reading projections
Why can projected IRRs in syndications mislead?
A projected IRR can mislead because it is the sponsor's estimate, built on assumptions about rent, expenses, debt and the sale price. Small changes in those assumptions move it a lot. Before you compare two projected IRRs, ask four questions:
- Projected or realized? A realized IRR comes from a finished deal. The vetting guide shows how to check realized vs projected returns.
- Gross or net? Deal-level IRR is before the promote. In the preferred return example, the deal earned 13.62% and the investor kept 11.98%.
- Levered or unlevered? The example above shows how far debt can move the number.
- What sale price is assumed? The exit cap rate drives the sale price, and the offering memorandum shows the assumption; see how to read a PPM.
Funds add one more. ILPA, the institutional investors' group, notes that credit lines used to delay capital calls can raise a fund's IRR, especially early. It asks managers to report IRR with and without them.
Rules for projections are also changing. On October 15, 2026, the SEC approved a FINRA rule change that lets broker-dealers show projected or targeted returns under set conditions. As of October 20, 2026, FINRA had not set an effective date, and the rule covers only broker-dealer communications.
MOIC and ROI
Does the equity multiple include your capital, and is it the same as MOIC?
Does the equity multiple include my original investment?
Yes. The multiple divides all the cash you receive, capital included, by what you put in. Subtract 1.0 to see the profit: 1.68x means a 68% gain over the hold.
Can an equity multiple be below 1?
Yes. A multiple below 1.0x means you got back less than you invested. A deal that returns $80,000 on $100,000 has a 0.80x multiple.
Is equity multiple the same as MOIC?
Usually. MOIC (multiple on invested capital) is another name for the same ratio of cash back to cash in. Check how each offering document defines the figure it quotes.
Is cash-on-cash return the same as ROI?
No. Cash-on-cash return covers one year's cash distributions. ROI (return on investment) usually means total profit over the whole hold divided by the investment, which is the equity multiple minus 1.
Watch
Sources
- Order approving FINRA rule change on projections and targeted returns (Release 34-106675, SR-FINRA-2026-004), U.S. Securities and Exchange Commission (Oct 15, 2026)
- 10-Year Treasury Constant Maturity Rate (DGS10), Federal Reserve Bank of St. Louis (FRED) (Oct 16, 2026 | accessed Oct 20, 2026)
- NCREIF Indices Review webinar slides, 2Q 2026, NCREIF (Sep 2026 | period ended Jun 30, 2026)
- The Nuts and Bolts of Private Commercial Real Estate (CRE) Investing, CFA Institute Enterprising Investor (Apr 7, 2023)
- 11.431J Real Estate Finance and Investment: cash flow pro formas, MIT OpenCourseWare (Fall 2006)
- Subscription Lines of Credit and Alignment of Interests, Institutional Limited Partners Association (Jun 2017)
- Private Investment Fund Terms: Fees and Distribution Waterfall, Cambridge Associates (Aug 27, 2024)
- How Relli works, Relli (accessed Oct 20, 2026)
