How Do You Calculate The IRR For An Adjustable-Rate Loan?
Internal rate of return, or IRR, measures the rate of investment returns over a set period of time. In simple terms, IRR is a predictor of how much money you can expect your investment to generate, expressed as a percentage. For real estate investors, IRR can help determine if putting money in a particular property will generate adequate enough income to make it worthwhile. Using IRR with an adjustable-rate loan is more challenging than using it with a fixed-rate loan and the calculation may need to be adjusted over time. Note that IRR is only a valuable measurement if you are receiving periodic loan payments–in other words, if you are a property owner receiving rent payments or the issuing party of the loan. Gather the information you need for the IRR calculation. You will need the amount of your initial investment, the length of time the loan payments will be made, the amount and interval of the loan payments along with the expenses associated with the loan (this is the cash flow) a
