A 50% return sounds great—until you realize it took 10 years. That's why experienced investors care about IRR.

This calculator shows you the annualized return on any investment, factoring in when your money actually comes back. Plug in your initial investment and expected cash flows, and you'll see whether a deal hits your target return or falls short.

Here's why timing matters: $100,000 that becomes $150,000 in three years is a fundamentally different investment than $100,000 that becomes $160,000 in five years. The second one returns more total dollars. The first one is actually the better deal. IRR captures that difference—and it's why this metric shows up in virtually every serious investment analysis.

Whether you're running numbers on a rental property, weighing two business projects against each other, or figuring out if that equipment purchase pencils out, IRR gives you a standardized yardstick.

IRR is the annual growth rate your investment actually delivers when you account for the timing of every dollar in and out.

The textbook definition: it's the discount rate that makes the net present value of all cash flows equal zero. But here's what that means in plain English—if you invest $50,000 and your IRR comes back at 15%, your money is effectively compounding at 15% per year across the life of the investment.

The magic of IRR is that it treats a dollar today as worth more than a dollar five years from now. You could park that dollar somewhere else and earn returns on it. IRR bakes in that opportunity cost, which is why it's more useful than just adding up your total gains and dividing by what you put in.

IRR solves for the rate (r) in this equation:

0 = -Initial Investment + CF₁/(1+r)¹ + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ

You can't crack this with algebra—it takes iteration, which is a fancy way of saying "guess and check until you nail it." That's why calculators exist. The math happens instantly; you focus on what the number means.

Step 1: Enter your initial investment

This is what you're putting in upfront—purchase price, down payment, initial capital, whatever leaves your pocket at the start. Enter it as a positive number; the calculator knows to treat it as money going out.

Step 2: Add your expected cash flows

What do you expect to receive at the end of each year? This might be rental income, business profits, dividends, or the sale price when you exit.

Click "+ Add another" for additional years. You'll typically need at least two or three years of cash flows to get a meaningful IRR. One-year investments are better measured with simple ROI.

Step 3: Read your result

The calculator spits out your internal rate of return as a percentage. Now the real question: does this beat your hurdle rate? If you need 12% to justify the risk and hassle, and your IRR comes back at 9%, you have your answer.

There's no universal "good" IRR. It depends entirely on what you're buying and what else you could do with the money.

A 12% IRR on a stabilized apartment building? Solid. That same 12% on an early-stage startup where you might lose everything? Not nearly enough to justify the risk. Smart investors set their hurdle rate based on the specific opportunity—not some magic number they read online.

That said, here's what experienced investors typically target:

How to actually use this: Say you're looking at a duplex that pencils to 14% IRR. Compare that against the value-add range (12–18%). You're solidly in the zone. Now compare it to just buying index funds at 8–10%. The 4-6 percentage point premium is your compensation for dealing with tenants, maintenance calls, and illiquidity. Is it enough? That's your call.

People mix these up constantly. Here's the cheat sheet:

IRR's superpower: It normalizes everything to a percentage. A $50,000 investment and a $5,000,000 investment can go head-to-head.

IRR's blind spot: It won't tell you how much richer you'll actually get. A 40% IRR on $10,000 generates $4,000 of value. A 12% IRR on $1,000,000 generates $120,000. IRR says the first one is "better"—your bank account disagrees.

The practical approach: Use IRR to screen and compare. Use NPV when you're making a final call between two options you can't both do.

Numbers on a page mean nothing without context. Here's how IRR plays out in actual investment decisions:

You're looking at a duplex in a B-class neighborhood:

• Your cash in: $150,000 (down payment, closing costs, initial repairs)
• Net rental income: $12,000/year for four years (after expenses, vacancy, etc.)
• Year 5: You sell. After commissions and payoff, you net $180,000—plus that year's $12,000 in rent.

Your IRR: 14.2%

Is that good? For a relatively hands-off rental, absolutely. You're beating the stock market by 4+ points, and you've got a hard asset. The question is whether the landlord headaches are worth that premium. For some people, yes. For others, index funds and peace of mind win.

Your shop needs a new CNC machine:

• Cost: $80,000
• Labor and material savings: $25,000/year for 5 years
• End of life: It's worthless (fully depreciated)

Your IRR: 17.3%

If you're financing other parts of your business at 8-10%, this machine is a no-brainer. That 7+ point spread between your IRR and your cost of capital is pure value creation. The machine pays for itself and then some.

A friend's company is raising a seed round. You're considering:

• Your investment: $50,000 for 5% equity
• Years 1-3: Nothing. They're reinvesting every dollar.
• Year 4: They raise again and do a small secondary sale. You get $25,000.
• Year 5: Acquisition. Your stake cashes out at $200,000.

Your IRR: 32.8%

Looks phenomenal—until you remember that most startups fail completely. That 32.8% is the good scenario. Sophisticated angels target 30%+ specifically because they need the winners to cover all the zeros. If this same friend's company had a 50% chance of returning nothing, your expected IRR drops dramatically.

You've got $100,000 and two options:

Option B returns ten thousand more dollars. Option A has a higher IRR. Which is better?

If you take Option A, you get your money back in three years—and then you can put that $150,000 into something else. If your next investment also earns 14%, you'll end up well ahead of Option B's $160,000 by year five.

IRR rewards getting your capital back faster because money in your pocket can go to work again.

IRR is useful, but it's not gospel. Treat it as one input to your decision, not the final word.

Here's the dirty secret: IRR assumes you can reinvest every dollar of cash flow at the same rate as the IRR itself. Your project shows 25% IRR? The math assumes that $12,000 distribution in Year 2 immediately starts earning 25% somewhere else.

In reality? That cash might sit in a savings account at 4% while you look for your next deal.

This matters most when projects throw off big early cash flows. The IRR looks spectacular because it assumes those dollars compound at spectacular rates. They usually don't.

If your cash flows flip-flop between positive and negative—say, you inject more capital in Year 3 because of unexpected costs—the math can spit out multiple IRR values, or none at all. If your deal has unusual cash flow patterns, sanity-check with NPV.

IRR can't tell you whether you're getting rich or making pocket change. A 50% IRR on $5,000 is $2,500 of value. A 10% IRR on $500,000 is $50,000. The "worse" IRR makes you wealthier.

What to do about all this: For quick comparisons, IRR is fine. For major decisions, calculate NPV alongside it. And if you want a more conservative IRR estimate, look into Modified IRR (MIRR), which lets you plug in a realistic reinvestment rate.