IRR and equity multiple describe the same cash flows and still manage to disagree. The multiple counts dollars. The IRR counts dollars against time.
Run the presets below, then drag the sliders. The point is to feel how the same multiple gets cheaper or richer depending on how long the money is out.
IRR
26.0%
Annualized. Punishes money that sits.
Equity Multiple
2.00x
Total dollars back per dollar in. Ignores time.
Total Profit
$100K
On $100K invested
The cash flows behind the metrics
What this means
Try Quick flip and Long hold back to back. Both can return about 2.0x, but the IRRs are far apart, because IRR charges rent on every year your money is out. The multiple answers "how much did I make," the IRR answers "how hard did each dollar work." A deal quoted on only one of the two is hiding the other for a reason.
Want to see how we apply this?
This is the math behind every deal we underwrite.