Ask for a deal's IRR and you get one number. Ask what happens if the exit cap moves 50 bps while rent growth comes in a point light, and you find out whether anyone actually underwrote it.
This grid holds one deal constant and prices every combination of the two assumptions that matter most: what you sell for, and how the income grew while you held it.
One deal: $10.0M purchase at a 6.5% cap ($650K NOI), 5-year hold, debt at 6.5% over 30-year amortization. The grid prices every combination of exit cap rate and NOI growth.
Levered IRR across the field
Annual NOI growth
| Exit cap | 0% | 1% | 2% | 3% | 4% |
|---|---|---|---|---|---|
| 5.5% | 13.3% | 15.5% | 17.5% | 19.5% | 21.5% |
| 6.0% | 9.9% | 12.1% | 14.3% | 16.3% | 18.4% |
| 6.5% | 6.6% | 8.9% | 11.2% | 13.3% | 15.4% |
| 7.0% | 3.3% | 5.8% | 8.2% | 10.4% | 12.6% |
| 7.5% | 0.1% | 2.8% | 5.3% | 7.6% | 9.9% |
What this means
Every model spits out one IRR, and that single number is always wrong. The honest version is a grid. The top right corner is the deal in the pitch deck: low exit cap, strong growth. The bottom left is the one the lender stress-tests. Slide the LTV up and watch the field spread apart, because leverage stretches the good corners and the bad ones alike. A deal that only works in one corner of this grid is a bet on that corner.
Want to see how we apply this?
This is the math behind every deal we underwrite.