Return metrics

1. Each metric answers one question

Return metrics are tools, not grades. A deal can show a strong IRR because cash comes back quickly, but a modest equity multiple because total profit is limited. Another deal can show a high multiple over a long hold but only a moderate IRR.

A useful investor summary should show several numbers together so you can understand income, timing, total profit, and what is still an estimate.

• Cash-on-cash asks: how much cash income am I receiving this year?
• IRR asks: how fast did my money compound after timing every cash flow?
• Equity multiple asks: how many total dollars came back for each dollar invested?
• DPI asks: how much cash has actually been paid back?
• TVPI asks: cash paid back plus estimated remaining value, per dollar invested.

2. Actual cash vs. estimated value

In active deals, part of the reported return often comes from NAV: the sponsor’s current estimate of what the property is worth after debt and reserves. NAV is useful, but it is not cash.

This is why DPI and TVPI should be read together. DPI is cash already distributed. TVPI includes both that cash and estimated remaining value. The wider the gap, the more of the return has not yet been realized.

3. Gross, net, project-level, and investor-level

A metric can look very different depending on where it is measured. Project-level returns may be before fees, promote, investor timing differences, or tax effects. Investor-level returns should reflect your actual contribution dates and distributions.

When a page shows projected returns, ask whether the numbers are gross property returns, net sponsor-level returns, or net-to-investor returns after fees and promotes.

• Gross property IRR can be higher than investor IRR.
• Cash-on-cash can change sharply after a refinance or major repair year.
• A high cap rate does not guarantee a high investor return if debt, capex, or vacancies are unfavorable.

4. A practical reading order

Start with the property: NOI, cap rate, occupancy, and rent upside. Then read the investor return stack: cash-on-cash, IRR, equity multiple, DPI/TVPI, and NAV assumptions. Finally, test the downside: what happens if rent growth is slower, occupancy dips, or exit cap rates move against the deal?

• Income today: NOI, occupancy, collections, cash-on-cash.
• Price paid: going-in cap, price per lot, debt terms.
• Future upside: rent-to-market gap, vacant lots, expense savings, capital plan.
• Investor outcome: net IRR, equity multiple, DPI, TVPI, hold period.