Return Metrics of Apartment Investing

One of the first steps to get started in apartment investing is to understand the definitions of the primary return metrics used for these types of investments. The four metrics we cover in this video are:

  • Annual Rate of Return (ARR) – This metric calculates the return for each year over the life of the investment hold period.
  • Equity Multiple – Tells you how much you’ve multiplied the cash you’ve invested. It’s a quick way to see the overall return in an easy way.
  • Cash-on-Cash (CoC) Return – The measure of the actual cash received in a given year divided by the amount of cash that remains committed in the investment.
  • Internal Rate of Return (IRR) – Like the Annualized Rate of Return except that it considers all cash flows (in or out) and the timing of your cash flows.

I also briefly discuss the tax benefits of multifamily real estate investing by mention of depreciation and what’s known as a 1031 exchange.

There are time stamps in the video description, which allow you to skip around the section you’d like to hear most about. Check it out and let me know what you thought!