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Which Metric Actually Matters? IRR vs. Cash-on-Cash
Description
Is a higher IRR always a sign of a better real estate deal?
Not necessarily.
In this video, Gino Barbaro breaks down one of the most important questions real estate investors need to ask when analyzing a deal: Should you focus on IRR, or should you be looking at cash-on-cash return and yield?
IRR (Internal Rate of Return) can be a useful metric for comparing investments, but it relies heavily on future assumptions — including rent growth, expenses, exit cap rates, financing, and the eventual sale of the property. Small changes in those assumptions can dramatically change the projected IRR.
That’s why Gino and Jake focus heavily on yield and cash-on-cash returnwhen evaluating their own investments.
The bigger lesson? Don’t confuse projected returns with realized wealth.
When analyzing a real estate deal, ask yourself:
• Would I still buy this property if it never appreciated?
• Can the property’s cash flow survive higher interest rates?
• How long could the property operate if rents softened?
• Will this investment help fund my next acquisition?
• Am I buying projected wealth or actual, verifiable income?
• Is the higher return worth the additional effort and risk?
Gino also introduces another important concept: ROE — Return on Effort. A property with a slightly lower projected return may ultimately be the better investment if it requires less management, has fewer problems, better tenants, stronger fundamentals, and greater long-term potential.
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About Jake & Gino: Jake & Gino are multifamily investors, operators, and owners who have created a vertically integrated real estate company. They control over $350M in assets under management. Connect with Jake & Gino here --> https://jakeandgino.com.
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