Episode Details

Is IRR really the gold standard for evaluating a real estate investment?

John McNellis, veteran real estate developer, investor, author, and educator, has a very different take.

In this episode from the Jake & Gino Podcast, John challenges the way investors use Internal Rate of Return (IRR) to evaluate real estate deals. His argument? IRR relies heavily on assumptions about future cash flows, exit values, and—most importantly—what the property's cap rate will be years down the road.

As John points out, predicting a property's cap rate ten years from now can feel a lot like predicting the weather ten years from now: you simply don't know what will happen.

The conversation dives into:
• Why IRR can be misleading in real estate
• How future exit assumptions affect projected returns
• The relationship between IRR and cap rates
• Why investors should question optimistic projections
• The difference between theoretical returns and actual cash flow
• How experienced real estate investors evaluate deals

John also shares decades of experience in commercial real estate and explains why he believes investors need to be careful about relying too heavily on numbers that depend on assumptions about the future.

What do you think—Is IRR a useful investment metric, or is it too easy to manipulate?

Watch the full conversation for more lessons on commercial real estate, development, investing, deal analysis, and building wealth.

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About Jake & Gino
Jake & Gino are multifamily investors, operators, and mentors who have created a vertically integrated real estate company. They control over $350M in assets under management. They have created the Jake & Gino Premier Multifamily Community to teach others a simple three-step framework for investing in multifamily real estate.

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We're here to help create real estate entrepreneurs...

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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