Glossary / Markets

Internal rate of return

The internal rate of return is the single annual rate at which a series of dated cash flows has a present value of zero, which makes it the only fair way to compare investments whose money moves in and out at different times.

It handles what a simple percentage cannot: instalments, delays, income arriving during the hold, and a lump sum at the end.

It is the right tool for comparing an off-plan payment plan against a ready purchase, because those differ almost entirely in timing.

Where people get it wrong

Comparing IRRs across very different durations. A thirty percent IRR over eight months and a twelve percent IRR over ten years are not ranked by the number alone.

The framework behind it Off-plan payment plans and their real cost sets out the rule, the arithmetic and where it breaks.

Read the framework

Related terms

Payment plan A payment plan is the schedule of instalments by which an off-plan property is paid for, and because money paid later is worth less than money paid today, two plans at the same headline price are not the same price. Off-plan Off-plan means buying a property before it is built, paying in instalments against construction milestones and taking ownership only at handover, which in Dubai is registered through Oqood rather than an immediate title deed. Cash on cash return Cash on cash return is the annual cash left after every running cost and every mortgage payment, divided by the cash the buyer actually put in, which makes it the only property return figure that answers what your own money earned.

Investments Playbook publishes educational research and general information. Nothing on this site is personal investment advice, a solicitation, or a recommendation to buy or sell any asset. Property and securities can fall in value. Past performance does not predict future returns. Figures shown are indicative and may be delayed. Always take regulated professional advice before acting.