I came up with this formula by attempting to use mathematical logic as best I could. =((Initial Commitment Amount+Running Total Distribution)/Initial Commitment)^(365/(Date of Last Distribution-Initial Commitment Date))-1 I had created an Excel Spreadsheet for all my real estate investments (currently I have 12 active real estate investments out of a lifetime total of 15) that displayed the dates of initial investments and the dates of various cash distributions.īefore I became aware of the XIRR formula, I tried my best to come up with a formula that would generate an accurate investment return (which I first revealed in my “ From Runt To Front: My First Full-Cycle Syndication Deal,” post: Essentially the XIRR formula incorporates the date of each financial event to more accurately address the discounted cash flow of an investment.For most investments that do not have payouts or capital calls on an annual basis, the XIRR formula provides a far superior methodology for estimating an investment return.Inaccuracies therefore arise when capital invested and distributions occur on an irregular basis as the IRR has no method for addressing the date for each specific financial event.IRR lumps all cash flows for a particular investment annually in its calculations.Using IRR can give you an annualized rate of return that gives a more accurate picture of how an ongoing investment is performing.The IRR is a far more complex formula that addresses discounted cash flow which is lacking in the ROI method.An ROI of 100% (doubling your money) is less impressive if the time period in question is 100 years.Although simple to calculate, it neglects to factor in the value of time.The ROI is a fairly simple calculation to perform, subtracting the final value of an investment from the original capital cost and dividing it by the original cost and multiplying by 100 to arrive at a percentage ((Final Value-Original Cost/Original Cost)x100).Just to bring everyone up to speed I think a brief overview on some of the financial terminology is in order: The X in this post is the “X” in XIRR, which is an incredibly handy formula that you can put into a Microsoft Excel spreadsheet to accurately determine the returns on a particular investment, real estate or otherwise.

Looking For Guest Post: I Broke The Golden Rule of Finance And Still Did Fineįirst off for those who are not into the rap scene, the title of this post is in reference to the late DMX and one of his classic hits:.

Looking For Guest Post: Almost Went Into Medicine.Looking For Guest Posts: Divorce and FIRE.

About The Doctor’s Bill (Can You Afford It?).“A journey of a thousand miles begins with a single step”-Chinese Proverb.

X gon give it to ya chivalry