Definition
Equity multiple
Equity multiple is total cash returned divided by total cash invested, with no adjustment for time. A 2.0x multiple means you got back twice what you put in. It is the natural partner to IRR: the multiple tells you how much, IRR tells you how fast.
Equity multiple = (cumulative cash flow + net sale proceeds) ÷ total cash invested
Worked example
Getting back $161,750 on $80,875 invested is a 2.0x equity multiple, whether that takes six years or sixteen.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The real estate investment calculator computes this from your own numbers and shows the arithmetic expanded. Year-by-year projection to your exit, with equity multiple and IRR at every possible sale year.
Related terms
- Capitalization rateThe capitalization rate is net operating income divided by price, expressed as a percentage.
- Cash-on-cash returnCash-on-cash return is annual pre-tax cash flow divided by the total cash you actually put into the deal — down payment, closing costs and rehab.
- Gross rent multiplierGross rent multiplier is purchase price divided by gross annual scheduled rent.
- Internal rate of returnInternal rate of return is the annual discount rate at which the deal's cash flows — the money in at purchase, the cash flow each year and the net proceeds at sale — net out to zero.
- Break-even occupancyBreak-even occupancy is the occupancy at which annual pre-tax cash flow is exactly zero — the share of gross potential income the property must collect to cover operating expenses and debt service with nothing left over.
Back to the full glossary — 21 terms with formulas and worked examples.