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.
Every example in this glossary uses the same deal: a $265,000 duplex renting for $2,650 a month, bought with 25% down at 6.75% over 30 years, producing $19,310 of net operating income.
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 — 20 terms with formulas and worked examples.