Glossary definition
IRR (Internal Rate of Return)
The annualised rate of return at which the net present value of all cash flows from an investment equals zero, used to compare the profitability of different development opportunities on a time-adjusted basis. Unlike profit on cost, IRR accounts for the timing and magnitude of each cash flow, making it the preferred metric for equity investors and joint venture partners.
Definition
The annualised rate of return at which the net present value of all cash flows from an investment equals zero, used to compare the profitability of different development opportunities on a time-adjusted basis. Unlike profit on cost, IRR accounts for the timing and magnitude of each cash flow, making it the preferred metric for equity investors and joint venture partners. A typical ground-up residential development in the UK targets an IRR of 15–25%, though this varies significantly with project duration, leverage, and risk profile.
See also
Closely related terms.
Equity Multiple
A metric that measures the total cash returned to an equity investor as a multiple of their original investment — for example, a £500,000 equity contribution that returns £1,000,000 represents a 2.0x equity multiple.
Hurdle Rate
The minimum rate of return that a project must achieve before an investor will commit capital, used as a benchmark in investment decision-making.
Profit on Cost
A measure of development profitability calculated by dividing the projected profit by the total development costs and expressing it as a percentage.
Net Development Value
The gross development value of a completed scheme minus all costs of sale including estate agent fees, legal fees, and marketing expenses.
Further reading
Guides that touch this term.
Guide
The Capital Stack in Property Development: How to Structure Your Funding
A comprehensive guide to understanding and structuring the capital stack in UK property development, from senior debt through mezzanine to equity contributions.
9 min read readReadGuide
How Does Development Finance Work? A Complete Guide for UK Developers
A ground-up guide to how development finance is structured in the UK, covering loan mechanics, drawdown schedules, monitoring surveyors, and what lenders look for in your application.
5 min read readRead
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