Other real estate metrics, in addition to cap rates, there are other metrics which are used in real estate investing. First, there's the breakeven ratio. This takes the periodic operating expenditures and debt service, which is the principle and the interest, and divides both by the GPR, or gross potential rent. This will tell us what percentage of the GPR the owner needs to achieve to cover those expenses. It basically hints at the occupancy rate needed. Secondly, we have something called the cash-on-cash yield, and this takes the levered cash flow, or the residual cash flows, in a period and compares them to the equity capital invested. The levered equity multiple, also called the multiple of money, or sometimes called the cash-on-cash, not to be confused with the cash-on-cash yield, is the sum of the cash returned to the equity investors, hence the modifier levered, over the initial equity investment. This is a classic private equity ratio and does not factor in the investment hold period or time value of money. Lastly, we have the most common metric, which is the IRR, or internal rate of return. This can be done both as a levered or unlevered return. The calculation is more complicated than a traditional private equity scenario due to the annual cash return or dividends returned to the equity investors. Since many real estate forecasts are often done monthly or quarterly, the XIRR function in Excel is the best way to handle these. It is often helpful to run a levered MPV calculation using a desired equity cost of capital to determine if the IRR is in line.
