Private real estate fund sponsors talk about returns in a language that rewards the patient investor who stops to understand what each metric actually measures. IRR, cash yield, and MOIC are not interchangeable. They measure different things. They can be manipulated in different ways. And for a given investor, only one of them is the most important — and that depends on what you are trying to accomplish.
This piece breaks down each metric, shows where each one tells the truth and where each one can obscure it, and gives you a framework for evaluating which one to weight most heavily when comparing private real estate opportunities.
Internal Rate of Return (IRR)
IRR is the annualized rate of return that makes the net present value of all cash flows — both in and out — equal to zero. In plain English: it is the annualized return figure that accounts for the timing of every dollar you invested and every dollar you received back.
IRR is powerful because it is time-sensitive. A fund that returns 2x your money in two years has a dramatically higher IRR than one that returns 2x in eight years, even though the multiple is identical. This makes IRR the right metric when comparing two investments with different hold periods.
Where IRR Can Mislead You
IRR can be inflated by early distributions. If a fund returns a large amount of capital to investors in year one — through a refinance, a property sale, or a special distribution — the IRR calculation rewards that return of capital as if it were a high-yielding investment. The actual wealth created may be modest, but the IRR looks excellent.
IRR also assumes you can reinvest returned capital at the same rate — an assumption that is frequently violated in practice. When evaluating IRR figures, always ask: what is the hold period assumption, and are there any early capital return events that might be inflating the annualized figure?
AG Capital Context
The AGIF fund has generated a 17.5% net IRR since inception through December 31, 2024. This figure is net of all fees, expenses, management fees, and carried interest — calculated on actual capital contributions, actual distributions, and investors' pro-rata share of net assets. Net IRR is the number that matters; gross IRR figures omit the fees that come out of your pocket.
Cash-on-Cash Yield (Current Yield / Distribution Rate)
Cash-on-cash yield measures the annual cash income generated by an investment as a percentage of the cash invested. If you invest $500,000 and receive $35,000 in annual distributions, your cash-on-cash yield is 7%.
This metric does not account for appreciation, principal paydown, or tax efficiency. It measures only the current income stream. It is the right metric for investors who have a specific income need — a monthly distribution that covers a spending target, for example.
Where Cash Yield Can Mislead You
A high cash yield with no appreciation is a liquidation — you are receiving your own capital back in the form of distributions, just slowly. A low cash yield with strong appreciation may create more wealth over a 5-year hold even though the monthly check is smaller. Always evaluate cash yield alongside total return projections, not in isolation.
For AGIF, our targeted annualized cash distribution is 7%, paid monthly. Since inception, we have distributed consistently at 7.3% on an annualized basis. The monthly distribution is real and is backed by property-level cash flows from 72 active tenants on NNN leases.
Multiple on Invested Capital (MOIC)
MOIC is the simplest of the three metrics. It is total value returned divided by total capital invested. If you invest $1,000,000 and receive back $1,700,000 in total — including all distributions plus your pro-rata share of equity at exit — your MOIC is 1.7x.
MOIC tells you how much wealth was created in absolute terms. It does not care how long it took. A 1.7x MOIC in three years is very different from a 1.7x MOIC in ten years, which is why MOIC should always be read alongside the hold period or alongside IRR.
Where MOIC Can Mislead You
Projected MOIC figures in fund marketing materials are often based on exit assumptions that may or may not materialize. A 2.5x MOIC projection requires a specific exit cap rate, a specific hold period, and a specific level of appreciation — all of which are assumptions, not guarantees. When you see a projected MOIC, the next question is always: what exit cap rate and what hold period is that assuming, and how sensitive is the model to changes in those inputs?
Which Metric Matters Most for You
The honest answer is that it depends on your investment objectives.
• If you are an income-focused investor who needs predictable monthly cash flow: cash-on-cash yield is your primary metric, with IRR and MOIC as secondary context.
• If you are a wealth-building investor with a long time horizon who does not need current income: MOIC and IRR over a defined hold period are your primary metrics.
• If you are comparing two funds with different hold periods: IRR is the only metric that normalizes for time, so it becomes primary.
• If you are evaluating a short-duration opportunity: IRR can overstate the case; weight MOIC more heavily to understand total wealth creation.
The most sophisticated accredited investors look at all three simultaneously — and they read the footnotes on how each metric was calculated. Net vs. gross IRR. Actual vs. projected MOIC. Annualized distribution rate vs. total cash returned. The metrics are only useful if you know what went into them.