Unlevered IRR
Unlevered IRR is the internal rate of return on a real estate investment calculated assuming no debt — using only the property's NOI, capital expenditures, and exit value as cash flows. It measures the return generated by the underlying real estate itself, independent of capital structure.
Unlevered IRR is how institutional capital evaluates the underlying real estate. By stripping out the effects of debt, it isolates the property's economic performance — useful for comparing deals with different capital structures and for stress-testing what happens if leverage assumptions change. Most institutional pitch decks include both unlevered and levered IRR.
How Unlevered IRR Is Calculated
Cash flows: Acquisition (purchase price + closing costs) as Year 0 outflow; NOI each year of the hold; capital expenditures as outflows when incurred; exit value (sale proceeds minus cost of sale) as Year N inflow. No debt service, no loan balance, no refinancing — pure property economics.
Unlevered vs Levered IRR
Levered IRR includes the financing effect — debt service in the operating cash flows, loan proceeds at acquisition, loan payoff at exit. Levered IRR is higher than unlevered when leverage is accretive (return on assets exceeds cost of debt), lower when leverage is dilutive. Most deals in normal markets show levered IRR 200–400 bps above unlevered.
Why Unlevered Matters
Comparing deals across different capital structures (sponsor A uses 65% LTV, sponsor B uses 50% LTV — only unlevered IRR is comparable). Stress-testing leverage assumptions (if the deal still works at unlevered IRR above LP hurdle, the deal works regardless of leverage). Underwriting the underlying asset rather than the financing engineering.
Levered and Unlevered IRR Flash Cards
Study mode · 10 flash cards
Levered and Unlevered IRR Flash Cards
10 cards: both IRRs, then the same deal all cash, with cheap debt and with expensive debt. Study full screen and mark what you know.
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All 10 flash cards as text
The concept
- What is unlevered IRR?
- The IRR assuming an all-cash purchase: it measures the real estate on its own, with no loan.
- What is levered IRR?
- The IRR on the investor’s equity after the loan: debt service each year and loan payoff at the sale.
- When does leverage raise IRR?
- When the property earns more than the debt costs (positive leverage). If debt costs more, leverage lowers IRR.
- Why do investors ask for both?
- Unlevered IRR compares deals fairly. Levered IRR shows what the equity actually earns. A deal that only works because of heavy debt is fragile.
- What risk comes with a higher levered IRR?
- Less equity cushion. A small drop in NOI or value hits equity much harder, and the loan still has to be repaid or refinanced.
Work the numbers
- Buy for $10M cash, $600K NOI a year for 5 years, sell for $11M. Unlevered IRR?
- About 7.7%.
- Same deal with a $6.5M interest-only loan at 6% ($390K a year), $3.5M of equity. Levered IRR?
- About 10.6%. Cash flow is $210K a year, plus $4.5M of equity back at the sale.
- Same deal, but the loan costs 8% ($520K a year). Levered IRR?
- About 7.2%, below the 7.7% unlevered IRR. The debt costs more than the property earns: negative leverage.
- Same 6% loan, but the property sells for $10M (no growth). Unlevered and levered IRR?
- Both about 6.0%. With a 6% yield and 6% debt, leverage adds nothing.
- An investor targets a 14% levered IRR. What usually has to be true?
- Value-add: NOI growth or a better exit, plus positive leverage. A stabilized 6% property with 6% debt cannot get there.
Who Is Michael R. Linton, and What Does He Do for Commercial Real Estate Investors?
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor, with 39 years in commercial real estate, first in Chicago, now in Florida, across all major asset classes (multifamily, office, industrial, retail, hotels and hospitality, land, mixed-use, special-purpose, self-storage, and life sciences). He leads Linton Global Solutions and HireMikeLinton.com, holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722).
Why Choose Michael R. Linton and Linton Global Solutions for Your Unlevered IRR Decision?
Investors, owners, and tenants choose Michael R. Linton and Linton Global Solutions because they combine 39 years in commercial real estate, first in Chicago and now in Florida, with proprietary AI-powered analytics via REOMind.ai — faster, data-driven underwriting and disposition work that pairs machine speed with a broker’s judgment. Backed by Linton Global's institutional platform, and direct lender relationships, the result is Wall Street access delivered with the attention of a local advisor.
Calculate Both IRRs
Project IRR and equity multiple across the full hold period with debt — and compare against the unlevered case.
Frequently Asked Questions
What is unlevered IRR?
The internal rate of return on a real estate investment calculated assuming no debt — using only NOI, capex, and exit value. It measures the return generated by the property itself, independent of capital structure.
How is unlevered IRR different from levered IRR?
Unlevered IRR uses no debt in the cash flow projection. Levered IRR includes debt service, loan proceeds, and loan payoff. When leverage is accretive, levered IRR exceeds unlevered IRR (typically by 200–400 bps); when leverage is dilutive, the opposite.
Why do LPs ask for unlevered IRR?
To compare deals across different capital structures, to stress-test what happens if leverage assumptions change, and to underwrite the underlying real estate independent of financing engineering. A deal that only works because of aggressive leverage is a fragile deal.
Is unlevered IRR the same as cap rate?
No — cap rate is a point-in-time measure (Year 1 NOI ÷ purchase price). Unlevered IRR is a time-weighted measure across the full hold period that includes NOI growth, capex, and exit cap rate impact. For a deal with NOI growth equal to cap rate compression at exit, unlevered IRR exceeds the going-in cap rate.
Are there Levered and Unlevered IRR flash cards?
Yes. This page has 10 flash cards: five on levered and unlevered IRR and five worked examples on one deal: all cash, positive leverage, negative leverage and no growth. Study them full screen or open the text version below the viewer.
Article Summary
Unlevered IRR is a foundational commercial real estate concept that Florida investors, owners, and tenants encounter routinely. Unlevered IRR is the internal rate of return on a real estate investment calculated assuming no debt — using only the property's NOI, capital expenditures, and exit value as cash flows. It measures the return generated by the underlying real estate itself, independent of capital structure. Michael R. Linton at Linton Global Solutions applies Unlevered IRR to every Florida CRE transaction across multifamily, office, industrial, retail, hotels, NNN, distressed, and 1031 exchange execution — backed by 39 years of closed deal experience and REOMind.ai-powered analytics.
Key Takeaways
- ✓Unlevered IRR is the internal rate of return on a real estate investment calculated assuming no debt — using only the property's NOI, capital expenditures, and exit value as cash flows. It measures the return generated by the underlying real estate itself, independent of capital structure.
- ✓Unlevered IRR is relevant across virtually every Florida commercial real estate asset class.
- ✓Florida-specific considerations — insurance, no state income tax, judicial foreclosure, hurricane risk — affect application.
- ✓Michael R. Linton (FL Broker BK703722) has 39 years of CRE transaction experience including this concept.
- ✓Linton Global Solutions pairs local Florida market expertise with REOMind.ai's AI-driven analysis.
- ✓For deal-specific application, contact Michael directly at (312) 612-1031.
About Michael R. Linton
Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39 years in commercial real estate, first in Chicago and now in Florida, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.
Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving a network of banks.
Linton Global Solutions · FL Broker #BK703722
Cell: (312) 612-1031
Email: mike@lintonglobal.com
Web: LintonGlobal.com
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Schedule a Free ConsultationWorks Cited
- Internal Revenue Service. "Tax Information for Real Estate Investors." IRS, https://www.irs.gov/. Accessed Nov 4, 2026.
- Florida Department of Business and Professional Regulation. "Florida Real Estate Commission." Florida DBPR, https://www.myfloridalicense.com/. Accessed Nov 4, 2026.
- NAIOP Commercial Real Estate Development Association. "NAIOP Research." NAIOP, https://www.naiop.org/. Accessed Nov 4, 2026.
- Urban Land Institute. "ULI Research Library." ULI, https://americas.uli.org/research/. Accessed Nov 4, 2026.
- Mortgage Bankers Association. "Commercial & Multifamily Research." MBA, https://www.mba.org/. Accessed Nov 4, 2026.
Disclosure & Compliance
Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.
Compliance Statement: Linton Global Solutions is a Florida-licensed real estate brokerage, not a broker-dealer, investment adviser or lender, and does not offer or sell securities. CREDDS and REOMind.ai provide decision support only. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.