Equity Multiple
Calculator
Results
- Equity multiple
- 1.85
- Net profit
- $85,000.00
Results
| Equity multiple | 1.85 |
| Net profit | 85,000 |
formula-map diagram
- Equity multiple
- 1.85
- Net profit
- $85,000.00
Diagram
Formula
Equity multiple = total distributions ÷ equity invested= 1.85
Note
This is a simplified model for informational purposes only; consult a licensed professional before making a financial decision.
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See all →Frequently asked questions
What does the equity multiple actually measure, and how is it different from ROI or IRR?+
The equity multiple is total cash distributed back to an investor divided by total cash invested, expressed as a multiple (for example, 2.0x means you got back double what you put in). Unlike IRR, it ignores the timing of cash flows entirely, so it should generally be evaluated alongside IRR, not instead of it.
Why can a deal with a lower equity multiple have a better IRR, or vice versa?+
IRR is highly sensitive to timing — a deal that returns your capital quickly can post a high IRR even with a modest total multiple, while a deal that ties up capital for many years might post a large equity multiple but a mediocre IRR because the return took so long to materialize. The two metrics answer different questions: total return magnitude versus return efficiency over time.
What's considered a 'good' equity multiple for a real estate investment?+
It depends heavily on the holding period and risk level, but many value-add or opportunistic real estate investments target somewhere around a 1.7x to 2.5x equity multiple over a 5 to 7 year hold, while lower-risk, stabilized investments may target a more modest 1.3x to 1.6x. Always weigh the multiple against how long your capital was tied up to earn it.
Does the equity multiple include the return of my original investment, or just the profit?+
It includes both — the equity multiple represents total cash received (return of capital plus profit) divided by total cash invested, so a 1.0x multiple means you simply got your original money back with no profit at all, not a break-even in the profit sense.
How does leverage affect the equity multiple?+
Using debt reduces the amount of equity you need to invest to control the same asset, so if the deal performs well, the same total profit is measured against a smaller equity base, producing a higher equity multiple than an all-cash purchase would. This is the same leverage effect that boosts ROI, and it cuts both ways if the deal underperforms.