January 15, 2025•2 min read
Equity Multiple: How Much Money Will You Make on Your Investment?
RentalIntel Team
Real Estate Investment Experts
Want to know exactly how much money you'll make from a real estate deal?
Equity Multiple tells you how many times your initial investment grows.
The Formula
Where:
- Total Cash Distributions = Cash flow received over time
- Final Equity = Sale price minus any remaining loan balance
- Total Cash Invested = Initial down payment, closing costs, etc.
Real-Life Example
Investment Breakdown
| Investment Details | Amount |
|---|---|
| Initial Cash Invested | $50,000 |
| Total Cash Flow Over 5 Years | $25,000 |
| Net Proceeds from Sale | $75,000 |
Equity Multiple Calculation
What Does an Equity Multiple of 2.0 Mean?
- Your investment doubled in value over time.
- More than 1.0? ✅ You made money.
- Less than 1.0? ❌ You lost money.
When Equity Multiple Matters (and When It Doesn’t)
✅ Great for comparing deals
✅ Focuses on total returns (cash flow + appreciation)
❌ Doesn’t account for time (use IRR for that)
❌ Can be misleading without factoring in loan costs
Pro Tips
- Higher isn’t always better—longer timelines reduce annual returns.
- Combine Equity Multiple with IRR for better decision-making.
- Use it to compare passive vs. active real estate investments.
The Bottom Line
Equity Multiple is simple but powerful—if your deal doesn’t at least double your money, it may not be worth it.
What's your ideal Equity Multiple on deals? Drop your thoughts below!
