Overpaying Does Not Show Up When You Buy. It Shows Up When You Sell.
A property IRR is one number built from two very different kinds of input.
The first is year one: leases, bills and a vacancy allowance a lender would sign off. That is evidence. The second is everything after it: rent growth, cost growth and, above all, the price a stranger will pay you in year seven or year ten. That is a forecast.
Most models blend the two into one IRR and never tell you how much of it is which. So I built a calculator that builds the return up one assumption at a time.
Open the property returns calculator
It is part two of the NOI calculator, on the same six properties in the US and India: year one is the underwritten NOI from part one, and the loan is the one the lender sized there.
The apartment, one assumption at a time
The 48-unit preset, bought at the $10.25 million asking price, with a $384,000 renovation in year two and a sale in year seven at a 5.75% cap rate:
| Step | Equity IRR | Change |
|---|---|---|
| Year-one yield, nothing changes | 4.0% | |
| + rent and cost growth, 3% a year | 7.0% | +3.0 pp |
| + renovation, 8% rent premium | 8.6% | +1.7 pp |
| + exit at a 5.75% cap rate | 5.8% | −2.9 pp |
| + the loan | 5.3% | −0.5 pp |
The renovation works. The rent growth works. Then the exit gives almost all of it back.
That is not because 5.75% is a harsh exit assumption. It is roughly where the market is. The problem started on day one: the asking price was set on the broker's NOI, so the cap rate on price was 4.58% against a market of around 5.5%. Overpaying does not show up when you buy. It shows up when you sell.
Turn the question around
An IRR is hard to argue about. The assumptions behind it are not. So the calculator solves for the two that matter:
- The highest exit cap rate that still earns the target. For a 12% equity return on the apartment, a buyer in year seven would have to pay a 4.21% cap rate, lower than almost any apartment trades at today. That is a much easier conversation than “is 12% realistic”.
- The highest price that earns the target. $8.59 million, 16% below asking. The NOI calculator, working only from year one, valued the same property at $8.54 million at the market cap rate. Two methods, nearly the same answer.
Where the profit comes from
The attribution splits every dollar of profit exactly: year-one income times the years held, income growth, capital spend, value from NOI growth (the sale at today's cap rate), the change in cap rate, buying and selling costs, interest, and, in India, tax. They add up to the profit to the penny.
On the suburban office it makes the answer obvious. The lease-up plan adds income. The sale at a 10.5% cap rate, against a 5.7% cap rate on the asking price, takes away $4.9 million. The property loses 5.2% a year before debt, the loan turns that into minus 19.8% on equity, and the price that would have earned 12% is $4.88 million, half the asking price.
Leverage is a race
When the loan costs more than the property yields, borrowing lowers the cash return every year. Over a hold, growth in NOI and value can still make debt pay, because the gains go to a smaller equity cheque. Whether it does is a race between growth and the cost of debt, and the “+ the loan” step shows who won.
In 2026, on these presets, the debt mostly loses. On the apartment it costs half a point. On the office it costs fourteen.
India: steps, and tax that changes the answer
Indian office leases usually escalate in steps, commonly 15% every three years, not a little each year, and the calculator models the steps. For an individual owner it also models tax:
- Rent is taxed as house-property income: 70% of rent after municipal tax, less loan interest.
- Under the old regime a loss sets off against other income up to ₹2 lakh a year, with the rest carried forward eight years against future rental profit. Under the new regime neither is allowed.
- A gain on a property held more than 24 months is taxed at 12.5% without indexation, plus cess, for property bought after July 2024. The Income-tax Act, 2025 took over from April 2026; as reported, these rules carried over.
On the Grade A office floor over ten years: 8.7% before debt, 8.4% after the loan, 7.1% after tax. To earn 13% after tax, the floor would have to be bought at ₹37.6 crore against ₹52 crore asked.
The flat is a bet on the price
The 3BHK preset is the clearest case. 82% of the property's profit comes from the sale. The rent never covers the interest, so most of the house-property loss goes unused: ₹42 lakh under the old regime, and all of it under the new one, where the after-tax return falls from 4.6% to 3.5%. To earn 12% after tax, prices would have to rise about 10.4% a year for ten years.
That can still be a good purchase. Families buy flats for reasons a spreadsheet does not capture. But as an investment, it is a bet on the price funded from salary, and the numbers should say so.
What it leaves out
Annual periods, one loan at a time, no lease-by-lease rollover, no US income tax, depreciation or 1031 exchange, no Indian surcharge, TDS timing or reinvestment exemptions, and no set-off of capital losses. The presets are illustrative composites, not real properties. None of this is investment or tax advice; check the tax treatment of any real sale with a chartered accountant.