What Is Equity Multiple?
Equity multiple measures the total cash an investor receives over the life of an investment relative to the equity they put in, expressed as a multiple such as 1.7x rather than an annual rate. It shows how much money comes back, but not how quickly.
Equity Multiple in plain English
Formula
Equity Multiple = Total Cash Distributions ÷ Total Equity Invested- Total Cash Distributions
- Every dollar returned: cash flow, refinance proceeds and sale proceeds.
- Total Equity Invested
- All the equity contributed, including any later capital calls.
Worked example
Same equity multiple, different holding periods
Illustrative example - round numbers, not current market data. Calculated with Reaixo's calculator engines.
Assumptions
- Equity invested
- $100,000
- Deal A
- $6,000 a year for 5 years, then $140,000 at sale
- Deal B
- $6,000 a year for 10 years, then $110,000 at sale
| Step | Calculation | Result |
|---|---|---|
| 1. Deal A equity multiple | $170,000 ÷ $100,000 | 1.70× |
| 2. Deal B equity multiple | $170,000 ÷ $100,000 | 1.70× |
| 3. Deal A IRR | solve NPV = 0 | 12.26% |
| 4. Deal B IRR | solve NPV = 0 | 6.73% |
Equity multiple (both deals): 1.70×. Both deals return 1.70× your money, but Deal A does it in half the time, so its IRR is 12.3% against 6.7%. The multiple tells you how much; the IRR tells you how fast.
What this calculation leaves out
- Equity multiple ignores timing entirely; always read it with the holding period or the IRR.
- Distributions are before the investor's own income taxes.
Calculate Equity Multiple
Equity multiple calculator
Total Cash Distributions ÷ Total Equity Invested
Why it matters
When Equity Multiple is used
- Comparing syndication offerings alongside their projected IRR and hold period.
- Reporting results to investors in a form anyone can read.
- Checking whether a high IRR comes with a meaningful profit.
Common mistakes
- Comparing multiples from deals with very different holding periods.
- Leaving out capital calls from the equity invested.
- Treating projected multiples as guaranteed.
Compare and common questions
Equity Multiple: frequently asked questions
What is a good equity multiple?
It depends on the holding period and risk. Read the multiple together with the IRR and the length of the hold.
What is the difference between equity multiple and IRR?
Equity multiple measures how much money comes back; IRR measures how fast. A deal needs both to be judged.
Can an equity multiple be below 1?
Yes. A multiple below 1.0x means the investor got back less than they put in.
Where it fits
- Investing, Exit: before this, Internal Rate of Return; next, DST.
More Investing Terms
Recommended next step
See why the same multiple can mean very different returns.
IRR vs equity multiple →Apply it to a specific property: Five-Year Investment Projection.
Sources and review
No regulator defines this term; the page follows common industry practice.
Where this applies: Not regulated. Investment and valuation ratios are industry and appraisal conventions; lenders, appraisers and analysts may define inputs differently, so check how a figure was calculated.
Last reviewed: · Updated:
Examples use illustrative figures; rules of thumb are labelled as such. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
Apply these investment calculations to a real property
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