You now have the full toolkit: time value of money, DCF, NPV, IRR, MIRR, equity multiple, unlevered vs. levered returns, and the capital stack. Time to put it all together on a realistic comparison.

An investor has $600,000 to deploy. A broker shows them two deals. Which should they buy?

The two deals

Deal A: Stabilized NNN Retail

Property: Freestanding Dollar General in Central Florida
Purchase price: $2,400,000
In-place NOI: $144,000 (6.0% cap rate)
Tenant: Dollar General (investment-grade, BBB S&P rating)
Lease: 12 years remaining, 10% rent bumps every 5 years
Rent escalation: flat during each 5-year period, step-ups at years 5 and 10
Operating expenses: absolute NNN (tenant pays everything including structure)
Typical exit cap: 6.25% at year 10 (slight expansion)

Deal B: Value-Add Multifamily

Property: 24-unit Class C apartment building in Orlando
Purchase price: $3,000,000
In-place NOI: $180,000 (6.0% cap rate)
Current rents: $975/month average, below market
Market rents after renovation: $1,200/month average
Renovation budget: $240,000 ($10K per unit, 24 months to complete)
Stabilized NOI after reno: $240,000 (8.0% stabilized cap rate on purchase)
Typical exit cap: 5.75% at year 5 (lower than NNN due to stronger demand)

Both deals require roughly $600,000 of common equity. Let's build the full financial comparison.

Step 1: Financing

Deal A financing:

Senior loan: $1,800,000 (75% LTV)
Interest rate: 7.0%
Amortization: 25 years
Annual debt service: ~$153,000
DSCR: $144,000 / $153,000 = 0.94x → FAILS lender minimum (1.25x)

Problem — Deal A doesn't cash flow with conventional bank debt at current rates. Let's try SBA 504 (if owner-user) or a life insurance company loan at a lower rate, say 6.0%:

Senior loan: $1,680,000 (70% LTV) at 6.0%, 25-year am
Annual debt service: ~$130,000
DSCR: $144,000 / $130,000 = 1.11x → still fails 1.25x minimum

The deal can't support 70% leverage. Reduce to 60% LTV ($1,440,000) at 6%:

Annual debt service: ~$111,000
DSCR: $144,000 / $111,000 = 1.30x ✓

Final Deal A structure:

Purchase: $2,400,000
Loan: $1,440,000 (60% LTV)
Equity needed: $960,000 + ~$40,000 closing = $1,000,000

Wait — we only have $600,000! Deal A needs $1M of equity at these rates. Either we partner up, or we skip Deal A.

Let's assume we find a partner who puts up the remaining $400K, taking 40% of the common equity. Our $600K buys 60% of the deal.

Deal B financing:

Senior loan: $2,250,000 (75% LTV)
Interest rate: 6.5% (agency debt, multifamily)
Amortization: 30 years
Annual debt service: ~$171,000
DSCR (stabilized NOI): $240,000 / $171,000 = 1.40x ✓

Plus we need to fund the $240K renovation budget. That can come from cash on hand or a bridge construction loan.

Final Deal B structure:

Purchase: $3,000,000
Loan: $2,250,000 (75% LTV)
Renovation: $240,000 (from equity)
Equity needed: $750,000 + $240,000 + $35,000 closing = $1,025,000

Also over budget. Partner up the same way — bring in a co-investor for $425,000, own 58% of the common equity.

Step 2: DCF — Deal A (Stabilized NNN)

Here's the 10-year pro forma:

                     Year 1    Year 2    Year 3    Year 4    Year 5    Year 6    Year 7    Year 8    Year 9    Year 10
NOI                 144,000   144,000   144,000   144,000   158,400   158,400   158,400   158,400   158,400   174,240
  (10% bump at Y5 and Y10)
Debt service       (111,000) (111,000) (111,000) (111,000) (111,000) (111,000) (111,000) (111,000) (111,000) (111,000)
Cash flow to deal    33,000    33,000    33,000    33,000    47,400    47,400    47,400    47,400    47,400    63,240

Sale at Year 10:
  Year 11 NOI                                                                                                   174,240
  Exit cap (6.25%)                                                                                            2,787,840
  Selling costs (3%)                                                                                            (83,635)
  Loan payoff (approx.)                                                                                      (1,080,000)
  Net to equity                                                                                                1,624,205

Total Year 10                                                                                                 1,687,445

Total cash returned to the deal: $33K × 4 + $47K × 5 + $63K + $1,624K = $132K + $235K + $63K + $1,624K = $2,054,400

Your 60% share: $2,054,400 × 0.60 = $1,232,640 Your equity: $600,000 Your equity multiple: 2.05x Your IRR (on annual cash distributions and exit): approximately 9.2%

Step 3: DCF — Deal B (Value-Add Multifamily)

This one has a different cash flow profile — heavy renovation costs in Year 1 and 2, low cash flow during stabilization, then strong stabilized cash flow after.

                    Year 1    Year 2    Year 3    Year 4    Year 5
NOI (ramping)     180,000   196,000   224,000   240,000   240,000
Reno CapEx       (120,000) (120,000)         0         0         0
Debt service     (171,000) (171,000) (171,000) (171,000) (171,000)
Cash flow       (111,000)  (95,000)   53,000    69,000    69,000

Sale at Year 5:
  Year 6 NOI                                                 245,000
  Exit cap (5.75%)                                         4,260,870
  Selling costs (3%)                                        (127,826)
  Loan payoff                                            (2,070,000)
  Net to equity                                            2,063,044

Total Year 5 cash flow                                     2,132,044

Interesting — Deal B has negative cash flow in years 1 and 2 because of the renovation draws. That means the investor needs to fund not just $1,025,000 up front but also the first-year operating shortfall of $111K + $95K = $206K in capital calls. Total cash out of the investor's pocket over the first two years: $1,231,000.

That's above the $600K equity available even with a partner. In a real scenario, you'd fund the reno from a bridge loan or equity reserves, not from new capital calls. Let's assume the $240K reno budget was already included in the equity at close and re-run it cleanly:

                    Year 1    Year 2    Year 3    Year 4    Year 5
NOI (ramping)     180,000   196,000   224,000   240,000   240,000
Debt service     (171,000) (171,000) (171,000) (171,000) (171,000)
Cash flow           9,000    25,000    53,000    69,000    69,000

Sale at Year 5 (unchanged)                                2,063,044

Total Year 5                                              2,132,044

Total cash returned: $9K + $25K + $53K + $69K + $69K + $2,063K = $2,288,044

Your 58% share: $2,288,044 × 0.58 = $1,327,066 Your equity: $600,000 Your equity multiple: 2.21x Your IRR: approximately 17.0%

Step 4: Side-by-side comparison

| Metric | Deal A (NNN) | Deal B (Value-Add) | |---|---|---| | Hold period | 10 years | 5 years | | Your equity | $600,000 | $600,000 | | Total cash returned | $1,232,640 | $1,327,066 | | Equity multiple | 2.05x | 2.21x | | Levered IRR | 9.2% | 17.0% | | MIRR (at 7% reinvest) | ~8.8% | ~13.5% | | Cash-on-cash Year 1 | 3.3% (on deal level) | 1.5% (on deal level) | | Risk profile | Low (credit tenant, long lease) | Medium-high (renovation execution, market rents) | | Workload | Minimal (zero management) | Heavy (renovation, leasing) | | Capital stuck | 10 years | 5 years |

Step 5: Which one do you pick?

On raw metrics: Deal B wins across the board — higher IRR (17.0% vs. 9.2%), higher equity multiple (2.21x vs. 2.05x), shorter hold (5 years vs. 10).

On risk-adjusted basis: Less clear. Deal A is essentially a bond — stable, predictable, zero management. Deal B is a real operating business — you have to execute renovations, lease up units, manage tenants, and hit your pro forma numbers. If you miss rent growth by 10% or construction runs 20% over budget, your IRR drops below Deal A's.

On capital efficiency: Deal B wins. Your capital comes back in 5 years, letting you do another deal. Deal A locks up your money for 10 years.

On workload: Deal A wins. NNN is passive; value-add is very active.

On financeability: Deal B wins. NNN deals with current interest rates have trouble cash-flowing at high leverage. Multifamily has agency debt options that are more favorable.

The right answer depends on the investor

If you want passive income and have deep capital reserves:

Deal A is better. The 9.2% IRR with minimal work is attractive.
You trade returns for simplicity and safety.

If you want maximum wealth growth and you have operational capacity:

Deal B is better. The 17% IRR compounds faster, and you'll be ready for another deal in half the time.
You accept execution risk for upside.

If this is your first commercial deal:

Deal A is more forgiving of mistakes.
Deal B's value-add execution is harder than it looks.

If you have a deep pipeline of similar value-add opportunities:

Deal B wins decisively. You'll compound at 17% across multiple 5-year cycles instead of being locked into 9.2% for 10 years.

The real lesson: metrics serve you, not the other way around

The same two deals could be "the right choice" or "the wrong choice" depending on the investor's goals, capital, and operational capacity. IRR doesn't tell you that. Equity multiple doesn't tell you that. The full toolkit from this course gives you the information you need; the decision is always situational.

This is why institutional investors have long-form investment memos, risk committees, and portfolio construction frameworks. A single metric never decides a deal.

What sharp investors actually do

When faced with a decision like this, experienced investors:

Build the DCF for each option using their own realistic assumptions
Calculate all five metrics — IRR, NPV, equity multiple, MIRR, and cash-on-cash
Build sensitivity tables — what happens if rent growth is lower? Interest rates higher? Renovation over budget?
Assess risk-adjusted return — not just the point estimate, but the downside case
Consider portfolio fit — does this deal complement or concentrate my existing portfolio?
Consider opportunity cost — what else could I do with this capital?
Decide based on the full picture, not a single metric

You've finished Course 4

You now have the full financial analysis toolkit:

✓ Time value of money
✓ Discounted cash flow modeling
✓ NPV and IRR
✓ MIRR (the honest IRR)
✓ Equity multiple and levered/unlevered returns
✓ The capital stack
✓ Deal comparison methodology

In Course 5, we'll take everything you've learned and build an actual Excel model from scratch — a complete institutional-quality pro forma template you can use on your own deals.

Ready? Continue to Course 5: Building CRE Pro Formas in Excel →

Full Walkthrough — Comparing Two Deals with Everything You've Learned