IRR (Internal Rate of Return)
IRR, or internal rate of return, is the annualized discount rate at which an investment's cash flows, including the eventual sale proceeds, have a net present value of zero. It accounts for both timing and the exit.
Why IRR Matters in a Laundromat Sale
IRR is the measure that captures what cash-on-cash misses: the resale. For a laundromat, exit value depends on the same drivers that set the entry price — lease term remaining at exit, documentation quality, and equipment condition — which is why a buyer planning a five-year hold should be checking whether the lease will still support a financed buyer when they sell. A store bought with eleven controllable years and sold five years later has six, and that is a different asset.
Example
A five-year hold with $24,000 of annual cash flow and a $310,000 net exit against $118,000 invested produces a very different IRR depending on the exit assumption. Model the exit lease term and equipment condition, not just a multiple.
What to Check
- Model the exit lease term, not just an exit multiple.
- Test what equipment condition at exit does to the resale price.
- Compare the result against a genuinely passive alternative before deciding.
Where This Comes Up
- Laundromat ROI and Cash-on-Cash Return: Doing the Math Correctly
- Laundromat Exit Planning: What to Fix 24 to 36 Months Before You Sell
- Payback Period
- Laundromat Valuation: How Stores Are Priced and Why
- Sell My Laundromat: The Confidential Sale Process, Start to Close
Related Terms
- ROI (Return on Investment) — ROI, or return on investment
- Cash-on-Cash Return — Cash-on-cash return is annual pre-tax cash flow after debt service divided by the total cash a buyer actually invested
- Payback Period — Payback period is the time required for cumulative cash flow to return the cash a buyer invested
See the full laundromat glossary for all 78 terms.
The Next Step
This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.