Glossary term
Equity Multiple
Equity multiple is the total cash an investor gets back divided by the cash invested. A 2.0x multiple means you doubled your money over the hold.
The formula is total cash returned / total equity invested. Cash returned includes distributions during the hold plus the share of sale proceeds at the end. If you invest $100,000 and receive $210,000 in total, your equity multiple is 2.1x.
The measure is easy to understand, but it ignores timing. A 2.0x multiple in three years is far better than 2.0x in ten. For that reason, investors look at equity multiple together with IRR.
Projected multiples depend on assumptions about rents, expenses, exit price and hold period. Treat them as estimates, not promises.
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