IRR, Cash-on-Cash, Equity Multiple: How We Actually Run the Numbers | Storage Point Capital

IRR, Cash-on-Cash, and Equity Multiple: What We Actually Look at Before We Move Forward

_{Storage Point Capital · Sarasota, FL · May 2026 · Investor Education}

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Every week we go through deals in our pipeline. We pull up the model, run the numbers, and pretty quickly figure out whether something checks the box or not. The conversation usually comes down to three metrics: IRR, cash-on-cash, and equity multiple. We look at all three. Not just the one that makes the deal look best.

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That is the problem with how most sponsors present these numbers. They lead with whichever one flatters the deal and hope the others do not get asked about. We do the opposite. Before we bring anything to our investors or move forward on a deal ourselves, we go through all three out loud, stress test the assumptions behind each one, and get comfortable with the conservative case, not just the base case.

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Here is how we actually think about these metrics from the inside of the deal, and what we are looking at every time we pull up a model.

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IRR: The Number Everyone Leads With and the One We Dig Into the Hardest

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IRR is the first number that comes up in almost every deal conversation. A sponsor says 22% IRR and it sounds great. But the first thing we do is ask what is driving it.

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In self-storage, IRR is almost always most sensitive to two things: the exit cap rate assumption and the stabilization timeline. Change either one and the IRR moves significantly. We have seen deals where a sponsor was projecting cap rate compression that had no basis in what was actually trading in that market. That is not underwriting. That is hope dressed up as a return.

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What We Stress Test First

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When we run a deal through our model, we go through it with a fine-tooth comb on the exit assumption. If a sponsor is projecting an exit at a 5.5 cap and the market is trading at 6.25, that gap is not a rounding error. It is the difference between a deal that works and one that does not. We set our exit cap rate conservatively based on where deals are actually clearing, not where we hope they will be in five years.

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The stabilization timeline gets the same treatment. If a deal needs to hit 90% occupancy by month 18 to produce the projected IRR, we ask what happens at month 24. Or month 30. We build that into the model and see where the IRR lands. If the conservative case IRR still clears our minimum threshold, we keep going. If it does not, we move on. There are always other deals in the pipeline that look better.

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"We have killed deals with a 22% IRR because the exit assumption had no basis in what was actually trading in that market. The number is only as good as what is sitting underneath it."

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Equity Multiple: The Scorecard We Are Most Accountable To

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The equity multiple is the simplest of the three and in some ways the most honest. It tells you how much you get back relative to how much you put in. A 1.8xmeans for every dollar invested, you get 1.80 dollars back. A 2.0x means you doubled your money. That is the final scoreboard.

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As a GP, this is the metric we feel most accountable to. IRR can look strong because of timing. Cash-on-cash can be managed in the short term. But the equity multiple at exit is the one number that tells the complete story of whether the deal delivered.

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The Hold Period Changes Everything

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A 2.0x over three years and a 2.0x over seven years are not the same investment. We say this plainly to every investor we work with. When we build our projections, we show the equity multiple alongside the projected hold period so the comparison is explicit. We also show what the multiple looks like if the hold extends by 12 months. If the multiple drops below an acceptable level on a one-year extension, the deal is not as durable as the base case makes it look.

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We build our equity multiple projections by working backward from a realistic exit, not forward from an optimistic revenue model. We ask what a buyer is actually going to pay for this asset in this submarket at the end of our hold. We pull comparable transaction data. We do not guess and we do not project based on where we want the market to be.

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What We Do When the Multiple Is Too Thin

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We have had deals where the equity multiple on the conservative case barely cleared 1.3x. That is not a deal we bring to our investors. It means there is almost no margin between a good outcome and a bad one. When we see that, we either restructure the entry price, find a way to create more operational upside, or we kill it and move on. We have got others in the pipeline that look better. It is as simple as that.

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Cash-on-Cash: What We Are Committing to Pay and Where It Comes From

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Cash-on-cash is the most tangible metric for anyone putting capital into a deal. It tells you what you are receiving annually on your invested equity while the deal is in the hold period. For a 100,000-dollar investment paying 7,000 dollars in annual distributions, that is a 7% cash-on-cash return.

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The number itself is straightforward. What is less straightforward is where that cash is coming from. And that is the question we ask on every deal we underwrite.

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Operating Income Versus Reserve Draws

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In a value-add deal, early cash-on-cash returns are typically lower because the asset is still being stabilized. That is normal and we tell our investors that upfront. What is not normal, and what we watch for closely when evaluating sponsors or reviewing deals, is when early distributions look strong in a deal that has no business generating strong distributions yet.

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If a facility is at 65% occupancy and the sponsor is projecting 8% cash-on-cash from month one, one of two things is happening. Either the underwriting is wrong, or the distributions are coming from reserves rather than operating income. Both of those are problems. One is incompetence and the other is a decision that benefits the sponsor at the expense of the deal's long-term health.

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We attach a source note to every distribution we send. If it comes from operating income, we say so. If we draw from reserves during a stabilization period for any reason, we explain why, what the plan is to rebuild them, and what milestone triggers the shift back to fully income-supported payments. That is the standard we hold ourselves to and it is not a common practice in this industry.

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"If a facility is at 65% occupancy and a sponsor is projecting 8% cash-on-cash from month one, you should be asking where that cash is actually coming from. That is a question worth getting a direct answer to before you commit."

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How We Run All Three Before Any Deal Moves Forward

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Before anything gets in front of our investors, we run the deal through a consistent framework. It is the same process every time regardless of how compelling the deal looks on the surface.

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•  Base case, conservative case, and stress case for all three metrics. Investors see all three, not just the base case.

•  We identify the single assumption driving the IRR projection and stress test it specifically. Usually, it is the exit cap rate or the stabilization pace.

•  The conservative case equity multiple has to clear a minimum threshold. If it does not, the deal does not move forward. No exceptions.

•  Cash-on-cash is shown year by year with the source broken out, so investors can see exactly where income comes from in each year of the hold.

•  We walk every investor through all three metrics directly before they commit. Not just in a document. In a conversation where we answer questions.

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This process slows things down sometimes. We are fine with that. Moving fast on a deal that does not hold up under scrutiny is not a win. We would rather kill a deal in our pipeline meeting than explain to an investor six months later why the projections we showed them were built on assumptions we could not defend.

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The One Question That Tells You Everything About a Sponsor

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We tell this to anyone evaluating us or any other sponsor in this space. Ask them to walk you through the conservative case for all three metrics and then ask what specific assumption has to fail for the deal to reach those conservative case numbers.

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If the answer is specific and grounded in real market data, you are talking to a team that has done the work. If the answer is vague or pivots back to the base case projections, you have learned something important about how seriously that team is taking your capital.

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We have that answer ready every time. We run the scenario before the first investor conversation happens, not after someone asks for it.

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For self-storage owners who want to understand how buyers and operators like us analyze a facility before we move forward on a deal, the team at Storage Point Advisors can walk you through how that underwriting process works and what it means for how your asset gets valued before you ever go to market.

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_{About Storage Point Capital: Based in Sarasota, Florida, Storage Point Capital is an operator-led self-storage investment firm and sponsor deploying capital alongside experienced operators across the United States. SPC is part of the Storage Point platform alongside Storage Point Advisors — a self-storage brokerage and advisory firm based in Sarasota, FL. We go through the numbers with a fine-tooth comb before anything moves forward. That is not a tagline. It is what happens in our pipeline meetings every week.}

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