Determining Purchase Price on Real Estate Transaction using Goal Seek, NPV, and IRR

SailMax09

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Jul 12, 2019
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I work in commercial real estate and we are trying to back into a purchase price by determining what initial outlay gets our NPV to 0 and IRR to 30%. Essentially, what acquisition price gets us to a 30% IRR. We're looking at this over a three year period. For purposes of simplicity, say I can buy an income-generating property at 50,000 and we're looking to finance 80% of the purchase ($40,000). Assume about $2,500 in closing costs. We'll make $6,000 (NOI in cash flow in year 1 - 3 and sell the asset in year three for 65,000.

What we're trying to do is figure out what purchase price will yield us a 30% IRR and an NPV of zero. We've tried figuring it out using the Goal Seek function, but have kept coming across issues due to circular references.
 

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