Gross vs Net IRR in a Syndication: Which Number Is Yours?
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A deal summary says "18% IRR." Is that what you will earn? Not necessarily. Some decks quote a gross IRR, measured before the sponsor is paid. What lands in your account is the net IRR, measured after fees and the promote. This post explains the difference so you can compare two deals on the same footing. It is general information, not investment, legal or tax advice.
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What each number measures
IRR is the single yearly rate that makes the present value of a series of cash flows equal zero. If the term is new, start with XIRR for syndication investors and average annual return vs IRR.
| Measure | Cash flows it counts | Who it describes |
|---|---|---|
| Unlevered IRR | Property income and sale, no loan | The building alone |
| Levered gross IRR | Income and sale after loan payments, before sponsor pay | All equity in the deal |
| Net IRR to LPs | What limited partners receive after fees and promote | An investor in the passive class |
See levered vs unlevered IRR for the first two rows.
Where the gap comes from
- Fees. Acquisition, asset management, financing, disposition and similar fees come out before investors are paid. See how sponsors get paid.
- The promote. Once investors reach their preferred return, the sponsor shares in profits above it. See the waterfall and promote.
- Timing. Fees charged up front lower the cash invested working for you from day one.
A hypothetical example
This is an illustration with made up numbers, not a projection of any deal.
| Step | Hypothetical IRR |
|---|---|
| Gross deal IRR, before sponsor pay | 17% |
| After fees | 15.5% |
| After the promote (net to LPs) | 14% |
The same property reads 17% or 14% depending on the line you quote. A deal quoted at a "net 14%" can be better than one quoted at a "gross 16%" that has not yet paid its fees and promote.
How to compare two deals
- Ask for net IRR to limited partners and for the fee list that sits behind it.
- Compare equity multiple and hold period too, not IRR alone. See equity multiple, IRR and cash on cash.
- Check that both decks use the same assumptions for exit cap rate and rent growth. See exit cap rate assumptions.
- Read the table the way an investor would. See how to read a projected returns table.
Questions to ask the sponsor
- Is this IRR gross or net to limited partners?
- Which fees and which promote tiers are already subtracted?
- What happens to net IRR if the sale comes a year late?
- Where is the full waterfall written in the documents?
How DoorRaise fits in
DoorRaise charges the sponsor two flat fees: a $1,500 setup fee and a $5,000 yearly administration fee. They do not depend on how much a deal raises, and the deal documents show every fee the sponsor takes, so an investor can rebuild the net numbers.
Frequently asked questions
Is net IRR always lower than gross IRR?
Yes, when fees and promote are positive. Net IRR is gross IRR minus the effect of what the sponsor is paid.
Which one should I trust more?
Neither is "true" alone. Gross shows how the property performs. Net shows what you receive. Use net to compare your own options.
Can net IRR be negative while gross is positive?
It can in a weak deal where fees are charged even though returns are small. That is why fee load matters.
Sources
- Investor.gov: Investor Bulletin, Private Placements Under Regulation D
- 17 CFR 240.10b-5, Employment of manipulative and deceptive devices
This article is general information as of November 2026, not legal, tax or investment advice. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.