Spring/Summer 1981, Vol 6, No 1

Abstract: The return on investment in residential housing is calculated by using the internal rate of return (IRR) framework. The IRR calculation simplifies the task of incorporating tax effects in the return. Since owner-occupied dwellings provide housing services as well as dollar returns, an imputed value of the housing services is figured in the cash flow. An example demonstrates the calculations involved and compares the IRR including the imputed rental value of the house with two other measures of return.