What the equity multiple measures
Equity multiple is the plainest measure of how much money came back. $5,000,000 returned on $2,500,000 invested is a 2.0x multiple and $2,500,000 of profit. It counts every distribution: cash flow during the hold, refinance proceeds, and net sale proceeds after the loan is repaid.
Because it ignores time, it complements the internal rate of return rather than replacing it. A 2.0x multiple over three years is a very different outcome from 2.0x over ten, and IRR is the measure that tells them apart.
How sponsors and investors use it
Investors often set a minimum multiple alongside a minimum IRR because a short hold can produce a high IRR with little absolute profit. Sponsor promotes are frequently structured around both hurdles, and preferred equity or co-GP positions are underwritten to a target multiple over the expected hold.
For a value-add plan, the multiple shows whether the business plan creates enough profit to justify the risk and effort after the bridge loan, renovation, and carry are all paid for.
Limitations
The calculator is only as complete as the distributions you enter. Include net sale proceeds after loan repayment, closing costs, and any promote paid to the sponsor if you are measuring the LP's multiple. It does not account for taxes or the timing of cash flows.
The result is an arithmetic output from the numbers you enter. It is not a quote, a term, or an underwriting decision, and H Equities does not see or store what you type.