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Compound Annual Growth Rate illustration

Real Estate · Return

Compound Annual Growth Rate

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Use CAGR to compare value growth across deals with different hold periods.

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Annualized appreciation

Ending ValueBeginning Value1Years−1

$400,000 growing to $520,000 over five years equals roughly 5.39% annual growth.

Step 1 of 4

Variables and units

  • Beginning Value

    Initial value.

    currency

  • Ending Value

    Final value.

    currency

  • Years

    Holding period in years.

    years

Common mistakes

  • Using CAGR for one-month changes.
  • Confusing total appreciation with annualized growth.

Step-by-step example

Annualized appreciation

  1. 1. Start with the example inputs

    • Beginning Value$400,000
    • Ending Value$520,000
    • Years5 yrs

  2. 2. Apply the formula

    Ending ValueBeginning Value1Years−1

  3. 3. Run the numbers

    5.39%

    $400,000 growing to $520,000 over five years equals roughly 5.39% annual growth.

What this result means

A CAGR of 5.39% is the steady yearly growth rate that would take the beginning value to the ending value over the period — it smooths out the ups and downs in between. Use it to compare investments held for different lengths of time on equal footing; never read it as a one-month or short-term rate.