What must be true for an investor to consider proceeding with a real estate investment?

For an investor to consider proceeding with a real estate investment, the internal rate of return (IRR) must meet or exceed the discount rate. This is a fundamental principle in investment analysis, as the IRR represents the expected annual return on an investment over time. The discount rate, often reflecting the required rate of return or opportunity cost, serves as a benchmark.

When the IRR meets or exceeds the discount rate, it indicates that the investment is expected to generate returns that are satisfactory compared to other potential investments with similar risk profiles. This condition aligns with the goal of maximizing returns on capital, ensuring that the investment is worthwhile and justifies the risks taken.

In contrast, if the IRR is lower than the discount rate, it suggests that the investment may not generate sufficient returns to compensate for the risks associated, making it less attractive. Thus, investors seek to ensure that the expected returns from the investment align favorably with the alternatives available in the market.

Other options reflect criteria that can also impact investment decisions but do not capture the essential threshold that investors consider when evaluating the potential profitability of an investment.