Internal Rate of Return or IRR

Hi Thre Elkam,
The IRR is a comparative tool to compare a property against a property and uses a very complex set of calculations.
The considerations to calcualte this are:
– Rates
– Purchase costs
– Renovation costs
– Maintenance
– Repairs
– Vacancy rates
– closing costs
– True market value
– Mortgage Application Fees
– Your income level
– Mortgage structure ( Interest only or P &I)
– Property management fees
– Prevailing taxation rates
– Expected capital gains rates
– expected inflation or rental and expenses.
AS you can imagine this would be an absolute nightmate to work this out on short or long hand…..
But hte good news is that there are programs out there that do all hte work for you once you have the data required.
PIA PRO is one and Dolf De Roos has another progarm call Property Magic I think.

CASH ON CASH Return gives you a good snapshot at the time … however IRR gives you good future and present returns and can outline potential budget blowouts or scenarios such as what if the rent goes down?, what if the interest rates of the mortgage go up etc.
Cheers
Kiwi