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IRR - Internal Rate of Return
The IRR is the percentage rate of return in the projection to date based on (a) the initial input to the investment and (b) the increase in that investment equity, adjusted for the time over which the IRR has been calculated and compounded annually. $100 increasing to $110 over one year has an IRR of 10%. To achieve a 'to date' return of 10% pa requires the net investment equity after year two to be $121 to reflect the second year s return on the first year s gain.
Rental Income
The net rental excluding GST to be achieved from the tenant after payment of all outgoings on a property. This is usually the net annual rental shown in the lease document.
Yield
This is the percentage return that the property should return on its price or valuation. On purchase, you can 'calculate' the yield as the percentage of net rental to price; but once owned, the yield is assessed based on market expectation, and once assessed, it is applied to the net rental income to determine the changing valuation. A property bought for $100,000 with $10,000 income has a 'yield' of 10%. But if a year later the yield 'should' be 9.5%, the valuation has now become $105,263.
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