Internal Rate of Return (IRR)
irr (internal rate of return)=leverage x (gross income-expenses-mortgage interest)/price. This measure the leveraged net investment yield without taking into account the mortgage principal repayments. It will be linked to cap rate by irr=leverage x (cap rate-mortgage rate). This number shows how the financing you obtained in increasing the property profitability. The difference with the cash on cash rates is the mortgage add-on rate, and this number shows the true profitability of the investment, and should be used for relative value computation.
This is one of the property key profitability measures.