Finance category
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Seller Financing Note Yield Calculator
Seller notes generate yield. This calculator computes effective yield.
Effective yield
9.20%
After-tax yield
6.62%
Purchase value
$2,850,000
How the math works
Effective yield combines coupon + discount accretion + prepay premium. After-tax applies tax bracket.
Purchase notes from sellers at 85-95% of face to boost yield. A $3M note at 8% purchased at 5% discount returns closer to 9.5-10% yield to maturity — meaningful in a low-bond-yield environment. Document default risk carefully; yield alone doesn't capture credit risk.
How to Use
- Enter note principal.
- Enter note rate %.
- Enter origination discount %.
- Enter tax bracket %.
- Enter prepayment premium %.
- Read effective yield.
Frequently Asked Questions
Yield components?
Coupon rate (stated in note). Origination discount (if note purchased below par). Prepayment premium (yield maintenance payment). Tax-equivalent yield (if comparing to munis or tax-exempt alternatives).
Secondary market?
Private notes trade at 85-95% of face typical. Performing 'A-paper' closer to face. Higher-risk (ITV, sub, weak credit) at 75-90%. Discount = additional yield to buyer.
Installment sale benefit?
For seller: gain spread across years when payments received (§453). Reduces current-year tax burden. Particularly valuable at high tax brackets or when spreading over lower-income retirement years.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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