Seller Yield & IRR Analysis
See your true annualized return from carrying the note. The IRR calculation accounts for the timing of all cash flows — down payment, monthly payments, and balloon — giving you the real yield, not just the stated interest rate.
IRR vs. Simple Yield — Why It Matters
The stated interest rate on your note (e.g., 7.5%) is not your true return. Your actual yield depends on the total cash flow picture: how much you collected as a down payment, when each monthly payment arrives, and whether there is a balloon. The Internal Rate of Return (IRR) captures all of this by finding the discount rate that makes the net present value of all cash flows equal to zero.
- A 7.5% note with 20% down and a 7-year balloon actually yields roughly 8.4% IRR
- The down payment is received on day one — immediate cash has more value than future payments
- Higher down payments increase your IRR because you get more money upfront on a smaller note
- Balloon payments compress your timeline — getting the remaining balance sooner boosts the annualized return
- IRR is the same metric private equity and institutional note buyers use to evaluate deals
Why Timing of Cash Flows Changes Everything
Two notes with identical total payouts can have very different yields. A $280K note at 7.5% with a 7-year balloon returns $280,764 in payments plus $233,500 balloon. The same note without a balloon returns $541,627 over 20 years — more total dollars, but the IRR is lower because those dollars arrive much later. The time value of money means a dollar today is worth more than a dollar in 10 years.
- A $280K note with 7-year balloon: $92,788 interest earned, 8.4% IRR
- Same note with no balloon (full 20-year term): $261,627 interest earned, 7.5% IRR
- The balloon version earns less total interest but achieves a higher IRR
- This matters when comparing against alternative investments — if you can reinvest the balloon proceeds at 8%+, the shorter note wins
- The reinvestment rate assumption is critical: the calculator lets you model what you would earn on proceeds after the note pays off
Sample Output
See what this feature calculates for you.
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