Seller Carry-Back Financing ROI Calculator
Seller financing (owner carry) bypasses bank — seller becomes the lender. Typically lower down payment, higher interest rate, balloon at 3-10 years. Calculate buyer ROI and seller yield.
| Loan amount (price − down) | — |
| Monthly P&I payment | — |
| Monthly cash flow after debt service | — |
| Annual cash flow | — |
| Cash-on-Cash ROI (yr 1) | — |
| Loan balance at balloon | — |
| Seller yield (effective APR) | — |
Seller carry-back financing (owner financing) bypasses banks — the seller becomes the lender. Buyer pays down payment, signs note + mortgage with seller, makes monthly payments. Typical structure: 10-20% down, 6-9% rate, 30-year amortization, 3-10 year balloon. Both sides benefit: buyer skips bank qualifying, seller gets higher price + installment sale tax deferral (IRS Section 453) + ongoing monthly income.
Why Sellers Offer Carry
(1) Higher sale price: sellers offering carry often command 5-15% premium because buyer pool expands. (2) Higher yield than bonds: current 6-9% APR on a real estate-secured note beats most fixed income. (3) Installment sale tax deferral (IRS Section 453): capital gains tax paid pro-rata as principal is collected, not all at sale. Major benefit for sellers in high tax brackets. (4) Monthly income: passive cash flow for retirees who don't want lump sum. (5) Hard-to-sell property: niche or distressed properties move faster with seller financing.
Balloon Payment Risk for Buyer
Most seller carries have a balloon — full balance due in 3-10 years. If buyer cannot refinance (rates spiked, property cash flow dropped, credit changed), seller can foreclose. Plan refi exit BEFORE signing. Build cushion: target balloon date when rates are projected lower (impossible to predict — use stress test), build equity through forced appreciation (rehab, rent increases), and have backup plan (extend, sell, refi at any rate). Many balloon deals are negotiated to extend at maturity if buyer is current, but never assume.
Last updated May 2026. Sources: IRS Installment Sales (Section 453).