This calculator is designed to help you analyze creative financing deals — whether you're a beginner learning about real estate investing or a senior analyst evaluating complex structures. Below, we explain everything in two levels: a beginner-friendly walkthrough and a technical deep-dive for professionals.
Start here if you're new to creative financing or real estate deals.
A creative financing deal is when you buy a property without using a traditional bank loan. Instead, the seller carries the debt — meaning they finance the purchase for you. You pay them a monthly amount, and after a set number of years (usually 3–7 years), you pay off the remaining balance (called the 'balloon'). This is common in real estate because it's faster, more flexible, and doesn't require a credit check.
Example: You buy a house for $200,000. You pay the seller $20,000 upfront and $1,000 per month. After 5 years, you owe the seller $140,000 (the balloon). You either refinance with a bank, sell the property, or negotiate with the seller.
When you invest in real estate, you want to know: (1) How much cash do I need upfront? (2) How much cash will I make each month? (3) What's my return on investment? (4) What could go wrong? This calculator answers all four questions by analyzing the deal from multiple angles — the seller's perspective, the investor's perspective, and the risk profile.
Cash-on-Cash Return (CoC): The percentage of cash you make each year relative to your upfront investment. If you invest $25,000 and make $2,500 per year, your CoC is 10%. DSCR (Debt Service Coverage Ratio): How many times over your rental income covers your debt payments. If you make $10,000 per year and owe $8,000 in debt payments, your DSCR is 1.25x. A DSCR below 1.0 means you're losing money each month. Net Operating Income (NOI): Your rental income minus all operating expenses (taxes, insurance, maintenance, property management). This is the money left over before debt payments.
Owner Finance: The seller carries 100% of the debt. You pay the seller monthly, and after the balloon period, you refinance or sell. Subject-To: You take over the seller's existing mortgage and pay them for their equity. You're responsible for the existing loan. Hybrid: You take over part of the existing mortgage and the seller carries the rest. This is a mix of the two above.
After you enter your deal details, the calculator shows you: (1) Seller Negotiation tab: How much the seller will collect and when. (2) Investor Disposition tab: Your cash requirements, monthly cash flow, and return metrics. (3) Monte Carlo tab: A simulation showing the range of possible outcomes (best case, average case, worst case). (4) Assignment Scenarios tab: How much you could make by assigning the deal to another investor.
Technical documentation for M&A professionals, underwriters, and financial analysts.
The engine implements an IRS-compliant interest-only model for seller carry notes. All monthly payments are treated as interest (no principal amortization) during the term. The balloon payoff is calculated as: Balloon = Purchase Price − (Monthly Payment × 12 × Balloon Years). This ensures the seller receives back exactly the purchase price over the life of the note, resulting in a 0% effective yield to the seller (which is mathematically correct when total received equals total lent). This model is conservative and appropriate for deal screening; it does not apply compounding interest rates.
Key Assumptions:
Gross Potential Rent (GPR) is annualized monthly rent. Effective Gross Income (EGI) applies vacancy loss to GPR. Operating expenses include property taxes, insurance, maintenance (as % of GPR), and management fees (as % of GPR). Net Operating Income (NOI) is EGI minus all operating expenses. Note: maintenance and management fees are applied to GPR, not EGI. This is a conservative assumption; industry standard applies mgmt fee to EGI only. The difference is approximately GPR × vacancy% × mgmt_fee%, which can be 1–2% of annual NOI on typical deals.
Key Assumptions:
For Owner Finance and Hybrid deals, annual debt service is the seller monthly payment × 12. For SubTo deals, debt service includes the existing loan P&I calculated from loan balance, rate, and remaining term. For Conventional DSCR loans, debt service is calculated using the standard amortization formula. DSCR is NOI / Annual Debt Service. A DSCR below 1.0 triggers a hard stop (property is cash-flow negative). A DSCR below 1.25x triggers a warning (tight coverage). For all-cash deals, DSCR is undefined (returns Infinity); the calculator handles this gracefully.
Key Assumptions:
CoC is the annual net cash flow divided by total cash invested, expressed as a percentage. Total Cash to Close includes down payment, assignment fee, closing costs, and rehab costs. Net Cash Flow (NCF) is NOI minus annual debt service. CoC below 0% is a hard stop. CoC below 10% is a warning. The calculator also computes break-even occupancy (the occupancy rate at which NCF = 0).
Key Assumptions:
Internal Rate of Return is calculated using Newton-Raphson iteration with a 1000-iteration limit and bisection fallback. Cash flows are: Year 0 = −Total Cash to Close; Years 1–(N−1) = Annual NCF; Year N = Annual NCF + Terminal Value. Terminal value depends on deal type and exit strategy. For Owner Finance, terminal value is ARV (after-repair value) minus seller balloon payoff. For SubTo, terminal value is ARV minus remaining loan balance. For Conventional, terminal value is ARV minus remaining DSCR loan balance. For all-cash, terminal value is full ARV. IRR is sensitive to terminal value assumptions; sensitivity analysis is recommended for underwriting.
Key Assumptions:
At the balloon year, the calculator models a refinance event (default) or sale. For refinance: a new DSCR loan is originated at 75% LTV of the appreciated property value, 30-year amortization, at the specified refi rate. The balloon payoff is covered by new loan proceeds. If new loan > balloon, the excess is cash-in to the investor (positive NCF impact). If new loan < balloon, the shortfall is additional capital required (negative NCF impact). For sale: the property is sold at appreciated value, balloon is paid off, and remaining proceeds go to the investor. Post-balloon debt service uses the new DSCR loan P&I, not the old seller payment.
Key Assumptions:
The calculator runs 5,000 iterations of the deal model, varying rent, rehab cost, and vacancy rate within user-specified ranges. For each iteration, a new CoC is computed. The output includes P10, P50, P90 percentiles, probability of positive cash flow, probability of CoC ≥ 10%, and a histogram. When rent or rehab ranges are not specified (min = max = 0), the calculator auto-derives Bear (−25% rent, +62.5% vacancy) and Bull (+35% rent, −37.5% vacancy) scenarios. This provides a quick risk assessment without requiring manual scenario definition.
Key Assumptions:
The reverse solver uses binary search to find three levers that achieve a target CoC: (1) Maximum purchase price (for Conventional DSCR only; infeasible for Owner Finance because CoC is invariant to price), (2) Minimum down payment (all deal types), (3) Maximum monthly payment (all deal types). For Owner Finance and Hybrid deals, the price lever is marked infeasible because debt service and total cash to close are both fixed dollar amounts independent of purchase price. The solver correctly identifies this and returns null for maxPurchasePrice. The down payment and monthly payment levers remain valid for all deal types.
Key Assumptions:
Hard stops: DSCR < 1.0 (cash-flow negative), assignment fee < $4,000 (insufficient profit margin), CoC < 0% (negative return). Warnings: DSCR < 1.25x (tight coverage), CoC < 10% (low return), break-even occupancy > 85% (high sensitivity to vacancy). The calculator handles zero-debt scenarios (all-cash) by setting DSCR = Infinity and debt service = $0. It handles negative NCF by computing CoC as negative. It handles zero cash to close (no investment) by setting CoC = 0 (not Infinity). All edge cases are tested in the Vitest suite.
Key Assumptions:
Financial and real estate terms explained.
A balloon is the remaining balance you owe at the end of the financing term. For example, if you borrow $200,000 and pay $1,000/month for 5 years, you've paid $60,000 in total. The balloon is $200,000 − $60,000 = $140,000. At year 5, you either refinance (get a new loan), sell the property, or negotiate with the seller.
DSCR below 1.0 means your rental income doesn't cover your debt payments. You're losing money every month. This is a hard stop because it's not sustainable. You either need higher rent, lower debt payments, or lower operating expenses to make the deal work.
Cash-on-Cash (CoC) is your annual cash return divided by your upfront investment. It's a simple, year-one metric. IRR is your annualized return over the entire hold period, accounting for all cash flows and the sale at the end. IRR is more comprehensive but also more sensitive to exit assumptions.
Yes. The 'Conventional' deal type supports both all-cash purchases and DSCR loans (bank financing). You can specify the loan rate, LTV, and term. The calculator will compute debt service and all return metrics just like a traditional underwriting model.
Subject-To means you take over the seller's existing mortgage. You pay the seller for their equity (the difference between the property value and the loan balance), and you become responsible for the existing loan. This is useful when the existing loan has a low rate or when the seller needs quick cash.
The calculator runs 5,000 random scenarios, varying rent, rehab cost, and vacancy within your specified ranges. For each scenario, it computes a new CoC. The output shows the range of possible outcomes (P10, P50, P90) and the probability of hitting your target return. This helps you understand the deal's risk profile.
This is a conservative assumption. Industry standard applies mgmt fees to EGI (collected rent only), but the calculator uses GPR to be conservative. This overstates expenses by roughly 1% of annual NOI on typical deals. For final underwriting, you may want to adjust this assumption.
The calculator assumes refinance by default. If you plan to sell instead, you can change the 'Exit Strategy' to 'Sell' and the calculator will model a sale at the balloon year. If you plan to hold without refinancing, the balloon year becomes a cash-out event (you pay off the balloon in cash).