Calculator methodology

A worked example from a well-known competitor prices a note at roughly $151,000 in its own marketing copy; the same inputs run through their actual calculator return $140,350.65 — a $10,650 error nobody appears to have checked. A second competitor tool discounts a seller-carry note one way and prices carrying-versus-cash the opposite way, in the same product, without saying so. Nobody in this market publishes their conventions, which is exactly why a claim like that is hard to check. This page is the fix: every convention below is the one our engine actually runs, and every tool page links back here.

Every one of these decisions is also load-bearing in Show the math on the tool that uses it — this page is the reference, not a separate claim.

Nominal rate, no EAR

Every discount, interest, and reinvestment rate in the engine is treated as a nominal annual rate, divided by the number of periods per year (i = annualRate / periodsPerYear). We never convert to an effective annual rate first. A 7% rate compounded monthly is a monthly rate of exactly 0.583333%, not the higher rate you'd get from first finding the effective annual equivalent. This matches how mortgage and note rates are actually quoted in the U.S.

Ordinary annuity by default

Payments are assumed to land at the end of each period unless a tool explicitly says otherwise. Turning on an "annuity due" or "payments at the start of the period" option divides the ordinary-annuity result by (1+i) — equivalently, it multiplies the payment stream's value by one extra period of growth, because each payment is received one period earlier.

Two exceptions, both intentional and both disclosed on the tool that uses them

Discounting the value of favorable seller-financing terms (present value of a note against a market-rate loan) is end-of-period. Comparing carrying a note against taking cash for tax purposes is begin-of-period — the seller is assumed to receive and redeploy each year's collection at the start of that year, not the end. That is a deliberate, different convention for a genuinely different question (a monthly payment stream vs. an annual tax-year cash flow), not an inconsistency — but it is exactly the kind of thing that looks like a bug if it isn't written down anywhere, so here it is.

Balloon payments replace, not add

A balloon due in month k replaces that month's regular payment entirely: balloon = balance(k-1) × (1 + i), and the total cash received over the life of the note is down + (k-1) × payment + balloon. The balloon is never a payment plus a separate lump sum in the same month.

Exit cap rate applies to forward NOI

When a tool estimates a sale value from a cap rate, it applies that rate to the NOI of the year after the sale (hold year + 1), not the trailing year's NOI. A buyer is pricing what the property will earn them going forward, not what it earned the seller last year — using trailing NOI systematically overstates value in a growing-rent scenario.

Adjustable-rate resets amortize the real balance

When a rate adjusts, the new payment is recalculated against the loan's actual remaining balance at that point — including the effect of any extra principal paid along the way — never against a hypothetical balance from a no-extra-payments baseline schedule.

Preferred return: cumulative, compounding annually

In the capital-stack / equity-waterfall calculator, a preferred return accrues on the unpaid preferred balance and compounds once per year. If a year's cash flow doesn't fully cover the accrued preferred, the shortfall carries forward and itself starts accruing the following year — it does not reset to zero.

Promote hurdles are tested against the LP's own IRR, at exit

Each IRR-hurdle promote tier in the waterfall is sized so the limited partner's own annual internal rate of return — computed European-style, with every promote-tier dollar landing in the exit year — clears that tier's hurdle before the next, more GP-favorable split takes over. It is never tested against the deal's blended project IRR or the GP's own return.

Note yield: additive points on a fixed base

The note-appraisal calculator starts every note at a 9.00% base yield for a performing first-lien single-family note, then adds whole percentage points for lien position, property type and condition, payer credit, payment history, seasoning, state foreclosure timeline, and loan-to-value — in that order.

Loan-to-value on a note is solved to a fixed point, not assumed once

Because the note's own price depends on the yield, and the yield's own equity-cushion adjustment depends on the price, we solve for the self-consistent pair: try each equity-cushion band, price the note at the resulting yield, and accept the answer only if the loan-to-value implied by that price actually falls in the band that produced it. Pricing the note once and reading the equity cushion off that single pass — the more common shortcut — can understate risk on notes that sit near a band boundary.

Opex, vacancy, and cap-rate defaults

Where a tool needs a default and the deal doesn't supply one: 35% operating expenses (of effective gross income), 5% vacancy, and a 6% exit cap rate. These are round, deliberately conservative planning assumptions for a generic rental — not a market-specific forecast — and every field they fill is clearly marked as a default, never presented as something you told us.

2026 federal tax constants — sourced, not guessed

The long-term capital-gains brackets and the standard deduction come from Rev. Proc. 2025-32 — the IRS's official 2026 inflation adjustments. The net investment income tax rate (3.8%) and its income thresholds, the §1250 depreciation-recapture rate (25%), the §121 primary-residence exclusion caps ($250,000 / $500,000), and the 27.5-year residential rental recovery period are set by statute and do not move with inflation, so they're the same figure every year until Congress changes them.