Investment Analysis: Seller Financing Amortization / Tax Basis Calculator
Originally published: 13/06/2022 12:11
Last version published: 09/08/2022 09:58
Publication number: ELQ-15934-2
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Investment Analysis: Seller Financing Amortization / Tax Basis Calculator

Model out the economics of seller financing transactions as the original investor of a piece of property/asset.

Seller financing involves: Purchasing something as an investment > selling it to a buyer > buyer repays with a down payment and then installments over time.

The template will calculate the final IRR of the investor based on their cash flows over time.

The user can enter in assumptions for the initial cost, sell price, down payment, and amortization terms (interest rate, payments per year, and term of amortization). An amortization will then populate the principal and interest repaid per period.

All the repayments are separated between taxable and return of basis. An annual summary displays the sub-totals of each component of the repayment as well as interest (all interest is going to be taxed as regular income).

Note, the down payment is also separated between how much is counted as 'return of basis' vs. taxable capital gain.

All logic is contained on a single tab and this makes it easy to expand the model to many transactions by simply duplicating the tab as many times as you need. The annual summary has its own start year and the amortization schedule has its own start month. 

In this way, it is easy to aggregate all the transactions on the same annual timeline in order to see relevant total interest, principal, and taxable gains that happen each year.

This will often be used for investing and reselling real estate or automobiles.

This Best Practice includes
1 Excel model and 1 Tutorial Video

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Further information

Model out a seller financing transaction from investment to full repayment.

Selling anything that is financed by the seller.

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