Dictionary of Business Terms: after-tax equity yield
after-tax equity yield
the rate of return on an equity interest, taking into account financing costs and income tax implications of the investor.
Dictionary of Real Estate Terms: after-tax equity yield
after-tax equity yield
the rate of return on an equity interest in real estate, taking into account financing costs and income tax implications of the investor.
Example: An investor pays $100,000 for an equity interest in a property that is subject to a $900,000 mortgage loan. The investor receives $8,000 of cash flow each year, then must pay $2,000 for income taxes. The after-tax cash flow is $6,000. Upon resale of the property, the investor receives $120,000 after a 5-year holding period, net of taxes on the sale. The $6,000 annual cash flow is combined with the $20,000 gain on resale to provide a 9.3% after-tax equity yield rate.
