Hassle-free Cashflow Minute Lesson 2: How and WHEN to Use ROI

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    28-Nov-2014
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    Real Estate

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David Campbell, professional real estate investor teaches how and when to solve for ROI, profit, and capital invested. Case studies are used for explaination.

Transcript of Hassle-free Cashflow Minute Lesson 2: How and WHEN to Use ROI

  • 1. Hassle-free Cashflow Minute Lesson 2: HOW and WHEN to Use ROI Investor Educational Series by Professional Investor / Developer David Campbell www.HassleFreeCashFlowInvesting.com 2011 All Rights Reserved
  • 2. Extension of Ideas from LESSON 1ROI = Profit / Capital Invested www.HassleFreeCashFlowInvesting.com
  • 3. Annualized ROI = ROI / Years Also expressed ROI per yearwww.HassleFreeCashFlowInvesting.com
  • 4. CASE STUDY: (Annualized ROI = ROI / Years Invested) When to solve for annualized ROI? * apples to apples www.HassleFreeCashFlowInvesting.com
  • 5. CASE STUDY: (Annualized ROI = ROI / Years Invested) ROI = 25% Years Invested = 6 months 6 months / 12 months per year = 0.5 years 25% ROI / (0.5 years) = 50% ROI per year www.HassleFreeCashFlowInvesting.com
  • 6. Manipulate the AlgebraROI = Profit / Capital InvestedProfit = ROI x Capital InvestedCapital Invested = Profit / ROI www.HassleFreeCashFlowInvesting.com
  • 7. CASE STUDY: (ROI = Profit / Capital Invested)When to solve for ROI? * step prior to annualized ROI www.HassleFreeCashFlowInvesting.com
  • 8. CASE STUDY: (ROI = Profit / Capital Invested) Profit = $25 Capital Invested = $100 $25 / $100 = 25% ROI www.HassleFreeCashFlowInvesting.com
  • 9. CASE STUDY: (Profit = ROI x Capital Invested)When to solve for Profit? * budgeting* deciding if a deal is worth effort* dividing funds between partners www.HassleFreeCashFlowInvesting.com
  • 10. CASE STUDY: Profit = ROI x Capital Invested ROI = 25% Capital Invested = $100 25% x $100 = $25 profit www.HassleFreeCashFlowInvesting.com
  • 11. CASE STUDY: (Capital Invested = Profit / ROI) When to solve for C.I.?* allocation of investment capital* need based reverse engineering www.HassleFreeCashFlowInvesting.com
  • 12. CASE STUDY: Capital Invested = Profit / ROI ROI = 25% Profit = $25$25 / 25% = $100 Capital Invested www.HassleFreeCashFlowInvesting.com
  • 13. David Campbell $500 million of real estate experience real estate investor / developer houses / apartments retail / office / land / resort condos / condo conversion financial strategistwww.HassleFreeCashFlowInvesting.com