Hassle-free Cashflow Minute Lesson 7: Arbitrage and Yield Spread

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Hassle-free Cashflow Minute Investor Educational Series by Professional Investor / Developer David Campbell www.HassleFreeCashFlowInvesting.com ©2011 All Rights Reserved Lesson 7: Arbitrage and Yield Spread

description

David Campbell, professional real estate investor and developer gives the definition of arbitrage and yield spread. Learn how to calculate yield spread and your return on investment on cashflow.

Transcript of Hassle-free Cashflow Minute Lesson 7: Arbitrage and Yield Spread

Page 1: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

Hassle-free Cashflow Minute

Investor Educational Series by Professional Investor / Developer

David Campbell

www.HassleFreeCashFlowInvesting.com©2011 All Rights Reserved

Lesson 7: Arbitrage and Yield Spread

Page 2: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

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Arbitrage is the investment strategy of borrowing money to

invest for a profit.

Yield spread is the mathematical result.

Page 3: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

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Yield Spread = earning rate - cost of funds

2% Y.S. = 7% earning - 5% borrowing

Page 4: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

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Case Study: $100,000 house @ 7 CAP

purchased w/ 80% financing @ 5%

WHAT IS THE ROI FROM CASHFLOW?

Page 5: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

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Case Study:

$100,000 house @ 7 CAP = $7,000 NOI$80,000 mortgage @ 5% = $4,000 interest exp.

$3,000 profit

15% ROI = $3,000 profit / $20,000 capital invested

Page 6: Hassle-free Cashflow Minute Lesson 7:  Arbitrage and Yield Spread

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David Campbell$500 million of real estate

experience

real estate investor / developer houses / apartments

retail / office / land / resortcondos / condo conversion

financial strategist