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

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Page 1: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

Hassle-free Cashflow Minute

Investor Educational Series by Professional Investor / Developer

David Campbell

www.HassleFreeCashFlowInvesting.com©2011 All Rights Reserved

Lesson 2: HOW and WHEN to Use ROI

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

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ROI = Profit / Capital Invested

Extension of Ideas from LESSON 1

Page 3: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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Annualized ROI =ROI / Years

Also expressed “ROI per year”

Page 4: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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When to solve for annualized ROI?

* apples to apples

CASE STUDY: (Annualized ROI = ROI / Years Invested)

Page 5: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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ROI = 25%Years Invested = 6 months

6 months / 12 months per year = 0.5 years

25% ROI / (0.5 years) = 50% ROI per year

CASE STUDY: (Annualized ROI = ROI / Years Invested)

Page 6: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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Manipulate the Algebra

ROI = Profit / Capital InvestedProfit = ROI x Capital InvestedCapital Invested = Profit / ROI

Page 7: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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When to solve for ROI?

* step prior to annualized ROI

CASE STUDY: (ROI = Profit / Capital Invested)

Page 8: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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Profit = $25Capital Invested = $100

$25 / $100 = 25% ROI

CASE STUDY: (ROI = Profit / Capital Invested)

Page 9: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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When to solve for Profit?

* budgeting* deciding if a deal is worth effort* dividing funds between partners

CASE STUDY: (Profit = ROI x Capital Invested)

Page 10: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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ROI = 25%Capital Invested = $100

25% x $100 = $25 profit

CASE STUDY: Profit = ROI x Capital Invested

Page 11: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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When to solve for C.I.?

* allocation of investment capital* need based reverse engineering

CASE STUDY: (Capital Invested = Profit / ROI)

Page 12: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

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ROI = 25%Profit = $25

$25 / 25% = $100 Capital Invested

CASE STUDY: Capital Invested = Profit / ROI

Page 13: Hassle-free Cashflow Minute Lesson 2:  How and WHEN to Use ROI

www.HassleFreeCashFlowInvesting.com

David Campbell$500 million of real estate

experience

real estate investor / developer houses / apartments

retail / office / land / resortcondos / condo conversion

financial strategist