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

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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 2: HOW and WHEN to Use ROI

description

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

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

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ROI = Profit / Capital Invested

Extension of Ideas from LESSON 1

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Annualized ROI =ROI / Years

Also expressed “ROI per year”

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When to solve for annualized ROI?

* apples to apples

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

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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)

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Manipulate the Algebra

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

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When to solve for ROI?

* step prior to annualized ROI

CASE STUDY: (ROI = Profit / Capital Invested)

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Profit = $25Capital Invested = $100

$25 / $100 = 25% ROI

CASE STUDY: (ROI = Profit / Capital Invested)

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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)

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ROI = 25%Capital Invested = $100

25% x $100 = $25 profit

CASE STUDY: Profit = ROI x Capital Invested

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When to solve for C.I.?

* allocation of investment capital* need based reverse engineering

CASE STUDY: (Capital Invested = Profit / ROI)

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ROI = 25%Profit = $25

$25 / 25% = $100 Capital Invested

CASE STUDY: Capital Invested = Profit / ROI

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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