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