hassle-free cashflow minute 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
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