hassle-free cashflow minute 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
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
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Arbitrage is the investment strategy of borrowing money to
invest for a profit.
Yield spread is the mathematical result.
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Yield Spread = earning rate - cost of funds
2% Y.S. = 7% earning - 5% borrowing
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Case Study: $100,000 house @ 7 CAP
purchased w/ 80% financing @ 5%
WHAT IS THE ROI FROM CASHFLOW?
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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
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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