Hassle-free Cashflow Minute Lesson 7: Arbitrage and Yield Spread
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Transcript of Hassle-free Cashflow Minute Lesson 7: Arbitrage and Yield Spread
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