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

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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.

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

1. 1. Hassle-free Cashflow Minute Lesson 7: Arbitrage and Yield Spread Investor Educational Series by Professional Investor / Developer David Campbell www.HassleFreeCashFlowInvesting.com ©2011 All Rights Reserved
2. 2. Arbitrage is the investmentstrategy of borrowing money to invest for a profit. Yield spread is the mathematical result. www.HassleFreeCashFlowInvesting.com
3. 3. Yield Spread = earning rate - cost of funds2% Y.S. = 7% earning - 5% borrowing www.HassleFreeCashFlowInvesting.com
4. 4. Case Study: \$100,000 house @ 7 CAP purchased w/ 80% financing @ 5%WHAT IS THE ROI FROM CASHFLOW? www.HassleFreeCashFlowInvesting.com
5. 5. Case Study: \$100,000 house @ 7 CAP = \$7,000 NOI \$80,000 mortgage @ 5% = \$4,000 interest exp. \$3,000 profit15% ROI = \$3,000 profit / \$20,000 capital invested www.HassleFreeCashFlowInvesting.com
6. 6. David Campbell \$500 million of real estate experience real estate investor / developer houses / apartments retail / office / land / resort condos / condo conversion financial strategistwww.HassleFreeCashFlowInvesting.com