Ajay Ahuja Blog Post on Return on Capital Employed

Do you know what your return on capital is?  ROCE.  Return On Capital Employed.  It is how hard your money works for you.  If you put £10k in and you get £10k out in a year then that is a 100% return.

100% returns are very achievable.  Think about it.  You put £10k in on a £100k property, prices rise by 10%, you sell for £110k and you make a profit of £10k from your £10k investment.  That’s 100% in my books!

What may come to a surprise to you is that 100% returns are not exciting to me.  And here is something else I want to surprise you with:

ALL professional investors are not excited by 100% returns on their capital.

As Shania Twain says:

“That doesn’t impress a me much!”

100% return on your money as another celebrity Simon Cowell might say is distinctly average.  100% you can get all day.  The main reason being is that professional investors BORROW.  They borrow so much that they try and put the least in possible.

In my situation I try to put NOTHING in and get cashback.  This means you get infinite returns on your money.  This is because any number divided by zero equals infinity.  I am glad I did pure maths when I was 18.

Infinite returns mean you can make money out of nothing.  I start with zero, borrow a bit to pay for surveys and get thousands back from choosing the right properties.  It is what all us professional  investors  call preserving their “PLAY MONEY”.

Play money is your working capital you use to put down to get back.  If you get some of it back well done.  If you get all of it back then excellent.  If you get all of it back plus more then go to the top of the class!

So make sure your money is working hard for you.  Put it in and get it back.  Get your ROCE hitting the roof.