Sherilynn, can you expand on your comment of more down, same ROI please?
I did some quick scratching on a scrap of paper:
$400k purchase price today
$20k option payment (5%)
=$60k net required for downpayment from investor (working w/80% LTV).
If you mark it up 6% of year one, the price is $424k. $24k profit / $60k net investor down pmt = 40% ROI net.
Plus mortgage paydown.
In the same scenario, if the tenant puts up the 15%:
$400k
-60k option pmt
=20k required from investor for net down payment.
To achieve the same 40% ROI, that yields a gain of $20k x 40% =8k
Plus mortgage paydown of the same amount.
What am I missing here? Who is going to do that much work to make a mere $8k, with all the same inherent risk in an RTO?
With all due respect, I would submit that the same $24k markup would yield a reasonable dollar profit, with a crazy ROI. And dollars drive our business, not percentages.
Illustrated in the extreme: If the TB puts up 75k upfront, then I only need to mark up the house by $2000 to achieve 40% ROI...