Real Estate Riches by Dolf De Roos Book Question

[Rich Hupper]

Hello Bigger pockets

I am reading the above mentioned book and I am having a hard time understanding a scenario the author describes. The following is verbatim:

" Imagine a property costs $100,000 and that the rental income is $10,000 per annum. Then by definition the yield is 10 percent. But the return on your money will be 10 percent only if you put up the entire purchase price in cash. If you only put up a deposit of $30,000 and got a mortgage for the remaining $70,000 then the return on your investment would now be $10,000 less the mortgage interest, divided by the capital outlay of only $30,000. If the mortgage interest rate is , say 7 percent, then the mortgage payment would amount to $4,900. Your return would then be $5,100/$30,000 or 17 percent.

Notice that the property is the same, the purchase price is the same, the rental income is the same, and yet the "return" has gone from 10 percent to 17 percent. And we have only just started, because we still haven't taken account of property taxes, maintenance, property manager fees, the vacancy rate, repairs, gardening, principal repayments, mortgage application fees, appraisal fees, or spider proofing, to name just a few expenses. Nor have we taken into account the depreciation you can claim and the the subsequent increase to your cash flow."

This scenario above completely boggles my mind. What kind of mortgage is he talking about? It appears he is getting an interest only loan on $70,000 at 7%. Also why would he not included the above mentioned expenses into his cash on cash return figure. 

He also talks about another scenario that confounds me. See below:

"It seemed to me that the agent was just not ready for a sale. Who on earth would want an empty funeral parlor? Of course, for me it wasn't empty. I acquired the entire property for a net figure of $170,000. I told the bank that that's what I had paid for it, but now I had two tenants. One, the funeral parlor operator, was signed up on a 10 + 10 year lease ( ten years with a right of renewal for another ten years ), and the other, the seller, was signed up on a 6 + 6 year lease, for a total rental of $30,500 per annum. Therefore, so I told the bank, it might be worth more than what I paid. The bank sent in their own appraiser, valued it at $240,000, and gave me a 66 percent mortgage of $160,000. So in this case, I had only $10,000 of my own capital tied up in the property, while I was receiving $30,500 in rent less $15,500 in mortgage interest, for a net $15,000. While the net yield on the purchase price was a modest 17.94 percent ( $30,500/$170,000), my cash on cash return was in fact 150 percent ($15,000/$10,000). Once again I was pulling more out of this property every year than I had put in as a one off at the beginning"

So he paid cash for this funeral parlor then found a bank that would give him a mortgage based on their much higher appraisal. Does this ever happen in today's world? 

If he paid $170,000 cash for the place why would he mortgage it? I am guessing to get $160,000 in cash to do other things with? Can this happen in today's world?

Also again is he working with a bank that will give him interest only loans? What banks do this?

I am a newbie and this book is old so I am not sure if it applies to today's investor environment.  

Thank you all for your help.