ROI increases as amount down increases? Where is my analysis flawed?

[George Pauley]

Hi gang,

Been away for awhile.  Retired about 3 years ago and have been living the dream on my passive real estate income.  :)

I recently sat down with a friend to help them analyze their first SFH rental investment. During the analysis I came up with the surprising result that the Cash-On-Cash ROI got better the more money we put into the investment. This result goes against everything I have ever heard (or believed) about real estate investing.

Here's the deal.  (It's not a good deal, but all the deals are bad these days.)

Price:  $153,000
Mortgage Rate:  8%
Rent:  $1195
Fixed Expenses (management, repairs, tax, insurance, etc.):  $468/mo

Here is my spreadsheet. I am calculating CoC ROI as (yearly net / down payment). I've checked many of these numbers by hand, and had my wife build her own spreadsheet to double check. She came up with the same results. So I don't think there is a math error.

What am I missing in my analysis?  

I'm sure I'm having a senior moment and am doing something dumb.  I look forward to having you all 'splain how dumb I'm being.  (Thanks in advance.)

%Down	Down	Mort	Cash Flow	CoC ROI
0.00%	$0	$1,122.66	-$395.26	*
5.00%	$7,650	$1,066.53	-$339.13	-53.2%
10.00%	$15,300	$1,010.39	-$282.99	-22.2%
15.00%	$22,950	$954.26	-$226.86	-11.9%
20.00%	$30,600	$898.13	-$170.73	-6.7%
25.00%	$38,250	$841.99	-$114.59	-3.6%
30.00%	$45,900	$785.86	-$58.46	-1.5%
35.00%	$53,550	$729.73	-$2.33	-0.1%
40.00%	$61,200	$673.60	$53.80	1.1%
45.00%	$68,850	$617.46	$109.94	1.9%
50.00%	$76,500	$561.33	$166.07	2.6%
55.00%	$84,150	$505.20	$222.20	3.2%
60.00%	$91,800	$449.06	$278.34	3.6%
65.00%	$99,450	$392.93	$334.47	4.0%
70.00%	$107,100	$336.80	$390.60	4.4%
75.00%	$114,750	$280.66	$446.74	4.7%
80.00%	$122,400	$224.53	$502.87	4.9%
85.00%	$130,050	$168.40	$559.00	5.2%
90.00%	$137,700	$112.27	$615.13	5.4%
95.00%	$145,350	$56.13	$671.27	5.5%
100.00%	$153,000	$0.00	$727.40	5.7%