Call this EAP (Earnings after Payments)To dig a little deeper, I'll also subtract the cash I tied up ($150K is about $30K + any rehab or closing costs at time of purchase) and apply a "cost of cash" (what is my opportunity cost of that investment in a fairly safe instrument), along with any EAP (can be positive or negative) and an estimate for my annual equity build (by estimating this from an amortization table).To clarify:Annual Benefit = Annual Equity Build + / - EAP - Cost of CashNote:  This is not accurate / scientific / mathematically rigorous, and I'm not recommending it as a way to calculate returns.  

Rate lock for six years and then annual resets thereafter sounds like a lot of risk Put bluntly, don't assume that you, or I, or anyone, can accurately predict where the market is going and in turn, where interest rates are heading.  6 years is a long way out, with a whole host of impacting events in the middle of it (Euro-zone issues, an election cycle and new president, potentially a new party being elected, etc.).  

As Tim Watcke pointed out, the deed of trust is the legal instrument that gives you the right to foreclose on the property if necessary.

So all we need to do is predict the next nasty recession..

For instance, everyone predicted that last winter would be a mild one.  

to give effect or force to (a law, decree, judicial sentence, etc.). to carry out the terms of (a will). to transact or carry through (a contract, mortgage, etc.) in the manner prescribed by law; complete and give validity to (a legal instrument) by fulfilling the legal requirements, as by signing or sealing."

Principal Instruments of Transfer – Deeds etc.8.

It's all the rage now but once people have it and have to keep dishes and glasses and shelving dusted, I predict it will quickly become a thing of the past. .....

"bubble") markets.There is no crystal ball as to what his local market will be like in 5 years from now, but we can get a better feel and make better predictions on what it might be like in a year (or two). 

I just think it might shed a little more predictive light on the couple.