However, even if I assume that the cash on cash return is reinvested at some rate (say the interest rate for the mortgage or the historical return of the S&P 500) the rate of return diminishes over time, eventually reaching whatever the reinvestment rate is.  

If you are trying to market other peoples stuff, please don't do that either, it diminishes your reputation.

But don't diminish being accommodating in a multiunit.

If you find 6 random people, I would think the quality of tenant would diminish.

Hi, @Rudy Brown, I would suggest that spreading your money out would be much more advantageous -- you're not only growing your portfolio faster, you're also diminishing the likelihood of losing your shirt if one of the properties doesn't cash flow for a while, has debt, etc.

If your lifestyle gets worse, why are you spending the best years of your life diminishing your lifestyle?

Sadly, though, your ability to do this practically as a newbie in a far away out of state market is greatly diminished, which is why I constantly advise against it. 

Loyalty in this business has really diminished since 2007 I find.  

The two entities can joint venture.Quick flipping houses with any volume will create exposure to UBIT, which can diminish the value of the opportunity.  

Run the numbers, this could potentially help you more cash than a sale without diminishing your portfolio.