, the RE LLC plans to re-finance and cash out all its Limited Partners' principle.

Another aspect is ethics, if you are not confident enough in the deal to put $1000 at risk, then maybe you shouldn't be doing the deal. 

You can get primary residence financing, cashflow, appreciation, and not to mention OOS can’t touch the principle pay down you get here in the bay.

Unless the buyer try to negotiate with seller, seller take home 5k more, and the buyer pay 5k less, cut out the middle man.This is not ethical and you have a contract with seller to prevent this from happening, right?

TITLE 74  TRANSPARENT AND ETHICAL GOVERNMENTCHAPTER 1 PUBLIC RECORDS ACT74-120.

You can pour an additional $100k into the property's principle in year 1 but that equity won't do you any good unless you refi, sell, or take out a HELOC (i.e. your monthly payments will be unchanged)... make your money work while you do, invest elsewhere 

@Gabriel BenavidezJust pay more to the principle.

Out of principle, it doesn't seem right that you would owe an agent 6% for a buyer you found (also I'm assuming the buyer doesn't have a real estate agent?). 

I’ve found a few that are already tenant occupied and I only analyze them if I see that the 1% or greater principle applies.

@Mark Creason has a lot of valuable insight to offer about the ethics and legalities in that biz.