Even the modest 4% annual appreciation equals wealth gains far above any monthly cash I can make on a rental.

Having been in the lending space for a while now,  Interest income is not passive - its considered/taxed as ordinary income- just like interest you receive from your bank and savings account.Regarding profit and expenses from a flip, "that depends" on many factors but again if its short term capital gains, its not tax friendly.As always consult with your tax advisor / CPA. 

The overall gain on the sale of the original property was over $500K, and I received $500K in cash.

This is a fantastic place to gain some insight into the REI world, particularly for those starting out. 

Lastly, if the home has appreciated at all, taking advantage of Section 121 and taking capital gain exclusions is just another strong point towards selling within the 5 years if you've lived there for at least 2 years. 

Short term capital gains for our bracket would be 20%.

Would love to buy you a coffee or anything to gain some first hand experience from you if you have time!

This gives you more flexibility while building equity and gaining experience.Risk Spread: More units mean a lower risk of vacancy impacting your overall revenue.

Without knowing the cap rates of other MFHs nearby, there's not much objective insight to be gained there.Good luck!

I can buy real estate syndications and never pay taxes on the gains (Lazy 1031).