After reading "The Millionaire Real Estate Investor" the author was illustrating how the longer you have your property, the lower your % Return on Equity ((annual price appreciation + annual debt pay down + annual cas...

A DIL in this situation could be deemed as unjust enrichment and overturned if an attorney gets involved or if there are any other junior interests.  

Raj,When considering whether to pull money out, a good approach would be to calculate your Return on the Equity (ROE).  

The lender originally won the case, but the homeowner appealed it and it was found that the homeowner was correct and the judge over-turned it.

If you sign a separate agreement outside of escrow, but use the house as collateral, it will be overturned by any judge and then you have an unsecured promissory note.

I am using ROE as the primary measurement and the numbers seem too good to be true. 

ROE?

If I do this repeatedly it could be overturned and I could be classified as a dealer as it appears those houses were really inventory and I did not plan to hold them long term as an investment because at that point I'm makng more money on the sale.

My personal preference is to look at investments as best I can over a long period of time, so my preferred metric is Return on Equity (ROE).House hacking, more than maybe any other style of REI, reveals the power of leverage.

I'm new to the investing side, so I am speaking as a business person here.Greg is right about any family coming in to overturn the deal, be sure you understand who will swoop in after her death and try to get the property and your deal overturned.If you are in no hurry to get into the property, then maybe you can structure the sale in one of the following ways: (1) possibly a sale at a fair negotiated price, with a leaseback provision, (2) sale at a fair negotiated price, where she carries the financing so you pay her a monthly installment and she can afford the assisted living facility, or (3) have an attorney create an agreement of sale that you and she negotiated a price and if that agreed upon price is at least, say 80% of FMV on the date of death, her heirs must honor the agreement and sell to you at that price, or give you a first right of refusal to purchase the property for say 80%, of FMV on date of death.