However investing in DIRECT real estate investments differs considerably from investing in mutual funds, index funds, bonds, money market and REITs that most investors are familiar with.  

If you had a decent war chest of funds for purchase and rehab, the area could be good if you want appreciation for the next couple years. 

Due to the low amount I will owe to the hard money lender I want to get a HELOC to find and fund other deals but when I am not actively doing deals I want the cash flow.

This demonstrates a significant difference of $132,000 in earnings by leveraging your funds and investing in multiple properties.

I offered 8% interest only, but firm (so if I did not have a deal and the funds were sitting idle, I would pay the 8% out of my W2).

Invest in Opportunity Zones: Reinvesting capital gains into Qualified Opportunity Funds, which invest in designated low-income areas, can defer and potentially reduce capital gains taxes.6.

Give the cost of money these days is around 7%, it would definitely be nice to have a paid off rental.7% cost of money sounds like a lot until you remember that it is actually the tenants that are paying it for you while your money is sitting in an index fund making 8%.

This is what I think I know:- The borrower can choose to pay off the note at any time (by selling the property or just paying off the loan with other funds), so it is important that the legal balance covers my investment and some profit- The borrower could file bankruptcy (can someone confirm that this will only cause delay, but not jeopardize ultimately collecting the legal balance of the note)- Most of these DOTs will have a rent assignment clause, so I could try to enforce that and collect rents from tenants (essentially manage the property) while I am holding the note and trying to foreclose.

You can do a 12 month cash out bridge which will pay off your old loan and get you funds to do the rehab as long it appraises high enough

Using your own funds to pay down your loan so you get a bigger loan sounds like a zero sum gain (aka IE using 1 dollar to pay down loan so you can net 1 more dollar from the new proposed loan) So how are you going to net more cash when spending 1 dollar to get another 1 dollar ?