Would you rather use that money to buy a safe 4% yielding instrument (like a US Treasury if they yielded 4%)?

It may help to tell you there are additional provisions in the tax code and Treasury Regulations that give additional guidance (see for example "Treas.

The ROI you offer this Private Lender (really the gap funder - the private lender is who ever decides to fund the remainder of the acquisition) should be at the absolute least 300 bps greater than the 10 Yr Treasury yield.

Here are some details from the my due diligence.First Mortgage is recorded in April 2006 by Bank XAssignment of Mortgage (or DoT) Assignor Name:  Bank X and Assignee name: Bank YLis Pendens (Notice of Pendency or Notice of Default): Recorded date July 2014Under active Judgement and liens: Plantiff: Bank Y and recorded date is July /2014Plantiff: I see threecondo association liens with recorded dates as May  2011, Nov 2013 and June 2015Dept of Treasury - IRS recorded date: July 2010Dept of Treasury - IRS recorded date: Dec 2015Under judgement and liens the foreclosing Bank Y has a recorded date of 07/2014, Does this mean Bank Y is a junior liens compared to the other liens ?

YES.Economists will also be watching the bond market, most notably the 10-year Treasury yield. 30-yr mortgage rates track the 10-year and the spread between the two is still historically high.

And, put simply, government debt (treasury bonds) compete with mortgage debt that are resold by your bank into the bond market.

I can generate income through MM fund/treasuries/dividend stocks/selling covered calls/cash secured puts, without ever leaving my home or having to deal with tenants. 

Or investing it in 5% treasury bonds?

@Marcus Johnson You won't find a definitive required holding period in IRS code or Treasury Regulations .

Though the Internal Revenue Code and Treasury Regulations are silent on this issue, a careful analysis of case law yields some principles that can be stated with certainty.First, the IRS has issued several rulings stating that if the property a Taxpayer seeks to exchange was acquired immediately before the attempted exchange, then the Taxpayer will be viewed as having acquired that property primarily to resell for profit, not held for investment.