In 2009-2010 when prices had plunged the risk of the market had greatly decreased .

I wouldn't decrease the number of bedrooms.

Under RESPA, is it legal for the lender's credit (line 802 on HUD) to be decreased?

I agree that my expenses could be refined above, and I have the hard numbers to support the cost associated with these units but I understood the 50% rule as being an ultra conservative metric that would cover CAPEX+Insurance, taxes, vacancies, etc...Also, the 100K is included in the loan payment but would likely not be financed, making the loan payment decrease.

As your equity increases, even when your net returns increase, you often find your return on the equity decreases. 

You get 75 mortgage and you get your money back- You make money in the spread between rent and mortgage and you have 75 to invest again- every 6 months you buy a property reinvesting and refinancing the same 75- meanwhile the properties you initially purchased increased in value and your mortgage balance decreased ... 1 to 5 years later (depending on the market increase) you can refinance again on the same houses...

Is there a deprecation method utilized where the life of the building decreases with time (i.e. 

Depending on how bad it is, I would anticipate higher vacancy and possible decrease in rents.  

Richard, this depends on your risk tolerance and whether or not your property will still cash flow after the cash out.Personally, I prefer to leave some equity in the property, to be tapped in case of personal hardship or if rents should decrease significantly in the future.

Your capital will be expensive at first, but as you grow your investor base you can decrease the cost of capital and structure the deals in a more profitable way.