Here are my numbers on my suggestions:1st home: rental income $7,900 per year (net rental income) -  $1,066(federal tax of 25% on $4,264 since $3,636 is tax deductible due to depreciation [$100,000/27.5 years]) - $3,000 (new home equity loan yearly payment at 30 year 4% rate) =$3,834; cash-on-cash return is $3,834/$25,000(home equity loan cashed out 75% of the value of the house to pay off the 2nd house) = 15.3%.2nd home: paid offNet income = $3,834 per year to put in stock market at average annual return of 9-11%, which compounds annually.Does this make sense to the experts on this forum?  

Compounding the problem for the higher end market in growing areas (like Katy) is the high tax rate.  

Still trying to figure that out - probably starting with 4 units, with the goal of compounding quickly if I have a great property management partner.

I can show you how an Option ARM makes you MORE money than an interest only or amortized once you figure the compounding interest of investing it.

I would say the best bang for your buck will be Millionaire Real Estate Investor by Gary Keller, The Millionaire Next Door, 10X by Grant Cardone, The One Thing, The Compound Effect and The E Myth.  

I calculated the annualized return using the equation for simple interest(multiplied 5.6% by 52/3,) your calculation considered the interest to be compounded.

More info is needed but you might want to try a commercial mortgage brokerage out of Santa Monica called Financial Compound.

I have all four units rented and cash flowing nicely at the moment, and want to tap into the great resources of BP to learn more about what it will take for me to begin really experiencing the compounding effect of equity and cash flow in RE.

I'm not losing anything...I'm compounding my $36k.Why would I want to wait 20 years to get anything back?  

The impact if this compounding effect is staggering.