Generally I move my price up 20% and I make interest on the payment amount amortized, so I am getting compound interest.  

The tax code has always allowed retirement plans to invest in many more things that what Wall St sells, and it takes a different business model to diversify an IRA into things like real estate, private company stock, private mortgages, precious metals, and the like.At the end of the day, an IRA is still an IRA, which is a tax-sheltered vehicle that allows you to compound your savings over time by removing the tax burden on the front end when you initially contribute and on the earnings.

All of that said if your subdivision is an infill for an existing area the thought of rifles or bows being fired off might be the least comforting idea on the planet...

While we also charge a booking fee, it is not compounded like some VRBO and Homeaway listings are.

Of course, I'm not accounting for salary increases or compounding interest because we're keeping it simple here. 

If, hypothetically I can earn, for sure, from my mutual funds or other means a rate of return 12%  annually (fixed) on my invested cash and I can easily reinvest it for compound interest, would you prefer RE efforts with the game of appreciation, depreciation, renting, condos, tenants, fixing, etc. or you will be content with this return.

This adds up to -$300k in total rent spent over 10 years, for which you get zero deductions or equity.Scenario 2: Purchase your home in NYC- Take your 200k and lever it up to buy a $1mm property that's going to appreciate on average 4% per year in NYC, compounded, so $1mm x 1.04^10 = $1.480mm for a profit of $480k. - That entire gain is tax free, since it is your primary residence- Your monthly payments will be over 4k per month, but almost half of that is going toward your own equity and the other half is a tax write-off that reduces your taxable income and possibly brings you to a lower tax bracket.SUMMARY: I'm not quite ready to declare victory for purchasing your home in NYC, but I have to admit, I just convinced myself a tiny bit more. 

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.  

As far as if the other person decides to bow out I think at that point I would be good with some type of equity trade off assuming they would already be in the deal for at least a year or two.