Compound that with the fact that his local market will eventually flatten out in terms or price appreciation. 

This is compounded a little bit since you are getting a loan instead of paying cash .  

I talked to my agent, who now bowed out due to the complexity of this deal.

But don't discount the opportunities also to either convert investment property to primary residence or to simply  use the deferred tax dollars for your own returns throughout your living life.The primary residence conversion benefit has received a hair cut in recent years but there is still significant opportunity to eliminate a lot of tax in that method.Doing an amortization can show you the benefit of keeping the tax and using it for your benefit in the same manner as a traditional IRA lets you compound your return pretax using the tax dollars.  

Let the power of compound rate of return do its work.

For example, A puts in $10k, B puts in $5k, and C puts in $50k and the entity pays 10% interest annually non-compounded.

Experience and networking compounds just like money does--keep it up, and never let yourself get too comfortable.

Even better I would love to hear what  our regular big government advocate Bill Gulley can add as to why you don't need an LLC because you should trust the courts  to make the right decision regarding your legal culpability and bow down to their wisdom in distributing your assets in an equitable manor to damaged and aggrieved tenants. 

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However, $5,500 is a lot of money for rent each month, even for a "compound" like we could have offered here to the right ground of tenants.