I worry that there will be some bleed or collateral damage if they start to get their asses sued off and their insurance buckles.

Our broker even said something about this being worse than personally guaranteeing because you would be essentially cross-collateralizing the properties. 

You should have enough collateral to buy the $1mm Sfh  Run the numbers and see if the salary and the paid off rental SFH can cover the new note.  

He needed to close this and another quickly and we financed the entire project with additional collateral, even closing costs and no appraisal!

Here is how most work:Rates: 10% to 14% (Most Deals are 12%)Terms: 1 Day - 24 Months (Most Deals are 6 months)Fees: 2-5 points(%) of loan amount paid at closing (Most Deals are 3 points(%))Minimum Loan Amount: $50,000 Max Loan: 65-70% of After Repair Value(ARV) 100% Rehab Financing Available (Most Deals require 20% of purchase price down payment or cross-collateral)Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 10 business days)NO PRIMARY RESIDENCES, NON-OWNER OCCUPIED ONLY, BUSINESS AND COMMERCIAL USE ONLY.

Making sure we are talking the same.The benefit to the lender is they get more collateral.  

Your money (initial cash) is still in the property and being used as collateral so the bank can sell you their money.You're still going to be restricted in how many times you can do this based on your accumulated "debt to income ratio".

Good afternoon,I have a term life insurance policy with which I’m looking to use as leverage (collateral) to purchase a commercial property.

When in reality the journey is the homes, the homes cross collateralized for the apartment buildings (or 1031'd), then you selling your expertise for a piece of larger projects with no cash in the game, then your training and education monies as you help people get up to speed.  

After it is finished, sell, re-fi or use as collateral for a personal note.