Is that an average home in the city or is that a cheap home in a not so great area? 

The cap rate around 8.5% (when the local average is 7-9%), I think this price point potentially strengthens the property’s cash flow appeal.All units are rented on 12-month leases, and the seller reported annual expenses around $22,075.

It works like this:(1) Save up enough money for a down payment(2) Buy a single family home that you will Airbnb/VRBO(3) Ensure the “average period of customer use” is <=7 days(4) Materially participate (5) Cost segregate the property, resulting in large depreciation deductions(6) Use the losses from step 5 to offset your W2 incomeWhat makes this possible is that operating an STR is considered “non-passive.”

What's the average length of stay each guests book for?

But, invest it in a mutual fund paying an average 8% return per year. 

Have multiple 4 units (B/C asset class) in different parts of city and we average about $100-$120 a month per building.Cheers,Art

We have them in every unit these days and only usually have to deal with maybe one or two every year or two, which averages out to units making it 10 or more years. 

Since typically unsecured creditors get on average 10% of their claim, the note holder can suffer significant loss.  

Assuming that a new construction home will appreciate 5% just because that's the average for the market can be dead wrong!

Invest the $550,000 in a mutual fund such as S&P 500 or VTSAX with a 10-year history average annual return of 12% 2.