Your not correct under many different circumstances.First property tax is 1.1% (fairly safe) with 2% annual increase (prop 13).Next expenses include a lot more than property tax and interest. 

@Felicia NituIn addition if you actually want to realize that value, you need to count another 5% for selling costs, and the taxes from the sale.Assuming a 20% capital gains tax, your total ROI on the above scenario would be about 12%, even with the numbers you were using. 

Easy to use yourself too HELOC works (there may be some places that do a HELOCs on rental properties)I personally have used a 401k Loan on a few occasions - You're essentially borrowing money from your 401k and paying yourself back (interest goes back into your 401k as opposed to a bank) and if you don't pay your 401k back the loan would simply become a withdraw (maybe some tax penalties, but you could probably finagle a workaround).

. $418,000 @ 3.125% on a 30 year fixed is $1,790.61 - what is the remaining $1,171 - taxes and Insurance?

About 90k that will be taxed at 40% if I take it now.

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.

Personally speaking, from an investment broker and investor standpoint, I feel single family investing is the riskiest in some investment ways in comparison to larger investments due to the fact that it only takes 1 repair or tax/insurance hike to put you under or lose all income.

Unless there is a reason to submit your tax returns, you could go w2-only. 

The tax paid from your lending proceeds should be the equivalent of your tax rate I would think.

But ya have to make some educated prognostications in life.Add this to the information your processing - What your talking about doing is eliminating around $4000 or interest expense (which is deductible anyway so really could be a real impact of eliminating $2800 or so) of debt in exchange for paying over $10K in capital gains tax (don't forget possible state gains tax as well).