While rates were near all time lows, we bought a home that we could reside in and rent out the backyard detached living garage space.

Hi,People always talk about how they purchase a rental property, wait a few years for it to appreciate, do a cashout refi to recoup their initial down payment, then whatever they earn in the future is infinite return.But in reality, how is this truly a "recouping of initial investment" when you have to pay a 4.5% interest to take out the cashout proceeds (with $3000-4000 of closing costs on top)?

Sorry for the late reply; I'm not on BP too often. 

As a custom builder for decades, I dealt with this way more than once, especially with new subs that had not worked for me before.Back in the old days we used to just go with a verbal ok, but in the last 20 years or so, it is imperative to have a written CO (even an email sent from the jobsite) from the Sub and then I would add 20-25% and submit a CO of my own to the customer.

In the long run, is that the type of company you want to be at?

Utilizing the years of experience from the people on the forums will allow me to talk intelligently with a realtor, the property manager, the seller, and so forth.  

Definitely prefer cash flow options, but im open to the other concept.

Is it worth the money to level the concrete in the basement of a future rental?

It would be a lien placed on the entirety of the property that is deeded in both your names (or in your entity, if you closed in the name of an LLC).If you plan to take full control of the property, you could refinance in your name/entity alone with a cash-out and pay your partner off with their equity share.

What town is the property in?