Assuming the current note fund I am looking to invest has x% return and has three year term, should I be expecting a higher or lower return in the next tranche if the interest rate rises in the coming years?

Competent financial literacy is sorely lacking with many in the lower and middle classes.  

If you know what you are doing to that level just get a license and do it legal so you can be absolutely sure there is no risk involved for your future tenants. 

you have a lot of options at that price range. jersey city is big and it is divided into different areas (high level): newport & water front, downtown jersey city, journal square, heights, greenville and bergen lafayette. for your price range, it might not be easy to find a good cash flow place in downtown or newport. you can check out multi family house close to the light rail in the heights; also places in journal square close to path station. also there are some places in greenville or bergen lafayette that have easy access to bus and light rail but you should do more homework if you want to house hack there. it varies street by street. 

I would much rater have a lower mortgage for cash flow than having all of the cash. 

I only have this weekend to really make a decision...to say no to the lower offer.  

If you have the money, i would do that plus add a metal z channel going opposite direction of the joists ( screwed on top of the existing plaster ) and then add another layer of drywall. the Z channel leaves a space that helps in sound transmission. the problem is the sound is transmitted through the existing floor joists too, so just the insulation will not do it because the joists are still against the ceiling. this is something similar, but in this picture they used clips in combination to hold off hat channel from the existing ceiling which will lower your ceiling about another inch. 

You say you are not interested in living in a multifamily property but that may be your best avenue especially with interest rates at a historically low level.

The prices are much lower, and rent seems to be about par.

It would take many lifetimes to exhaust those REI opps available and on all levels.