The key is to generate a return on your investment every month, not just after three years of waiting to sell...While it's certainly possible that your investment property will increase in value by 6% each year, it's also possible that it won't increase at all for the next 5 years, or maybe even decrease in value.But, if you're smart about what/how you buy, it's possible to make much more than 6% per year on whatever actual investment you make.

Is it reasonable to assume that the rate of discount on the note decreases as the note amount increases?

You have to define what we are talking about here.Average that I see is 30% Operating and Expenses,10% property management,10% vacancy.Every building is different and has it's own set of challenges.If someone self manages they can claim lower operating expenses with no management costs.Although the landlord does use up their time and energy which should have a monetary value to it.I tell landlords when I list their property that we have to count a property management fee in the numbers.If not a majority of the buyers will not be self managing and the numbers won't make sense to them.Otherwise we will be looking to sell to a small group who self manages.It depends on the size of the building as well.Many small buildings like a duplex or quad is self managed.Most larger buildings are not but there are a few.If you go over 50 units you can easily get a 5% property management fee but vacancy can generally run higher at 15% and with 30% O and E still puts you at 50%.I do see some buildings running at 60%.It's because the owners are underwater on the loans and have not maintained the property.They keep having to do patchwork repairs to get by and have high tenant turnover with rekey and reconditioning unit expenses which drives O and E above the 30% mark.If you factor rehab and going in and making changes and charging a slightly lower rent you can decrease tenant turnover and cute repairs to bring inline with the 50% total costs.You just have to look at what you can do with the property.The 50% is only a starting point.

You would only be decreasing your commission in the last scenario, not the listing agents commission.

For all three of these, you need to take into account closing costs on the initial acquisition of the real estate, which will decrease the amount you can buy.

Also you will save money by "depreciating" half of the duplex, that's indirect money, but it saves you in taxes paid every year.Also, if you have the cash, try to leverage it and either flip smart alongside few buddies that know the game, though note flipping activity has slowed down across nation as inventory amount decreased and price increased.

It's a great way to get yourself started and give your family a decent return on Their money That Might Otherwise be sitting in a CD, a bond or decreasing in value in the stock market.

I also have an FHA loan, looking to decrease PMI and interest rate.

Inputting CapEx to 5% per month about $133 would decrease the cash flow to about $350/month.  

However, I tried accommodating the tenant and decreased the early termination charge to 1/2 month's rent.