Is this a sound rental investment with 35% required down?

[Cami Gerbmak]

Hi all,

I sure would appreciate any advice and insight concerning my situation. I'm new to the world of real estate investment and learning as much as I can before I purchase. I currently live in Phoenix Arizona and have a primary home with a 30 year conventional loan and 200K cash savings to put towards a rental investment property. My credit score is 815, the only debt I have is my home but my debt to income ratio is high and per my lender I will need to put at least 35% down on a property to qualify (lender is suggesting 7 year arm.)  But doesn't that seem high?? I've known some investors with awful credit only putting down 20%.  What am I missing? I've worked with this lender on previous primary homes and they know I'm a good customer.  Is it because it's for an investment property?  

My goal is to find a property that's turnkey ready and has new big ticket items such as roof and ac. I found a single family 4/2 property (no hoa) in a good rental market area (rents run 2200-2600) that's fully remodeled with new roof and ac at $495k. The comps are running 475-505k but the phoenix market is still overinflated. If I were to purchase this property, I would need to put down $173,250 plus 10K estimated closing = $183,250 (leaving me $16,750 in cash reserves for both homes and unexpected expenses.) My estimated mortgage would be $2152 (P&I, taxes & insurance included) and rents need to be $2440 per lender. So question 1. How much cash reserve on average is best/wise to have on hand for both homes? In my mind, $16,750 seems tight, but it's hard to know what's realistic from an investor perspective. Question 2. If cash flow is break even or possibly $200 each month, is such an investment sound especially having to put 35% down? Many have said if it doesn't make the 1% rule then it's best to walk away. Thoughts? Thank you!