This means they don't have to pay for the replacement cost limits of insurance (aka they can insure for a slightly less value) and then they are still covered for something catastrophic.  

We work catastrophe events and live full time in an RV.

I once heard a story about a guy who made a catastrophic sales mistake in the range of hundreds of thousands of dollars.

I believe it tends to give me a slightly lower return, because the sponsor is going to be more careful, and if there is a severe downturn will prevent me from taking catastrophic losses.

A bit of catastrophizing …Everyone’s management styles are different.  

We don't know what we don't know and that can be catastrophic. 

Figuring out realistic projections--cashflows, depreciation, cost recovery, exit strategy, IRR, construction costs, time required to stabilize the building--was challenging for me.I required a 30% IRR because I assumed I would make catastrophic errors along the way.

But that’s why I’m having someone who’s experienced walk me through it so I don’t get worked over and lower the chances of anything “catastrophic” going wrong on that end of things

not for me, too many horror stories with this type of investment- if you dont have bug and noise complaints then you have structure issues(and I'm a builder) dealing with multiple tenants and guests etc. a large condo was just vacated after this last hurricane in the front area where our homes are located and it was caused by structural damage "from the hurricane" but once they uncovered it it was a failure to maintain that resulted in some almost catastrophic damage. not for me, if you do it, spend some good $$ on a structural inspection- literally will make or break the bank among other things!

I'll probably reduce that as I build my portfolio up, since it's less likely that all will have a catastrophe at once.Another note on cash flow is that if you are getting $200/mo at the top of the market, and the market turns, that could turn to $0 or negative when you renew your lease.