Unforeseen damages when we start to rehab4.

When I had 1 or 2 properties and an unforeseen issue would arise for $500-$1,000 I’d lose my mind.

Then, build a schedule with actual dates, milestones and be sure to add in extra days to allow for unforeseen issues which arise.

We encountered a lot more termite damage than expected, which caused some unforeseen costs.  

It would be a little insurance for the unforeseen issues that can come up with any institutional bureaucracy.

You need protection against unforeseen title clouds or old liens. 

The miniscule cash flow likely wont cover unforeseen expenses on cheaper properties, at least in my area.In all honesty, I would stop and look at your goals and figure out why a 200k property or a 40k down payment is scary to you.

There are some reserves that may be required for agency (Fannie/Freddie) debt, and others the sponsor chooses to on their own raise to decrease risk for unforeseen circumstances. 

And, then, there's always those unforeseen repairs...My recommendation would be to find a lender who will tell you when to come back with the required earning history and who will be ready to make it happen when you do. 

There are always going to be issues that arise and unforeseen expenses that seem to always popup.