There were a few unexpected repairs during the first year, but I attribute them mainly to poor maintenance of the previous landlord and tenants.Lessons learned?

So if you use LOC to purchase and then need extra money because something goes over budget or unexpected things happens most hard money lenders can't do much for you at point and your stuck.Often hard money loans are interest only or have interest rolled into payoff. 

Keep saving until you have the cash for a down payment as well as a solid cushion to help deal with unexpected expenses (and there will be more than a few).

The issue I see here is that after the basic fixed costs per month, there is about $1600 left for unexpected and routine repairs, maintenance, etc.  

The cash flow usually doesn't add up fast enough to cover the expense of your first vacancy... especially if it's an unexpected vacancy.

My wife and I are currently under contract on our first deal and things have taken an unexpected turn.

In this case, the guy seems wiling to pay more than a hard money lender would charge, so I'd be asking myself why that is.Second nugget of free advice is never loan against any property that you wouldn't be delighted to own. 

It happens because the provider feels like they can demonstrate cash flow - but be careful because they can minimize certain expenses to make the cash flow look good, but then unexpected expenses could kill your profit.

If you aren't getting a good feeling, look towards the national lenders, such as Quicken (who are unexpectedly attentive and responsive).  

But, if you only budget 5% and have a month long vacancy then your Cash Flow takes an unexpected hit.