You might find that if you don't get good enough deals to begin with, the amount Fannie Mae will lend under their DF scheme won't 100% cover the amount you originally borrowed against your prior property to buy the subject property (even though their Rules let them), unless you're buying cheaper properties each time.Another thing: Your Debt-To-Income Ratio is likely to take a big hit each time, because Banks notoriously make you wait years before they'll take full account of the income derived from property purchases (and even then, only a percentage is credited). 

Tenants notoriously abuse water when they don't have to directly pay for it.

@Seth Borman while I get your point and heat pumps are more efficient you need to consider that in places like MA, RI, CO, and other cold climates they are backed up by electric resistance when temperatures drop these are notoriously wasteful heat sources. 

A violation is punishable by up to 5 years in prison and $250k in fines. 

You can be fined up to 1 million dollars and get up to 30 years in a federal prison.

You can break security laws unintentionally which could equal large fines and/or prison time.  

Other factors like the duration of the project play in heavily in this analysis and development is notoriously difficult to predict the timing of and to account for life's uncertainties.  

The NWI classification means absolutely nothing from a regulatory perspective and is notoriously spotty in accuracy, but it's a good first hint that there might be something there to look at if it shows a feature.

So I know that the Los Angeles area is notorious for being "impossible" to cashflow.

If that is the concern and the threat of prison is not deterring that behavior, I don't think the threat of losing a state license will be effective.My partner is from Illinois.