And historically our area is one of the most resistant to negative price fluctuations. 

Each and every flip.Normally people finance this 1.75% FHA fee, and I do not equate the fee to discount points because you take the hit when you go to sell & random market fluctuations between now and then 5-20 years from now are going to matter way more than 1.75%.But buying a property with the intention to sell it in a few months is very different. 

Here's my current strategy...Build up 30 days of expenses in checking account to handle short term fluctuations (following the YNAB rules).

This gives me reason to increase rents due to market fluctuations and inflation.

How will fluctuations in the economy play a role?

We saw this happen with the last downturn, talk about property value fluctuations. 3.

If his income fluctuates (which is pretty common for most of the self employed folks I know) or the building implements special assessments (most do at some point), your friend could really find himself in an even tougher spot.I'm sure his 3mm apartment is pretty nice, but it's really costing him too much based on his current income.

Ned,I'm not sure I entirely agree about the clueless commercial buyers, but perhaps I make too large an assumption on how other folks underwrite.Interest fluctuation is a routine fact of borrowing here in Canada, and most other places in the world, where mortgage terms - both residential and commercial - are definitively short in comparison to the U.S.A. (6-months to 10-years here in Canada with 5-year being the "norm").  

Natural gas is low right now but with the fluctuation in prices, that would be a deal breaker for me.Also, do you have property managment lined up?

What you have to be aware of is that Section every now and then will cut what they are sending 5-10% you, they fluctuate often.