Follow your gut here, this loan officer is misguiding you.The grey area comes in if you buy the property with the intention of occupying it, then you do actually move into the property as planned, and then a few months later some unforeseen life circumstance comes up (death, divorce, out of state job offer, etc). 

Use numbers that work for you even with unforeseen costs.

You can also work at it part-time so you can keep the lights on w/your day job especially if REI and MF is your passion because you will have unforeseen energy and enthusiasm to make that work. 

Real Estate Attorney costs, Architect, Builder, Engineer, Permits, Licensing, unforeseen expenses and fees, ect. 

I lean more towards the 2% deals because I like to be conversative in the event something strange or unforeseen happens.

Good afternoon BP,As we all know when taking on properties to invest in sometimes we come across some unforeseen costs that become apparent during the rehab process.

@Steve Vaughan sorry for sounding harsh yes on our small scale of buying properties for the most part it is not rigged like Wall street but we should always have in the back of our mind that there will always be unforeseen corrupt forces working against  us  whether it be someone trying to hide mold or bad foundations or insider knowledge on zoning changes yes we can choose not to buy something but when the facts are distorted(fraud) we will still be fooled just look at all the wholesalers trying to buy houses with empty promises 

I assure you its not the electrician.......He will probably just tell you that there were some unforeseen problems that popped up and they need more money to finish.........ha ha..   

as a contractor and investor i can tell u that there is no per square foot price on any rehab. i rehabbed aa 1200 sf home for 5k andput 15k into 900 sf home. unforeseen issues are what cost the most. anyone can put in a new door for 500 dollars, but if you find theres no header or framing is bad, you will now have extras. i usually find that every simple repair tends to have extras that you cant predict.

Here again this is my methodology, I'll never state that's it's right but it has provides me leverage to account for unforeseen expense after closings.