This reserve fund cushion is critically important to maintaining predictable cash flow.To keep down costs, the cash flow investor must do careful tenant screening. 

I would recommend running the numbers a few more times with more optimistic and pessimistic predictions to give yourself an idea of what would happen if...something goes south and you have to settle with smaller returns.

I would start with SF since you will be dealing with more predictable purchase and sales prices and more choices for your exit strategy. 

Just keep showing her the data, no starry-eyed predictions of the future, just compare numbers to what a 'normal' investment could do (based on actual historical data).

I remember reading an article that predicted something similar a handful of months back (I believe it was on Inman, I'll have to check).

They may look at “fair market value” or the judgment amount, no way to predict.  

The good news about this is, that it makes investing in Milwaukee very predictable - areas that have historically done well, have developed better in the last 5 years that the average, which brings predictability and low risk.I definitley agree with you on the economic outlook.

Nobody can predict what the future holds.

Phoenix has THOUSANDS of jobs projected in the coming years - in fact, all predictions are that we won't have enough housing inventory to meet demand.

But, as you point out, it eventually will be in that 5th year, if your prediction holds true.So, if I were confident that $15K is the correct repair cost, and also that 5 years was the likely time-frame, then I would wisely set aside that $3K each year as an actual expense that would come out of income and go into a separate CAPEX account for accounting purposes.I would then adjust my NOI number accordingly and recalculate CoC.