Certainly not afraid of it -- the government red tape is Partly a question and difficulty removing a bad tenant is probably he biggest downside - that goes for any property though.   

To me this is very market dependent and product dependent.. in our Market some developments that are red hot that Lennar owns they might only offer 5k on a 600k sale.

A whole sea of red flags waving, this is wild.

It’s 100% refundable if you find a problem so you’re waving a huge red flag when you fight and die on this hill. 

If a PM doesn't have pricing on their website, that is a red flag. 

But there are also some real challenges, like dealing with lower tenant quality on average, the extra red tape, annual inspections, and the longer time it takes to get tenants placed compared to the open market.

Though fee schedules vary by company, generally speaking, you'll pay more up front for checkbook control and less over time, since the full custodial companies will have transaction fees not to mention the red tape of going through the custodian for all transactions. 

Understanding their cash flow is critical.I especially like your idea of communication clauses—non-responsiveness is a huge red flag, and setting expectations upfront can save a lot of headaches later.

In my case the prospects claimed to have never heard there was any problems with pit bulls which was also a red flag to me as everyone knows this.

Melissa DSCR loans are business purpose loans therefore there is much less documentation and red tape to deal with vs conventional financing.