There are numerous threads about sub to and many investors believe it is a high risk strategy (especially for seller) and believe buyers who use it “take advantage” of naive sellers.  

As you know, most residential doesn't work on cap rates, but if you are in those MF like you have then this is applicable. 

You can - 1) establish a trust for asset protection, 2) utilize the Homestead Exemption for property protection, 3) consider tenancy by the entirety for marital property (this might just be applicable to California, my home state)4) make sure you have adequate liability insurance for additional protection, 5) think about forming a business entity to shield assets, 6) and have proper estate planning for asset distribution.Seek tax and legal advice from experts in your state.

Something problematic they find that was undisclosed on your application (not saying you'd do this, just giving an example), title issues, entity issues, issues with the appraisal even if the value is acceptable...you can either bite the bullet and pay for the appraisal, don't move forward with the loan, or try and find a HML/PML willing to lend to you without an appraisal. 

The reason for this is that RE market prices are based on numerous criteria.

Two reputable termite treatment companies have recommended that my townhouse and all the others in our row of 6 townhouses need to be fumigated together.The management company and the HOA board of directors have been aware of the termite infestation in numerous townhouses in the community for some months.

I simply asked but how many qualify for a house around the median price point(this was for Raleigh, NC), he responded oh maybe 10-15% of the new applicants.

Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable).

My question is: how do you do that and comply with Dodd Frank, which imposes numerous regulations if you finance more than 3 properties per year to consumers who will reside in those properties?  

Most of us had to be this ourselves (with a little help from our investor agents, where applicable).