Investing with foreknowledge that property values are falling seems like a timing problem or at least a situation where my offer would be reduced to reflect this coming change.As to how much to put in as a down payment that depends more on your numbers, your risk tolerance, ability to get financing, cost of financing, etc. 

@Emanuela HallIt all depends on your long-term goals, your reserves, and your risk tolerance. 

I appreciate everyone has a tolerance for utilizing leverage.

Preferences for control and involvement, risk tolerance and investment objectives should all be considered in your decision. 

However, the more we thought about it, the more we realized we do not have the risk tolerance to rent out the illegal basement unit and would rather make it legal.

Quote from @Robin Simon: Its definitely dependent on a lot of variables, personal situation/risk tolerance, etc.But high-level, I would say that there can certainly be a balance - sometimes people forget that when using hard money or any sort of financing, for some reason you need to "MAX out leverage" - i.e. do a 100% financing for a flip or a max cash-out refinance etc..However, most hard money lenders would be totally willing to do a lower leverage loan (and would probably prefer it) such as 50% or 60% LTC instead of the usual max amount. 

So it's not an outright zero tolerance ban but described by the city council members as getting a reign on the unlicensed hotel operations and commercial activity in DC.  

Also, think about your risk tolerance and whether you prefer the stability of long-term rentals or the potential for higher short-term gains.

Between our equity in properties and money in savings I believe we could comfortably acquire two to three more houses, we just need to have a conversation about risk tolerance I guess.

Something, or the other, you need to know more specifically what you're doing and where your risk tolerance sits in what you're not going to do.