I too would be extremely cautious in trying to apply that exemption. (3 units or less)  It is a big bag of worms.

You actually just gave me some great insight here to be cautious of.

I'm new to this and I pay cash for everything with no lender money so I think I'm being overly cautious on which deals to move forward with because I have never gone through a DSCR refi before.  

However, I think we need to be cautious and use 2019 occupancy rates to be safe.

But even then, I am super cautious and plan only to spend truly extra money.

If you are talking about long term buy and hold I would be even more cautious about investing in low income neighborhoods, unless you have talented property management to handle that market of tenants, and other potential problems that come with them.

In addition to the other advice you received, be especially cautious with Section 8 - if you have a lease in place and take a Sec 8 voucher holder, often you are locked in to charging them only their tenant portion as stated on the HCV contract, not any additional RENT on your lease agreement.

I might be overly cautious then.

If the tenant has lied about something be very cautious before signing a lease with them.

To be overly cautious you should probably consider increasing your required return on your equity on these projects too because the income stream is more volatile than a higher class property would have.