If they lend to you at 70% LTV, they can still get all their money back even in the catastrophic situation of you defaulting immediately and the market taking a massive hit at the same time.So, if the market truly says your property is now worth 150k, the bank is comfortable with lending to you based on that valuation.Loan to cost is not generally a ratio used for mortgages - usually LTC is used in construction lending where there is value being added.

If something catastrophic happened to the property we would be out some money, but not all.

“If you are driven, focused and unshakeable, then a good landlord you shall make.”But, as a landlord myself, I’ve learned that those steely traits can be developed over time.That in fact, they must be if there is any hope of long-term success.Because you quickly learn that if you can’t steel yourself against the regular onslaught of events that the average person would consider catastrophic, you cannot grow a rental business.Once the work was completed on my first buy-and-hold rehab, there was a horrendous leak.

I've been toying around with the idea of demanding to hold 2- and 3-month deposits after a string of tenants (especially long-standing tenants from former landlords that we have acquired) caused major, often even catastrophic damage. 

Well, first Brett, HGTV producers manufacture a lot of "catastrophes" into episodes to make the episode dramatic.

Especially considering how many renovated properties have traded the last few years at ~4% caps.7 CAP would be catastrophic. 

Any extra costs will end up putting more move into the house than it’s worth... while not catastrophic, could be problematic.

If so, would a heloc be a better approach to have as a potential "emergency" fund to take care of surprise catastrophes?  

UPDATED STRATEGYBased on input thus far, here is my updated strategy:Use cash and a construction loan (if needed) to build and rent a 4th conventional unitRefi at conventional rates (original mortgage + construction loan + up to $900K cash out for a 4-plex)Build and rent 2 ADUs using cash outBuild and rent basement ADU with HELOC, construction loan, or cash outStart an ADU building business (there are at least 1,000 homeowners like me in Berkeley - I will meet each one) BRRRR small properties or syndications to cut my teeth with any remaining cash outConsider whether selling or exchanging makes sense once all rents are seasonedUse accumulated cash flow to buy smaller properties or syndications to establish teams in key citiesKeep my eyes peeled for jumbo cash out loans to enable much larger RE investments down the roadShield all RE investments from liability stemming from potential catastrophic losses to highly leveraged triplex in CaliforniaLastly, it will take a while but I intend to report back with successes and lessons learned as I move down my bucket list.  

@Amber Wills, The 1033 exchange has much more relaxed time frames, reinvestment requirements, and you can do it yourself with out a 1031 QI.Of course though, the 1033 exchange is only available in cases of catastrophic loss or forced sale or conversion (like an eminent domain action).