First American Exchange recommends that taxpayers build in a “cushion” by identifying properties that are worth less than what is permitted, in case some properties are later determined to have a higher value than what was originally estimated.4. 95% Rule.

I thought I’d maintain a 6 month minimum cushion in the business before moving on to (and saving for) the next property.

The property in question is a hoarder house and not a polished MLS propert, so I thought I would give myself a cushion so I can provide myself adequate time to inspect.

When you sell a property your proceeds at closing generally will be 8-10% below the sale price due to 5-6% realtor commission, settling escrow accounts, county deed recording fees, etc.At 80% LTV you can get the mortgage insurance payment dropped, you open up the possibility of other non-FHA and non-owner occupied financing, you give yourself a cushion to sell if needed, and you reduce the possibility of being upside down if values pull back.  

On the other end of the spectur, I feel you can get a little more aggressive on the upscale properties assuming you know the area as the larger margin spread creates more cushion. 

At this rate, you would need to put down 35-40% to break even in terms of monthly cashflow, with a slight cushion for some minor repairs and occasional vacancy.Another challenge is the acquisition cost: typically $200k per door, which could go up to $300-350k/door in desirable upper-middle-class areas.

So long as there is enough equity cushion to absorb any market shocks.

If you tweak the financing right - 40% or 35% down, your CoC return goes up and you still have equity to survive a downturn, and you have more cash in the bank as a cushion, or buy another one.5 units starts commercial property in the eyes of a bank. 

I'm looking to do flips to raise a safety cushion for when I start buying rentals.Chris, I agree, there are many of these people around. 

The cash flow on the 5 would certainly out perform the 4. 5 units also spreads your monthly revenue out over more tenants giving you more cushion from vacancies.I'm curious about the reason someone told you to go with 4 units.