One way to minimize risk is to wait for the "blood in the streets" phase to run its course.Brazil right now is heading that way. 

There's a lot of moving parts and margins are getting thinner.

However, if you follow my advice and use the LLC, you won't be using conforming residential funding as legal entities are not eligible for conforming loans, only "warm blooded" people. 

-------------------The market is hot for wholesalers...so they're pushing thinner deals and some investors are biting because they're speculating on appreciation. 

I tell everyone Blood or Bombs, if there isn't blood or bombs leave me alone, don't talk to me, don't look at me, it can wait, I'm busy.

There may soon be blood in the streets.

Donate blood twice a week and earn $800 a month.

Hey @Chris Farinella - great question, there are a couple of different reasons that others have provided but here's where it's at:- you're right, with debt financing the larger the mortgage the thinner the cashflow margin (pretty self explanatory)- even with all cash deals, if you buy a house that's $1M plus, you're not renting it out for $10k/month in rent (rent isn't correlated with property price, it's correlated with market rent for comps). 

I still purchased STR this year though, in the height of the market, but I only purchase where it's a recession-proof, the price now already appreciates again.Today, dec 2022, I've seen a lot of blood in the street, especially in suburb Single Family house that was affected unnecessarily due to rate hikes, as the price fell to the 2020 level, it's buying opportunity, wait for 3 4 years before selling it in 2026 could make easy 100k capital gain.

People buying STR are generally geared towards upper middle class who likely have careers where they are in some form of management and giving up control to someone else just isn’t in the blood, but objectively speaking, without emotion involved you really need to run your numbers.