They lived there for about a year without incident.

I think what both of you are saying is that likelihood (or probability) is less when you are not leveraged (fewer units) , The impact could be more severe than if you leveraged and owned more units Let me quantify Basis From example above $300K start with $50 K houses / Rent $750 Expenses (%50) $375 ( you still have taxes and insurance regardless if you carry a mortgage or not) Appreciation 5% Option 1 Buy 6 $50K houses free and clear Starting equity = (300K value – 0 Loan Balance) = 300K Income = $750 Expenses (%50) $375 Cash Flow $375 Times 6 units = 2250 Month (same as Mr Duncan Demo) Option 2 Buy 12 $50K houses ($25K Down, $25K Financed) Starting equity = (600K value – 300K Loan Balance) = 300K Income = $750 Expenses (%50) $375 P&I (25K at %5 for 30 years yields monthly payment of $134 Cash Flow $240 Times 12 units =$ 2880 Month Risk assessment / Management While the probability of getting a bad tenant is more with the greater # of units, The IMPACT would be less: Risk Analysis Hazard : getting a bad tenant that late/skips on rent Effect: you lose one months rent ($750) Probability of Incidence (PofI) = in our example 1 in 20 (5%) Option 1 PofI = 6 units *(.05) = 30% chance Impact + (-$750 cash flow ) -> Net cash goes from $2250 to (2250-750) $1500 a (%33) decrease Option 2 PofI - 12 units * .05 = %60 chance you get stuck Impact = ((-$750) cash flow -> net cash goes from $2880 to (2880 – 750) 2130 = 26% decrease So while the chance Is greater with multiple units , the impact is lessoned due to the other income streams.

After we settle, the seller informed us that around 1/2/15, a biting incident happened between the dog and another tenant. 

Tenant agrees to pay for cleaning the drains, including toilet drains and pipes, of any and all stoppages, except incidents created by roots or structural defects.

In doing further research since the incident however (as a new landlord, in hindsight I realize I should have researched it sooner) we have learned that it's such a rare breed that it's not on most insurance companies radar, but is just as vicious/ferocious with a history of many fatal attacks and should be excluded.  

Where you may be required to take out the underlying lien to protect your interests (and that of your investors/lenders) holding funds available for acquiting costs (foreclosure, attorney fees, title search and costs of disposition) should be viewed as a fixed contingent cost of one incident per five to six loans initially, and then allow this reserve to float to about five per cent of the number of loans in the portfolio.

I understand that the caregiver has been faithfully taking care of the rent for the tenant and had helped in the past as well with out incident.

But even if it is break even or slightly positive, do you want a property thousands of miles away where you are one vacancy or one weather incident from a very negative situation?

What aggravates me about this situation is the HOA never communicated anything to me personally about the trash in front of the property until yesterday when I received an email of the incident and a fine and a required meeting with the board.My management team told me the trash from the rehab would be hauled away, not just left in front of the property in one of the two parking spaces.

Improve upon them and that will allow for larger projects with minimal incidents.