IMO, what might help is a letter from your attorney to advocate your position due to undue constraints as you were not familiar with the new route which was then unknown that needs to be taken, but that it poses additional risks or exposures, if such applies.

I agree with some of the responses here that you need to understand what you're getting in to, and most importantly understand the 'metrics' of every deal.If the numbers work, and you've minimized your risk by knowing them and gaging your deal by them, then you will be fine, regardless of market conditions.I agree with one of the posts here that just because someone is a loan officer, realtor, or banker/accountant, that does not make them an 'expert' in this arena.If you understand the numbers of every deal, and you know how to apply them, YOU become the expert.EVERY Time.Everyone needs housing, and rentals are a great start right now for newbies, since that market is going to be expanding as we go along here these next few years.People that could have qualified for a mortgage now HAVE to rent, so if your metrics are in order, your exposure should be limited and your upside should be more 'blue sky' than what may appear evident to others.Good luck, and Learn ...Scott Colley :D

Try to keep your total exposure to no more than 65-70% of the ARV of the house.  

@William Knights You mentioned off-market home buyer - I assume you are asking about using a broker for resale of the property.For the best market exposure, your listing should include an offer of compensation (aka co-op commission) that is competitive with what others are offering in your market, so buyer's agents have incentive to show it and sell it. 

If you hold a property with a tenant in it for some time (at least a year), when you sell that is not likely to be considered a flip.It is easy to put on the internet or in marketing materials "you can flip up to 3 houses a year" and not have exposure to UBIT. 

I was far too simplistic in my question, I understand the exposure if you can't sell before the principal kicks in or if appreciation stalls but if rates jump they can readjust the rate inside the IO period?!  

As your portfolio grows, you will find, depending on the size of the bank that they will want to limit exposure to you as a single borrower or impose restrictions on you like you described so it's better to have multiple options.

Thinking of buying a 5BR house in the city of Philadelphia and renting by room to 5 unrelated young professionalsThe house would be 3,000 Sq ft new construction and meet all forms of habitabilityNow here's my question - assuming more than 3 unrelated persons in a house is a code violation and worse case scenario that neighbors call or tenants for some reason call L&I1 - what is my potential exposure with the city.  

(Assuming the condo association  and a other aspects are good) I get the same sense from my limited exposure to Philadelphia that it too is probably not a good town for condos.

If they are willing to take on that much exposure they are likely going to be compensated by junk fees, high rates, or dip into your profits.