So as you get some serious equity, your return on equity is going to be diminishing rapidly. 

Appetite for residential with a lot of commercial lenders has diminished, especially with out of state borrowers. 

If you are risk averse then keep higher equity, that will diminish your returns, but limit your potential risk.

Your primary relationships should come first, but there is a point of diminishing returns even for high-priority activities.

You will get a lot of people who say yes yes yes and when it comes time to fill out docs for a deal your yeses will start to diminish. 

The laws of diminishing returns will almost guarantee over-payment.If you're still SOL... just figure out what the average market response to bedroom/bathroom counts is and ignore everything else. 

What are my options if rates keep ticking up and 5 years from now they are to the point where it completely diminishes cash flow?

That seems to me like I would be diminishing my negotiating abilities.

So the return potential diminishes further closer to 11.54% IRR with a ROI of 10.69%.  

If the fact that a DOS clause is/would be invoked if the insurance policy changes, I would walk away before potentially diminishing or even sacrificing coverage by trying to “skirt” the correct way to insure the property.