The key is having enough monthly income coming from your W2 job and rental income to offset a catastrophic housing meltdown.

They are making a bet that they won't get involved in a catastrophic lawsuit that will exceed the coverage or be an exclusion of their insurance.

You can borrow to invest in the stock market, people don't because companies can lose 100% of their value, housing does not have this problem, because while depreciation can occur, a catastrophe like a fire, hurricane etc. has insurance.2.

But the big problem is what happens if the motors fail or the power goes out -- which is essentially a sewage going everywhere catastrophe.

I believe it tends to give me a slightly lower return, because the sponsor is going to be more careful, and if there is a severe downturn will prevent me from taking catastrophic losses.

Aside from a catastrophic recession, the equity isn't going anywhere while my units stay occupied.You can always refi again/later as values and rents go up.

The mortgage company will force it, and I’m sure you don’t want to self-insure in the unlikely event of a catastrophic loss.

If something breaks in the house I'll pay to fix it, I just want the insurance company to cover catastrophic events such as a fire that completely destroys the entire building.  

If you were forced to hold all, and you had a catastrophic event of at least $5-$10k, then what would you do?

The property I'm looking at is a SFR with a purchase price of $182,000.I think a lot of people mis-use/don't understand insurance - my personal mantra is to only insure against the catastrophic or the unknown.