However, it can also turn into a money pit and you could lose many months of rental income.

I would not purchase a negative cash flowing property unless there is a 100% guarantee that the property will appreciate enough to make it worth losing money every month (and there are no guarantee's in real estate).

Owning a multi is a great plan, but you don't want to lose it through rough economic times so insulate yourself against those downturns with solid reserves.  

With my knowledge of the market I thought to myself "how can i lose?"

The floor keeps the rate from falling too low so that the lender doesn't lose money on the loan.  

You’re really losing sleep at night over taxes when sitting on that much money?

My offer was rejected partly because the seller does not account for cap ex, repairs, vacancy and management.The homes show that actually but I can't think of a polite way to say that.Without accounting for them the cash flow looks higher, if you do account for them it loses money at the price they want.I gave them the deal analysis from BP to make my case.Any thoughts on how to work with this? 

I'd have concerns of buying high, then moving back home or to family or to next job and being underwater when I wanted to sell my house and losing a lot.

I am about to lose my W2 income and my wife and I are trying to buy our second investment property.

Your gross is currently $5940/month, so NOI would be $3564 a month on actuals.  20% down at 3.95% for 20 years (it won't qualify for longer-term) is $5551/month so you'd be losing about 2k per month.