It really depends on what kind of yield you can safely and consistently produce.    

Even though ACH transactions can transfer money in as little as 1 day, it still can take 48 hours to get rejects on some transactions, so the safe bet is to hold all transactions for 48 hours before forwarding them.  

I'm not sure that positive cash flow at $400 a month is a safe enough bet. 

You may need to add much more to be safe. 

I have found that when I am just staring out on something, it is healthy to challenge my assumptions and "discount" mysleef a bit to err on the safe side. 

Check them out at: http://renovationfunders.com/investors/866This is a very safe way to make money while learning to invest in real estate.

Realistically, you only need to collect 50%-70% of rent to get an awesome return on your money so it's just as safe of a risk as a place that you need to collect 95% of rent to make a desired return. 

I understand it is very important to learn as much as you can about your potential tenants, but you want to make sure to not cross a line.I'm not too sure of the legality of the situation, but to stay on the safe side I would never recommend asking someone about another person's credit report.

Is it even worth not spending the extra few hundred just to be on the safe side?  

That said it is safe to say that a lot of people who purchase in their backyard or out of state are not using the best practices for due diligence or working with preferred parties.