We now have an insurance carrier that covers water & sewer line failures on all those we hold title to.We have some properties that we have 'sold & hold' 5-6 times.

This is very helpful @Mike D'Arrigo - i am in a midst of talking and reviewing multiple TK options.The more I am getting into this, the more I am realizing that I have to be on the lookout for these red flags that you summarized.I have, in my opinion, talked to some nice operators that seem to be dealing only with A/B neighborhoods and fully renovate and sound very trustworthy but then the margins are not very favorable (around 7 COC).

But if you price the property to low, then if anybody ever gets audited red flags will go up very fast. 

Just as an initial look though, that 3% looked like a red flag to me given the rent roll and purchase price.

Many carriers will not insure any student housing unless they tenants are going for a Masters or PHD then they do not care about them being a student.

By the way, he also charged me an extra $800 over the contract price, because the city inspector made him hire two people for the three days where he had the concrete trucks or dump trucks sitting outside waiting, to put traffic cones and wave flags to direct traffic when one lane was partially blocked. 

I always respond the same day, so if they are not responding to you that is a red flag 

If you do that may be a red flag.

Is this a huge red flag?

Rafique Karim If the seller notes the borrower wants to do a DIL and only wants $2k that sends up red flags as they could take the DIL and then get an agent to sell it or sell it to an investor.By the way I am not far from you if you want to get together for coffee sometime let me know