SOP for Nationstar is to put any short sale that goes under escrow up on Auction.com as an attempt to recoup as much of the loss on the short sale as possible and still having a safety net of original buyer's offer as a reserve on the auction.  

However, as a debt-only investor, most are going to want 10-18% percent return, safety in the form of a first or second position lean on the property, and a solid deal, given they know what they are looking at. 

In your case, since you are in Oakland, it is more complicated as you need to consider the safety of the structure & materials due to the Bay Area being prone to earthquakes.

At that time we could do whatever we want for work and I have considered using leverage at that point to build a big real estate business with the cashflow safety net in place. 

To belabor my comment above and several times in the referenced thread, your safety will first come from getting to know, like, and trust your borrower.

If not, should I be using a 60% rule for extra safety when expected rent gets below a certain level?

My family has been in the real estate industry for over 30 years dealing in both commercial and residential and the best strategy as far as safety and profitability goes (that's what matters) would be through tax deed auctions which is what i have dedicated myself to now.

When the lease expires, or if the tenant will release you, just write a contract with the buyer, have a good attorney vet it for safety, and you can do it yourself.I expect you can get a TX contract from FirstTuesday, or Carlton Sheets, etc.

Repairs could be a lot less, im just throwing a safety number out there.

Developing a safety net/emergency fund is a good idea for anyone, but especially if you have kids.