If you want to talk risk, put down the PE talk for a second and look at commercial real estate, inflation, higher defaults, forever wars, growing china dependence and the economy and tell me that real estate would not be effected equally across the entire board when the house of cards fall, yet dividen stocks (this is a fact) tend to out perform the rest of the market due to hardships not really keeping people from drinking coke and eating at fast food chains.

One oh-$hit during rehab can eat into that very quickly.

I think the lender will probably require it I would be shocked if they dont.Also as you mention HML can really eat you up especially the rates in NJ PA and NY not so bad west coast were experienced folks can get 1 and 7 and only pay on drawn funds.. 

Because that mortgage payment will eat up almost 70% of all your available income.

These could even be in a market where values are appreciating quickly. if you get caught at the top of the market, have an event happen that eats into your reserves, get a bad tenant, or just about any other event could take you down.  

As a lender, we require flood insurance if the property is in a flood zone, which can eat into your cash flow if you want to hold the deal. 

New builds are a different animal than I am accustomed to for sure. 

If an animal makes a mess it stays on top . 

The only downside that I am experiencing is that the PM I have takes 30% off the top, so having different houses in different markets means lots of fees eating into my profit.

You can't eat equity and as much as you'd like to keep them it sounds like it'd be more beneficial for you to have some extra cash on hand.