There is a great article here on BP that I read few months ago when I first started as well (and had the same question you had).Click HereIn general, most people would say be conservative and put in 1 months of rent, but that would totally depend on your property. 

Hey Folks,I am totally newbie here and getting ready to get my hands dirty with rentals.

It totally depends on what part of the "bellcurve" you're buying and leasing out. 

For instance, if one’s net worth is $500K, and most of its tied up in real estate, would it be a good idea to keep the next investment at $100K or less (20% of total net worth) from a diversification standpoint to prevent from devastating loss in the event something majorly goes wrong with the property?

My total take home will be $2700/month after expenses (PITI, trash, sewer, water, etc.)Addressing the second part, while the property still has tax abatement, I may unload it after a couple of years since the property should increase in value due to my additions and the gentrification of the area

Just gave a total of $30k worth of repairs.

Cash flow of about $600 total.

But, that's 2 properties for 8.5% down total! 

Also, that discussion was about  one year ago, so I need to get an update from them to see if the is still the case.Norman has never been a target market for me due to the increased commute to work that house-hacking would add, but this deal would allow me to walk into around 20K of equity based on recent comps, and increase my total cash-flow, from renting out my current house-hack.

That means you are losing access to at least 25% of the total value of the property.If you take on a partner, there is far less cost (if any).