You shouldn't have negative cash flow with a 15 year fixed conventional mortgage provided that you buy in the rental market "sweet spot" and don't over pay. The sweet spot is approx. 100k-150k purchase price. Those homes you should be able to obtain a 1% rent to value of the property provided you don't overpay. It's getting more difficult at the higher values as rent increases are lagging behind climbing sales prices, but I'm still able to do so. I just don't acquire as much inventory as I would like.
An example: a $150k purchase with 20% down leaves a $120k promissory note, at 3% for a 15 yr. fixed loan the payment in $506 per month. That leaves $994 per month, or $11928 yearly for insurance , ad valorem taxes, vacancy, management fees, maintenance/repairs, and other expenses. Insurance and ad valorem taxes should be no more that $6k. You should cash flow plenty!
To answer your specific question. Negative cash flow tolerance depends on the property owners overall financial picture. I haven't, but would do a negative cash flow purchase provided the upside was above average and my budget allowed the additional monthly resource outlay.
In the current market, I don't see a need to acquire residential investment properties that don't cash flow, there are deals that do! The 10% yearly appreciation won't continue and smart investors will have to evaluate acquisitions based on cash flow alone. The income tax advantage of depreciation is a game of pay me now or pay me later when you sell. Remember, the IRS doesn't recover depreciation deductions at the capital gains rate, instead it is recovered at the ordinary income rate which is usually higher.
