Now there was an increase in the bill to 1,755$ for 3 months.

I just do not want to take this possibility off the table if it could help us really get moving in terms of number of doors we have rented out (a 2/3/4 door rental is an exponential increase in our cash flow, compared to the single family home we are planning to buy first). 

With inventory tightening and competition increasing, what strategies have been most effective for sourcing truly undervalued properties?

That is assuming your DTI can cover the increased mortgage payment.If you have use for that extra $100k that you would get back right now then don’t wait.

When choosing a location, focus on markets with job growth, population increases, and a diverse economy.

The property value has increased quite a bit since then and i would like to increase it, but i wasn't sure it they would entertain it being that its an investment now and not my primary home.  

They can introduce you to all the local players you will need like property managers and lenders.Over time, increase your own personal knowledge and development with books, podcasts, and conferences on the topic.But finding a commercial real estate broker with a teacher's heart will go a long way to getting you started.To your success!

Also considering live and flip, or make our first home we buy an opportunity to increase our income as well (renting basement or part of the unit).

A fresh coat of paint in a modern neutral color and updated lighting can really elevate those spaces.Adding a deck or patio can be a great way to increase usable living space and boost value.

I definitely agree that rent by the room is awesome for increasing cash flow - again, it does come with it's headaches but with the higher risk comes higher reward (I've been doing it for almost 3 years now, it's really the only way to make the numbers work with little cash down on properties).From my personal experience, talking to others at meetups, and reading this post, I think there's definitely demand for specialized rent by the room property management.