Being that the loans are based on the potential income, would employment also be a factor?

Jake Clopton at Clopton Capital would be a good person to call to see if it's a match based on the size of the deals you want to do.

.-  Expand:  We can't expand at this location, and I have spent 3 months looking at every potential lot and can't find a space the right size, zoning or price to build on. 

Beyond the formal checklists: no evictions, 3-4x income to rent, prior landlord references, employment checks; I would also look at things like responsiveness to communication when we are setting showing, were they on time to showing, did they look me in the eye and shake my hand, did they show up to showing high?

I have the ability to get these units built at very favorable costs and there are no real comps I can find so I am at a loss for planning my development strategy with regards to the size of loan I could reasonably get.This will be my first project and my partner's third but he self-financed the two others.

In my small city (70,000 or so) we have a university with about 20,000 students with a nursing school, hospital, and obviously several mid size employers that I’m sure have people travel into this area for business purposes.  

Often times there are bedroom size requirements, residential sprinkler system requirements, among others.You'll want to then check the state regulation agency and review their requirements and licensing process. 

Average home prices I’ve seen are anywhere for 800 to 1 million for a home his size but in more updated shape. 

Are most landlords/PMs not contacting employers and instead simply trusting the paystubs provided?

With Electric Boat being a main employer in the area, along with the Coast Guard and Navy Base, it makes it a great place to invest!