I'd try to fill at least a few spots to get some income coming in, and then do a rolling conversion to MTR as you have the cash to outfit a unit with everything an MTR needs.

As it stands now, the sweet spot in that area in the market for rent seems to be a little larger 2/2 house with large living area for guests.

Is she correct or am I spot on?  

It gets easier with each passing day to spot them.

100% agree with @Collin Hays - find a local manager, preferably one not too large or not too small, I would say 30-90 properties is usually a sweet spot.

Places like Memphis, Little Rock or OK are great spots to look and 200k will be plenty. 

If you do sell, think about where you’d put the money, whether into more passive investments like index funds or REITs, or possibly diversifying into a different market with better opportunities.If you decide to keep renting, you’re in a pretty solid spot right now.

But they had to jump through a dozen HOA hoops..eventually, the building got stricter on short-term stays.For single-family homes, if you can snag something with a scenic deck or quick access to popular spots, you’d be surprised how many travelers pay a premium for that “living like a local” vibe.

You’ll want to invest in areas that have tenant interest but also aren't on the extreme end of neighborhood quality—this means avoiding the very toughest spots, where turnover can be high and managing tenants can be difficult.

I know a lot of spots in Utah have very good REIAs.