What are these applicants offering to make up for being less desirable than other tenants?

I get the sense that option #1 is not a desired direction but more a begrudging one of frustration at "making less than" ____ amount.

Many STR owners have ventured into MTR to supplement their income and we have far more supply than we did 2 years ago.With your desired price range of under $100k inventory is likely to be very limited. 

All the emphasis and effort on renovations and inspections is ultimately an attempt to control the controllables enough to create a desirable home for a future resident.

I think I understand your desire to take out a low interest loan, then lend out that capital to your builder at a higher rate of interest, pocketing the spread as profit.- What rate are you intending to acquire your loan?

It gets more complicated if the base zoning is not compatible with desired use.

Not everyone has the time or desire.

Not all vacancies get filled, but the desireable ones certainly do.

If you have access to  large amounts of capital then you can set your refinance at a comfortable payment based on your desired return.

At the end of the day, perhaps choose the one you find most desirable for your circumstances.