I think the biggest issues I've had in the past with other programs is that it's a one size fits all and that's simply not the case.

Did your lender present you any options for continuing forward or you simply can't get approved for a loan without being a permanent employee?

I simply budget 5% of incoming rent for maintenance and 5% for future capital improvements and manage the properties as time goes and as things come up.For example, when a tenant moves out, I will look at the property and determine if any rehab/upgrades make sense at that point.

The only thing we are a bit confused on is he said you can simply "back out" of the deal if you change our mind...but how would you just "back out" of the contract if there is nothing actually wrong with the home?

You would simply create a new LLC and transfer ownership, incurring no taxes during the process.

And we all know this simply is not true in vast majority of cases. 

Should I just patch the nail holes and patch paint them? 

IMO this is simply to create more opportunity/work for the attorneys representing tenants.

All the sweat equity finally dug me out of the hole and I was ready for some rentals.

Then whenever a good opportunity arises, you can simply write a check out of your credit line and purchase in cash.