I've read about 203(k) loans, and they seem like a good place for a newbie like me to start.I wanted to get the community's opinion of 203(k) loans (pros, cons, traps, hidden gems), and also to ask how I might go about approaching the owner with an offer?

Airforce museum is indeed one of the gems in Dayton!  

Then it's becoming a master of quickly sifting and filtering through all the garbage to find the gems. 

I definitely recommend reading as much as you can in multiple genres/categories (especially leadership and personal growth...Extreme Ownership by Jocko Willink was insanely impactful for me), and you'll be amazed at what gems you're able to pick up from even non-finance/non-real estate investing books. 

Great location, seems like a gem that will need sweat equity.

Your LL was a gem and did all he could.

I walked the neighborhood during the 2008 recession and realized this house was a short sale gem during a time when nobody was buying homes.

Be prepared to be shocked by the low, low price that rehabber will offer him to buy the gem. 

Not every investor has the time or desire to search and underwrite hundreds of properties to find the hidden gems to acquire.

I think there are hidden gems but sometime stop and think outside the box.