Yes, most of the reputable lenders have a min loan amount of 65k - 75k with a minimum of 40k - 50k of that amount going toward the purchase.I've been down this road before with a few investors who want to buy cheaper homes and what I can tell you is that - 1) It's not easy and 2) You WILL NOT like the rates, fees, and points.Think about it, what does a lender stand to make on an interest only loan for about 40k. 

Any advice on how to source reputable contractors in a specific area?

You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.There are over 20 real estate accountants on this site.

If you're solely looking to invest passively longer-term you're probably better off finding a reputable syndicator and investing passively. 

It offers a secure and transparent process for both buyers and sellers.NoteTrader Exchange: An online marketplace where you can list your note for potential buyers.LoanMLS: A marketplace for buying and selling mortgage loans and notes.FCI Exchange: Another platform where you can list and sell your notes to investors.Note Investing Forums and CommunitiesBiggerPockets: A popular real estate investing community where you can network with potential note buyers.LinkedIn Groups: Join groups focused on note investing and real estate to connect with potential buyers.National Note Group: An online community where you can connect with other note investors.Note Brokers and BuyersNote Brokers: Engage with reputable note brokers who have access to a network of note buyers.Local Real Estate Investor Groups: Attend meetings and network with local investors who might be interested in purchasing your note.Financial InstitutionsCredit Unions and Community Banks: These institutions may be interested in purchasing performing notes.Private Equity Firms: Some firms specialize in acquiring performing mortgage notes.I hope this give some direction regarding your situation.

Consequently, you could also have to gain to lease which is the opposite, but seen a lot less in residential. 

Once I heard tax savings, it pinged me to think that you should never invest money into real estate with tax consequences being the first reason unless you have to offset something.

You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.Good luck.

If you are putting your STR on Sch C and NOT providing substantial services, you will cost yourself money long term and risk the IRS reclasses your activity (which may or may not have consequences).Nonpassive does NOT equal Income from Self Employment automatically. 

The lender will know who the more reputable builders are in the area.