I was at the gym and overheard a gym member talking to the trainer.

and so they may not fully understand some of the information they're discussing, but when he mentioned Garrett Sutton and implied this is something he believes, it made me wonder whether or not I missed something and if this is something new. 

This implies house hacking a duplex to quad.  

Sub 100k properties are a different chapter all together; my theory is that a property value (which is comprised from land and improvements) for a total of 100k implies negative land value, because a 1000 sf structure has some intrinsic value that can not go below 100k as long as it is functional.

This implies the $200/month cash flow in unlikely to ever be worth more than the $200.I recommend all investors start local but you seem to be adverse to that so I will go with another one of my common assertions: The only Midwest investing that makes sense for most Coastal So Cal/San Fran RE investors is true MF (5+ units).  

These financials would imply an 8% for this particular property. 

other areas because of this massive marketing by how to trainers and the low bar of entry for every 100- that fail at it . 500 replace them.

Given that it has been ~ 8-10 years after the last crash, does this imply  that this city has no good appreciation potential?

At the end of three or five years you would have to pay that off in full.Unless their offering something better than implied by what you wrote this doesn't seem very exciting.

You imply there is a pre-payment penalty ("Buyer may cash out anytime after the first 5 years").