It also means avoiding a huge 20%-down investment loan up front, higher interest rate, inflated insurance and huge difficulty refinancing to get cash out at 70% LTV down the line.I know it is a slow way to build a portfolio but is this correct?

Office space and flex space, however, is VERY susceptible to the economy, whereas Self-Storage is recession proof and inflation proof.  

I would recommend you do this because your lenders numbers are inflated and you're not paying on the principal you could be in trouble in the future for refinancing.I hope this all helps.

Make sure you get a good scope of work and know your costs, depending on where you get your scope numbers - inflate them by 15-20%.  

Not sure what you end goals are, but if you have 55k sitting around not generating any money and sitting in checking account, it'd lose it's value due to inflation.

I sure don't.You do not need all the business out there to do very well as a broker or agent.There is a small percentage of the population that wants to sell themselves, have ultimate control, and generally have inflated ego's ( not all but some ).It's a numbers game whether a broker or an investor.

However, it seems like a waste to stick all of it into my bank account and make 1% on my money and lose money after inflation. 

There is no guarantee that the 600k ARV you're estimating will be there in 2 years so I wouldn't bank on inflation and appreciation like it's a given.

Also, your cost of doing business (taxes, insurance, etc) is going to increase 2-4% for inflation so why lock yourself into a 0% increase in revenue.The way I would do option 3 is charge $1,100 (market) for the first year and some higher rent for the second year. 

At 24000+ miles per year driven, the inflated price of used trucks, and the fact that we use them for business AND kid hauling/family duty, buying used didn't make business sense after running numbers on a long term cost/year basis: we would simply kill higher mileage used trucks before they made up for their cost.... and I know since I killed three used vehicles running my business before, kept good records, and examined what they truly cost me to keep on the road including diminished value when they were traded in broken.