., so hopefully their pricing is slightly better due to economies of scale with their other clients.

I postuatle that you need to take that into account if you actually want to make any money in this business.. unless you have the ability to scale greatly or buy large Multi like Serge.. you need some appreciation to have a profitable investment down the line.  

What type of capital is needed to be developing at this scale for an individual investor?  

Most having to do with economies of scale. 

The problem is that it is very difficult to operate larger scale in these rural areas.

Economies of scale are also a big plus with a preferred lender.The advantages of having strong performing properly leveraged no less than 50% to no more than 70% debt is using proper leverage.  

If you're having trouble getting deals then reassess your acquisition criteria and see if you can scale up on your quality and still project to make similar returns.

I'm know a lot here set up businesses but is it really necessary if you only invest on a smaller scale ... say 2-4 properties?

It's hard to find a fund that isn't a REIT to get involved on a larger scale unless you are able to put the downpayment on a piece of property there, Traditionally only the large hedge funds and pensions that have been involved in this extremely unsexy (yet, cash flow liquid!)

There are a lot of things you have to be careful of but they are the same as with a long term rental just on a different scale.