An appropriate strategy - particularly where you do not have land value to fall back-upon.    

In particular how does the realtor get paid if you are able to get a lease option agreement with the seller. 

If you are using 3rd party management this will be a non issue in most cases.

One particular strategy that interests me a great deal is short-term corporate rentals.

$3k in non-mortgage expenses sounds ridiculous... that's $36k a year.

Your friend is literally living below the landlord, one who's probably very particular about who comes and goes of THEIR property...

@Joel OwensI really like your idea about focusing on equity and rent growth and buy nicer new house.It is very hard to find good deals now a days, better to go with new construction home in nicer neighborhood.Do you recommend any particular Atlanta area or particular communities where we can find good new construction homes.

For that matter, I have yet to see anything on the MLS (I haven't found a good source of off-market opportunities yet) with a cash ROI above a 10-year treasury bond (once all costs are taken into account).I'm already heavily invested in other non-RE assets (stocks, bonds, etc.) so for me to go in on a property that needs rehab, management, etc., it better be worth the extra hassle.

Don't think that one particular out of state market will shoot you to success or abject failure. 

Even non-conventional lenders, most likely won't entertain this.