I understand I have to find the right loan and do the math, but is there really any other downside to the FHA and that additional insurance cost? 

It is only fair that you pay them something in a situation like this and you need to consider what this is costing them not only in hard costs but in the inconvenience and lost opportunity.

It costs $300 a year in MD to maintain an LLC. 

While mortgage rates are a non-issue for you, the challenges of rising insurance costs and market fluctuations might deter other buyers, potentially lowering competition and prices.

I attended several of his webinars, mostly no/low cost where he books legitimate industry companies and speakers.

Seeking stable, long-term housing can lead to longer tenancies and lower turnover costs, which is what many Section 8 renters are after.There are, however, disadvantages to take into account.

The $$ I will save on the closing costs can offset the slight negative cash flow that I may encounter. 

It's important to understand if this can be corrected or if you are putting off the decision to lose the liability which only costs you more time and money.

Does anyone have an approximate cost per sqft to build new construction.

Unless specifically allowed or required by Section 8, this is often illegal both for the tenant and the landlord and you will often be required to sign a document to that effect.