Is it as simple as getting the site designed and engineered for the footprint, cleared and graded (all of which I am comfortable with), and then hiring a GC to build the building?

We then will either sell or keep it as a STR depending on what makes more sense for us. 

So if the house is worth 300k and you owe 200k then most you could pull out would be 40k (minus costs) and it would be a second mortgage most likely which would be expensive. 7.5-9.5% likely.But, you can put as little as 15% down for a conventional loan on a single family.

And then, you ask your soon to be tenant during their walk through, if they are familiar with that type of lock and how to use a paperclip or stiff wire to open it.

If you're lucky enough to get a free and clear property where the seller is willing to finance, this reduces much of the risk associated with seller-finance.I would make sure the title is then moved over to your name, especially since there is not a risk of a due-on-sale clause being triggered.

If we price it for what the comps show, then they are typically coming out of pocket every month. 

I would fist run the numbers to see if it is a good deal at the price and everything else, and then I would drive down the streets to see if you see any licensed contractor signs/trucks.

Then just ask: Hey, since you moved out of state I was wondering what your intentions were with this house.

But, given that he has a primary residence there already that he must leave (Army doesn't give much choice on location), if he isn't able to sell the property quickly for at least break even, and can't take a deduction for a loss, my thinking is to flip it to a rental (question is which kind makes the most sense), he should be able to cash flow given his monthly expenses, even if only $100/mo, then if he still sells for a loss in a year or two, he could take a deduction.  

Your wish list is more like a $350k property in Lakewood, Cleveland Heights, University Heights,Shaker Heights, et al.It's time to re-evaluate what is most important, and then work backwards to figure out the locations where you can achieve the desired result.