If my logic is terribly flawed please forgive me as I've been only looking into real-estate for two months.  

For that matter, I also know I wouldn't attempt a 5k purchase and rehab in my own town either.for buy and hold especially out of state  I have one rule that is think is so simple but so over looked.. buy at the median home price of an SFR ( if thats what your buying )  or as close to it or above it as possible this one simple buy box will preclude a lot of the horror stories.buying something for 50% or less than median one just needs to put simple logic to it.. 

But if repaired by third parties, we should expect higher repair costs.So the idea of buying OOS/Turnkey for cash flow really sucks, because the logic contradicts itself.

With high unemployment, I worry about preserving my savings, unless I can convert them into an asset that pays me enough to not worry so much about loosing work.Is there any sensible logic to getting approved for a larger mortgage than the bank would give you?

It's that simple.the logic you guys using fo not calculating all the appreciation dynamics that happened since 2008-2009. 

His logic and possibly his words convinced me that I didn't want to deal with out of state investing in this type of asset class.

They will be the some of the best qualified help in town.Your other option is to break the work into logical chunks and have specific people do that part of the work.  

Is it logical to wait until house prices drop or does it still make sense to ignore this and purchase a property now?

Take advantage of that time to learn.Trading paper is a logical next step when you're already familiar with other forms of trading.

You should use the logic of an investor, but there is little or no (financial) logic in choosing a residence.