I guess I’m going to be a bit of a contrarian but here goes.  

@Jason Aurelius SawickiI would not take a 401k loan under any circumstances, so I guess you should wait

Obviously lots of factors in this decision but I guess the basic question would be how much you value your time?

I guess will have to see how it goes.

Based on the fact that other infill lots are not being developed, my guess is the area can not support new construction costs.As for your question on the builder, he will make his money on the builder/GC markup on the construction contract. 

He has a tendency to argue w/ contractors about stuff, then ask them to come back to fix things. 

Jeremy is right, if you have a good system then there's nothing wrong with buying out of state, but I'm guessing for your first one, the system is still in the works.

Again, I'm sorry that I don't understand the intricacies of how this all works, and I guess what I'm in search of is a bit of clarity and direction of how would you folks structure these assets and how would you go about insuring the assets?  

My guess is the houses are in class C areas because they had to be, for ARV and cash flow purposes, but are unlikely to operate at a high enough Cap to justify a buyer not just moving on an APT building instead.

Time would tell I guess.