Just to give perspective, a FHA approved 2 bedroom condo in the area I am looking sells for ~$200k, their unapproved counterparts ~$170k (15-20% difference).

I'm going to bring a different perspective based on my experience. 

What are some of the pros and cons of each, from a private investor's perspective?

I don't think the price is unfair, it sounds like a beautiful home, but most people willing to spend that much on rent would just buy their own home in NWA. 2) Even if you did find someone willing to rent it, there is a higher likelihood that they are in a transition of some kind (recently relocated to NWA, recently sold home etc) which means you might have to repeat the process of listing again sooner than you would probably want to. 3) If you are thinking of this home now from an investment perspective, consider the returns you are getting based on your cash/equity in the project--if you could sell the home and reinvest that equity in a smaller SFH or duplex at a higher cash-on-cash return, that would probably be the smarter move and give you fewer headaches over time.

Not often do we see a perspective  like yours on here.I agree the broke but kind-hearted can't help others financially the way they want to. 

Does that even make sense, or am I not seeing this from the correct perspective?

From a learning perspective and I am concluding, 1. a simple addendum to an existing purchase/sale contract saying seller can stay x days post closing, etc,etc, does not suffice at all...2. a best option is to move closing back, 3. and a last option is to create a "lease agreement" or "post occupancy possession agreement", I assume same thing. that needs to be written with strong terms of protection, and it is handled completely separate from the closing transaction.

Your options are limited both from a capital raising and asset management perspectives.

From a rental perspective, more doors are better to account for any vacancies.

While my intention is to keep the property long term, I feel that $5000 could be "better spent" from a short term perspective for something such as adding AC or using the $5000 toward another property.