Do they collect rent like an apartment complex or are they simply a contact point for residents?

Developing a new subdivision probably but not rehab a home.By the way since you asked above, in Coeur d'Alene property managers charge 8% of collected rents.  

If my friend fails to make Z number of payments to Wells Fargo I would have some “option” to step in and continue making payments and transfer the title into my name immediately (to then sell the house and cash in on any equity and just dump it).The motivation to do the following is about a $375 difference between my X payment and the rent collected.

And, as required by most states, the forner tenant would be notified of the status of their deposit, even if this means sending the notice (and then collecting it) to the last known address...the rental property.

Master Lease", the way I have heard it explained by David Tilney is that you lease the property from him from him and take a % of the money you collect. 

Also you may have a very hard time collecting on any judgment against the tenant for any rent/damages beyond security dep, so it usually behooves you to get it back on the market quickly.

Collect monthly checks via on-line, tenant deposit rent into a local bank, and etc.u.) rinse and repeatI personally prefer online rent deposits.I most likely miss a step or two, fyi

How will I collect the rent?

Everybody has got to live somewhere and collecting rent checks isn't rocket science. 

Not collecting rents, etc.You must hire a property manager which adds to costs and you cannot do any maintenance yourself so you end up overpaying for work to be done.