The issue I'm running into is that I'm thinking of investing in my hometown area - where I no longer live but still have family - and I believe more emotional perceptions may be dictating whether I think I want to invest in one area over another.

Not sure how sophisticated guys in that space are, and not saying that in a bad way.

They are Accredited and I am not, but qualify as 'Sophisticated'.

Most sellers will not touch a third party note, but there are some more sophisticated sellers and brokers that will do so. 

Everything is perception. 

My question is, what, in the experience of you more sophisticated investors is the best strategy for my first investment?

Most sophisticated buyers will understand. 3.

I'm hearing demand for houses is high but inventory is low, would have thought fewer sales would result it appraisers sitting around - just my perception.

The majority of our deals are for accredited investors, though we have some for sophisticated investors from time to time. 

If you want or need greater sophistication to change the LLC Agreement later on, that can always be done and/or reviewed by an attorney pretty easily.