On the surface, I don't see any major problems with allowing him to be employed as a private contractor.

Bottom line;  investigate local employers, available jobs, ideally new employers moving to an area so good tenants will always have good jobs to pay the rent.

Some subs but employing ppl to do the floor trim paint demo etc.

IMO not too many people take into consideration that when you are self employed, none of your benefits are subsidized!

My goal is to make enough passive income to “retire” in my 40’s ( 7-10 years) My wife and I are still employed, but my wife no longer can work overtime.We have money to invest in our first rental property, but should I use the Cares Act to pull money from my 401k without penalty and invest in more properties?

But, my town is also the state capital, near pretty major centers of employment and the highway.

My company already owns (we developed) an RV Park, a 6 plex, and several other single family rent homes that we are rehabbing at the moment.Also, once “self employed” how do you go about proving employment?

There is usually a higher business cost to use those experienced contractors who are properly insured and have a great track record.One of the few times I see investors get a great rate and high quality work is if either they employ the contractor directly so their jobs are the sole focus or they do lots of volume to give a contractor team consistent work.It sounds like you are playing in the one off space with an non-certified contractor hours away from where you are.

Calling prior landlords, verifying employment etc.. 

I know nurses employed at state run prisons who are state employees.