So then offer to pay him and do a profit sharing option.

You will then have a few options with that rent money....you can put it into principal or you can start saving it to purchase yet another property.

For a while she had a house with a rental suite and rented it out for extra income. 

It's an out of state property, so going to check it out for myself isn't a viable option. 

And the real volume is conducted by wealthy investors who have the option to build marketing machines and flip, hold, or wholesale deal flow at scale.

Loan rate/terms get complex once you hit that 5+ unit property, so you'll ideally want to work with someone who can help on both sides of your plan.I'd also consider MTR as an option for a $70K property.

Occasionally you can achieve cap rate compression for growth or the building comes with extra land for some value add but that's not a given.

I'd like to your feedback on two options I'm considering.

The extra insurances we need to hold, bonds, etc.

I actually had to get enough units where I could offer tenants multiple housing options when I purchased properties rented at way under market rates and then (an embarassing number of times) personally watch tenants that would "suffer" from a rent increase turn down smaller (but nicer places) or  nicer places in a less prestigious zip code (sometimes only minutes away) before I realized that I was hampering my ability to earn a living in order to subsidize the lifestyle choices made by a some random stranger that happened to live in a property I bought.