The lower the class, the more reason to stick to your requirements (which should match the market).

I would continue looking in the market as good deals do still exist for those willing to do the work.

I’ve “heard” you could live there for a year and then go some where else however you can’t pull out another FHA loan with the exception of moving somewhere to work or having an increase in family size.Any advice on what a good way to start is with no real capital to your name (to BRRRR) and no credibility to raise money?

This assumes the market rent for the unit I will be moving into.My goals from entering real estate are 1. add diversification in my investments (right now heavily invested in stocks) and 2. house hack, so that tenants pay part of the mortgageIn my current market, I have two options: a. buy older houses, renovate, bring the rent to market --> this will cashflow, but needs a lot of time investment which I don't haveb. buy turnkey properties: --> renovated and already occupied by tenants but may not be cash flow positive.I found a property that's type B.

I've read a lot of Marco's posts on BiggerPockets about Memphis and other turnkey markets, but seeing him in person was even more impressive.  

They are currently paying $1050 and the current market rent is $2000.

If we are classified as dealers under the tax code, it seems any profit a partner takes home would be taxed at their ordinary income rate vs. capital gains tax if we were considered investors?

The best advice I have for you is to find a growing market.

Are you planning to invest only in your local market, or are you open to exploring opportunities elsewhere as well?

I set the monthly rate based on Airbnb's suggested rate (market rate) and the 20% discount per month.