Again, the area really isn't a slum, it's just a poor town.

And they are often blissfully unaware of how much renovations will cost and therefor drive up the price even if the listing is in poor repair.

Perhaps a good place to start is finding a few lenders who offer competitive financing terms and products in the markets you are targeting. 

We spent a little more then usual because we wanted the finished product to be hi quality and we spent on nicer finishes, design and staging.

The property will be paid with by residential lending products and personal money, but how is the business part of this plan be established (i.e., creating a legal contract for rent/finding tenants)? 

He knew how to do the work but was a poor business owner which showed up as bad money management, among other things.

Commercial loan products that just underwrite the property and not the borrower.

Instead of competing with the guy in Nebraska for his $100k deals (disproportionately for broke people with poor credit, especially if they're calling you in California for a mortgage), why not let him have all his $100k deals, and take his California $750k referrals (where >5% down and great credit is more likely anyways)?

Either way, you need to find a commercial lender offering you a product that suits your requirements. 

It refinances that VA loan into another loan product therefore restoring your entitlement.