That is not  meant as a criticism, simply that is not what they specialize in. 

Unfortunately, we've been self-employed in a non-real estate industry for a LONG time now and we couldn't document our income in a way that was sufficient for our lender - so we did a cash deal instead.I thought the equity in that property and in the home we own outright (about $256,000 in total equity) would be enough to reset the conversation for our next deal, but our lender says existing equity will always be overshadowed in our situation by documented income (or lack thereof.)  

Your post lacks important information such as your location, typical local cap rates, , expected cap ex based on condition and what your anticipated value gain may be.

I've been holding onto my W-2 income simply for the allowance of getting a home loan and realize once I convert full time 1099 my chances of getting the loan decrease significantly.

I want a property management team to start off with, simply because I don't know the ins and outs, and need people who make this their business.

You will simply have to just add these costs into your analysis to see if it is worth it.

With $300k of student debt hanging over your head simply qualifying to buy additional investment properties will be extremely difficult cause your debt ratios will be totally blown out. 

My time is simply more valuable being used in my profession.

There are myriad reasons why the rates are lower for a primary residence vs an investment property, but simply put, if the mess hits the fan, what property are you going to let go first, the one you're living in or the one that you rent? 

To simply buy an above average cap rate means you have to buy an asset at below market value.