I have met with at least 2 contractors in my area and they say that materials are very expensive now and they fluctuate quite frequently, which makes it difficult to make reasonable estimates on cost.  

If the numbers STILL don't make sense, then it's very possible that in your market it makes more sense to buy existing and rehab than build from the ground up.The builder does a variety of work from custom to commercial to rehabs.

I lend in the 2nd lien position frequently, but my LTV is capped at 70%. 

The DSCR thresholds can knock your LTV down as well.  5+ opens loan options for 5/10yr Treasury backed notes, 5/10yr SWAPs backed notes with balloons, vanilla 30yr fixed, ARMs, Interest Only, etc... there are a variety of loan options out there.Then you have unicorns lenders... those that will do no DSCR requirements if your property meets the right conditions. 

You can learn a whole lot from a variety of great podcasts, including the BP Podcast, @Whitney Sewell's The Real Estate Syndication Show, @Brandon Turner's books on multifamily and much more.

My current situation will not allow me to move frequently but we make a good income.

This is a great question, and as a military spouse I see it asked really frequently.  

Do you frequent auctions?

There is a vast variety of homes you can invest in from under $100k with great a great return to expensive luxury homes you might be able to flip and get a good deal.

The longer you allow this tenant to stay and keep missing payments, the worse the situation will become (and the more money you will lose).There are a  variety of ways to get rid of a tenant (eviction is one, but it's time consuming and can cost a lot, and you need to follow the law and local regulations).