While your imediate area may be tought to cash flow, I bet within an hours drive there are neighbrhoods that will make great rentals.

Your best bet will be smaller local banks.

I currently own a small construction company and I'm looking to start investing soon.

If it's a new construction freshly rehabbed it would sell for $225k-$300k depending on where its located but older houses that are newly rehabbed sell for $200k-$250k.From a buy and hold side I would never want to be higher that 65(maybe 70%) LTV and with this model I don't see why I would ever have to.

He is involved in the construction industry and has a few rental properties.

What would be my best bet.

With $3,000 budgeted (which seems high pending condition for just carpet/paint) and it being the slow point in the construction schedule you should be able to get some great bang for your buck there.

My partner on the other hand used to have a construction company in Las Vegas, but when the economy went down so did his company.

I know it may seem crazy, but I'm just wondering if the wallpaper doesn't come down easily (which I bet it won't because it appears to have been there a while) how difficult it will be to fix the walls.

I would consider buying a multi-family you intend to Owner Occupy (OO) and purchase it using conventional (bank) financing construction loans.