The one that is hands-on might take a loss but financial ruin is less likely. 

I guess the pros and cons would be local is a little more hands on for first time investors (less of a return) and I can house hack.

Most of the time you can take the hand sketch you already have and talk to them over the counter.

You cannot claim homestead if you do not live in the house most of the year (don't know the actual amount of time required off hand).

Hope you are in good hands.

The equity you're building up is still money you're building up, even though it isn't immediate cash on hand, just like if you put money into a 401K, you'd still count the interest you're making even if you can't take it out right away.

So investors can take the property off their hands and lenders still get their cash?

It will depend entirely on the class of property and the amount of hands on management you are intending to do. 

You can offer a check  when they hand you the keys and everything is out.  

However when you want to get boots on the ground and really do it, you'll need someone to hold your hand that's been there before.