Ryan, where are you getting the idea that $1500 per month can buy James a $300,000 home? Not only is the payment on the mortgage more than that, you are not counting the FHA MIP fee, which would add another $200 or so to the payment, plus the property taxes, homeowner's insurance, and any HOA dues. Besides that, the $4500 you mentioned is not enough for the 3.5% down on FHA, and you also are not counting a single dollar of additional debt.
Aside from that, no underwriter is going to allow you to qualify based on rental income in anything other than a multi-family, If, on the other hand, you can find a condo for $150,000 or less, with very minimal fees and property taxes, you might have a point. By minimal, I am thinking under $300 combined for those amounts. Then, on top of that, James should have parents that still help him out with certain things.