Even though there are multiple variables to assess here, what's the age of the property? 

You mention tax benefits.

As others mentioned, you're going to have a very hard time getting a loan when you're currently in default on any kind of mortgage, HML or otherwise.

I should mention my dad is a disabled vet as well and is maybe interested in growing a portfolio too so we could team up.

A close friend of mine worked with a client who snagged a few acres just outside of town near the North Platte River.. it didn’t show up on the usual listings, but popped up through a local contact who’d been hinting at a seller looking to keep things quiet.You mentioned it’ll be a three-year timeline.. that’s actually not a bad window.

If they aren't taller than two floors, you might not be able to go up.I thought about that and mentioned it to the Contractor.

With BiggerPockets Pro you can access a lot of great calculators & tools for doing exactly what you mentioned above.

If you purchased this property with conventional financing, then as already mentioned 12 months is needed to pull cash out. 

I personally manage my rent by the room property and yes there are some headaches, but as you mentioned it's one of the most viable ways to maximize returns in a high-priced market.

I should have clarified when I mentioned the housing is for individual veterans.