Looks like a nice town, but one that probably has limited economic prospects.   

I think the limits only apply to what the Section 8 program is willing to pay, not what you can charge.

With the limited info that you provided, I personally would keep it in my portfolio as long as the unit is cash flow positive and the outlook for the location and overall rental market is positive.  

We've mostly used 20% - 25% down payments on 30-year fixed to lock in low rates for 30 years, but this limits our purchase power.   

Additionally, the limit for VA loans in much of the country is less than $500k (like $437.5 or something).

If their maximum bid instruction is acceptable to us, we tell the lawyer, as a courtesy, if we plan to bid higher than their bid instructions, and we immediately bid a dollar higher than their minimal bid limit when the sale comes up and the lawyer representing the foreclosure entity bids the minimum amount to start the sale.As another courtesy, I also talk to other regular investors at the sale whom I have done business with or whom I have another business relationship.

From what I have learned so far, with my limited experience, you are accounting for a potential protracted vacancy, and should consider allocating some capital to update units when they turn over.  

You can house hack sure, however, your options are limited by that type of loan.

This is one of those sit back and relax, go do something for a couple days and check back within the contract frames.I know it is nerve wracking but you don't own the place yet so your level of control is limited.

I cater more to occupied because I like to modify or reinstate these loans which is much easier to do if the occupants are still in the houseAnother thing to consider would be the statute of limitations.