After updating I would then be able to rent the place out for $1200 a month.Again, these are made up numbers, I'm just curious if this idea would work or is there something I am completely missing that would prevent me from doing this?

My Debt To Income ratio is currently around 50%, which prevents me from taking out a conventional loan.

For example, a hard money lender backs out at the last minute and never funds the deal so it never closes, or you do a final walk through and aren't satisfied with the condition of the house and back out, or there's a natural disaster right before closing that destroys the house, or any number of things that prevent you from ever owning the house after you sign the paperwork.  

Essentially, I would need to refinance out of a VA loan to conventional loan, ideally with 20% equity to prevent PMI.  

A seller would finance a property with defects that knowingly would prevent qualification of some other form of finance.

At Leen’s Lodge in Grand Lake Stream, Maine, a group of chief economists, money managers, financial advisors and officials from a Fed regional bank got together for a fishing retreat disguised as an economic retreat. ...

A little confused over the approach and do not want to create unnecessary work by doing something wrong.

This is equally important to the dumpster to prevent mold/mildew, etc.All exit strategies back on the table.

Won't help the current situation, but your landlord could get ideas from BPers to prevent this next month!

To minimise risk and to get some exposure to the world of development without taking any unnecessary risk I plan on starting out by sub-dividing and or re-zoning land.