I asked three banks can I use another VA loan (#3) so long as I don't exceed the VA cap amount. 

The better part of those two stories is that there was actually a cap rate listed.....................Uhhh nope!!

What will it cost for cap ex, management (when you grow and want this), regular maintenance, taxes and insurance (if not in mortgage) vacancy allowance, eviction costs, turn around costs to make the units rerentable. 

I have been emailing back and forth with an agent and I received this email  and now I am confused as to why the tenants are being difficult.

High cap rates, but watch for the fool's gold(a listing with an outlandishly high cap rate, for instance- on those, you'd be lucky to attain half the cap rate.)If you're not planning on having your boots on the ground, I'd say don't start with a property needing tons of rehab- better to start with a high-quality and high-functioning property, build your team, and then go for a rehab if that's what your goal is. 

@George Skurtu in my part of the country its extremely difficult to get a property rezoned.

You're in a great position coming out of a cap gains tax free proceeds.

If you go for a 2-4 unit, you can use an 3.5% FHA loan up to 1.3 Mil, but the rental rates will have to justify the appraisal, which can be difficult sometimes with rising value. 

CapEx is difficult to predict.  

Or they can ignore your offer.Some people wont put a cap on their escalations at all.Also the fact that you are escalating over other offers, does not necessarily mean you will be the winning offer.