If the household income is sufficient to meet your minimum criteria to rent, without counting the income you consider dubiously documented, then I would go forward with the leasing up. 

I agree Investing in local market will definitely be a less risky and more manageable choice.

There are too many cooks in the kitchen and the project and IRR suffer-Licensed professionals that fall into FINRA-based compliance regimes given their business model shun these deals because they're too small to generate commissions sufficient to cover the cost of compliance-FINRA-based professionals propagate reams of nonsense in the industry to justify paying layers of fees that are not needed.  

If you don't have sufficient deposit from tenant presumably you can file a lawsuit in small claims court or superior court (with attorney).Holes in the wall can get fixed in a weekend.

The budget of $2k is not sufficient.  

My thoughts on this is that it totally makes sense to make the improvements and go for the higher rent, but he is a very good renter and I know what to expect with him.I think if I get an answer to question number one, I should be able to calculate my ROI and answer number 2 myself.For major repairs it may be that you don't have a choice but to "back it into cost basis" as you say.

Can you tell me about your property in Burnaby and why it was a good choice for you?

Additionally (in my experience), the property must be sufficiently different from your other property that still has a VA loan on it.  

When you have a choice of paying the bank back now or later, take later.

It is your choice how to spend the money.