We are both wanting a slower, less chaotic pace of life and are finally ready to take steps towards real estate investing in the Boise area.

For the life of me I can't figure out how to make the numbers cash flow with a 3-5 year balloon payment that he casually suggested. 

We could save a ton of money over the life of the loan, if we were to hold it for the remaining time.I also discovered that we would break even very quickly on the ARM, in roughly 9 months.

The only downside is the monthly PMI which you are stuck with for the life of the loan.

I have had plenty of good rentals, but please consider how things can go out of control and consume your life and money. 

Next, I read @Scott Trench - Set For Life, it really intrigued me even more about the benefits of house hacking a multi family property.

Find a good inspector that is trusted by professionals in your area and get a good pulse on the effective life of your big ticket items (Roof, HVAC, HW heater, etc.) and calculate out how much each will cost to replace, then do the math backwards for what you need to put aside for CAPex and maintenance. 

With FHA loans, the mortgage insurance is higher and will remain for the life of the loan.If you are married, best route for your plan would be to use a HomePossible, then FHA, then have your spouse do a HomePossible, then FHA.

Documenting and pushing concerns raised over health and safety issues is also a classic leverage-move played by scam artist tenants.I'm not saying the tenant's concern is unfounded, but tenants asking for over-the-top precautions is going to add substantially to your costs and timeline.    

If the property has any health or safety hazards, VA will require that you fix them before moving in.