And just so we're clear, I understand the depreciation recapture, I am just unsure on the "nonqualifying use" regulation since the home was first a primary residency to begin with.  

Not all the section 8 inspectors understand this.

I understand that any cash that I put down at the time of purchase is a cost to me. 

@Harit Pat I also highly suggest teaming up with a broker who you'd want to build a relationship with and truly understands the ins and outs of different underwriting guidelines.

I do understand its may not be huge cash flow just yet but wanted to start building my portfolio. 

Although this might seem like a super exciting way to “get out” of your current situation, please understand that REI is a very competitive and difficult business.

I do understand I went from the top tier tenant that will pay the most for the perfect setup down to the unit that can be paid for with section 8 and will attract a lessor tenant or someone single / new young family / retired / disabled / fixed income etc.Here's the deal figures With closing paid , seller counters 10k above my offer, 6% VA loan, no points Does the property lacking those features make it a deal breaker ?

It is not very user friendly, it's very difficult to understand a lot of what it can do and what each setting means. 

Let me summarize to see if I understand the situation correctly.You bought a 5bed/3bath in a nice neighborhood.

This is contrary to my understanding but he is adamant that this is the case.