Lenders love this due to the guarantee of funds if the borrower dies or defaults.When flipping homes I’m not generating any passive income, all my money is tied up in the properties I’m flipping.

You cannot discriminate against children, but you can certainly discriminate against low income, poor credit and/or poor life choices.       

Ideally you've already talked to the bank to make sure you know how much you can borrow. 

The ability to invest using a VA loan is limited as the borrower must occupy the property as their primary residence.

I realize that I'm an out-of-state borrower but a 35% down payment on a NNN is pretty low on the risk scale I would imagine.Can anybody provide some guidance or recommendations on this?

Your choice. 

It sounds like you are borrowing 100% of the purchase?

Scenario:-168k note at 10%-20% down on the original purchase-Borrower can’t qualify for a confirming loan and the note is ballooning in 6 months.

You are going to borrow $170K for real estate, which doesn't pay you anything, and live there.

Can you borrow against the land to pay off your primary residence and then sell the land to minimize capital gains?