Obtain proof of verifiable income, which you then verified?

It you think you can re-rent it in three months, then let her pay 4 or 5 months rent to buy out of it, with part of that being a credit for the security deposit money, assuming there are no damage deductions. 

In other words, if you wait until the end of the month and realize they haven't moved out, you then have to start the eviction process which would make the time before they move out and a paying tenant moves in longer.

First home will be with the VA loan so I have to homestead it and then after the first year I am refinancing then turn around and do it again for the 2nd home, but I wont have to wait another year because I will have the rental history at that time.

You want something easy (set it and forget it), but then mention multifamily and hiring property management.

If rent is $1500 per unit then $3000 a month for 18  months. ($54,000).Then it is agreed that the contractor has a 10 % equity share on the property also

Then you could use an FHA loan. 3.5% down for FHA. 5% down if you plan to owner occupy a property with a conventional mortgage.

Even if your sister is his mother, giving up a 2.75% interest rate, giving away 250k of his equity to pay off someone else's debts (even a family member), then having to downsize but have approx the same mortgage payment doesn't sound fair to him at all. 

I then called the loan officer and left a voicemail with no return call. 

If you were well networked, and could get a great deal on a fixer and then tackle the rehab, that might work, but much of L.A., Orange, and SD counties definitely have price to rent ratios that are not favorable for cashflow.