Seems to me that, should my circumstances change so drastically that I need my equity during the term+6 mos of this Agreement, I'm eating into margin.

Either approach is fine, but it really depends on your goals and circumstance.

You need more information about your circumstances.  

In such circumstances, individual investors are limited in how much they can invest to no more than 10% of the greater of the person’s, alone or together with a spouse, annual income or net worth (excluding the value of the person’s primary residence and any loans secured by the residence (up to the value of the residence)).What I don't understand is the following: If my net worth and salary were exactly $100,000.

It's always a good ideal to seek a consultation from a CPA because every investor has their own set of circumstances.

This make me think the owners defaulted on a VA loan, but under what circumstances would a VA property become a Wells Fargo REO 3 years later? 

If you are uncertain you are not ready and not fully educated.Of primary importance is that you go in with the full understanding of the risk and worse case scenario are prepared to lose it all due to circumstances beyond your control.

IRS uses Fact and Circumstances to determine if the house is your main home.

(I know that sounds like a long time, but we had a presentation at RIREIG last week by an experienced eviction attorney who said a smart tenant or tenant with a lawyer could easily stay in that long in some circumstances.)I don't say that to dissuade you or to be gloomy, just to recommend extra care and consideration before raising the rents significantly on both of your units.

The worst thing you can do is be uncertain and let your circumstances dictate how you live your life.