You want to make it very easy for the tenants to renew early (limits their leverage) and inconvenient to leave.  

Given the FHA limit of 468k, I am hoping I will end up with about 100k for renovation. 15% of this reno cost would be set aside as contingency fund to comply with FHA reno regulations.

However, you need to consider that over time taxes and insurance do go up, so if the margins are very thin in its present state with limited expected rental growth it might not be a viable deal. 

But remember,  if you have overall loss, the loss is limited unless you are RE pro. 

It will cost more to setup, but will save money over time as well as providing much greater control and flexibility to you as the account holder.

It is generated by real factors that can be researched and are quantifiable: NIMBY'ism, building restrictions, business expansions of many different sectors, rent control, etc... 

You can pocket millions or you can lose your shirt...in either case based on variables beyond your control. 

Just sounds like a lot to deal with on such a small property with limited upside potential.

The general consensus among those of us hashing it out, though, is that if he wants to use his VA entitlement, his options are to either 1) use it up to his limit and then get a 2nd mortgage to cover as much of the remainder as possible 2) OR to use his VA over the prescribed entitlement in which case he will have to come up with 25% of the difference between his entitlement and the purchase price.

@Tom Smith easily attainable if you invest it correctly.In syndication for example, the standard is an 8% preferred return (the limited partners receive 100% of profits until 8% annually is met), 70/30 split thereafter.