The exact percentage is going to vary from lender to lender (unless you go with a traditional mortgage and that is dictated by FNMA and other government agencies).Your plan sounds doable.  

Remodel of space should be permitted and conform to any local regulations. 

It is also hard for a lender to quantify the value of "room and board" and as banks have to justify their loans to the government I think you may have a hard time to stick their neck out for you unless your room and board is somehow listed on your paycheck. 

It's really not something to worry about, so no need to sound the "big government" alarm.  

@Ryan Carter In California, no county will post the owner’s mailing address online because of the cited Government Code section.

When the DoD threatened a major reduction in personnel from Fort Campbell last year, it was met with heavy resistance from all echelons of government representatives on both side of the border which effectively shut down DoD's consideration of a major reduction.

Your very first step in the process is to study the state landlord tenant regulations in each state and determine which is the most landlord friendly.

Personally, I don't think I have what it takes to manage this type of risk, and for me this will probably mean staying out of an asset class which would probably be most impacted by this type of regulation... i.e.

"If you let it foreclose, you get nothing" ..and im sure the local HUD office would love to hear that he's collecting government subsidized housing payments while letting the house go into foreclosure.  

@William Brown It all depends on your local government.