The preliminary environmental reports came back with issues requesting that a full phase 1 & 2 were needed (super pricey, and still no guarantee), and that the lender was not comfortable proceeding.

If 4 & under, in an LLC, they may request a personal guarantee with 25% down and a bit higher of a rate. 

Agreed he will still need to sign a guarantee on the loan.  

So far I was quoted from Guaranteed Rate (BP vendor): 75%LTV max, 30YFR, 3.625% +2pts

Thanks to the VA Home Loan Guarantee, I did not have to put up too much money. 3 years later I moved out, currently renting that property and cash flow positive (basically covering my 2nd mortgage), and was able to buy my 2nd home under the VA Home Loan as well.Safe to say, I am in a good financial situation.

We scrambled to get a room for my daughter as the university would not guarantee housing (normalky they do).

That isn't anything you can guarantee will always be there or be there when you retire.

Best advice I can give it to talk to a local broker in your market, confirm with the municipality that it's a licensed rental (separate address is not a guarantee of this), and make sure your lender knows all the facts before getting too deep into the deal. 

I had a long talk with my husband about this, and while Section 8 is guaranteed rent payments on time every month in an uncertain economy, we just cannot support a system in which 1 family is paying $1200 for a meager 2 bedroom in need of updates and busting their humps to scrape do it, and their neighbor is living in a renovated home and using taxpayer money to pay for it.

Appreciation is never guaranteed so I advice you to stick to the numbers that reduce risk.