this purchase was definitely more of a long term project when initially purchased but i believe still has some great ROI potential. 

Ideally, you're creating enough value to refi in a year or two and pull out your initial investment.

As far a cheap jobs coming in higher than initially quoted I agree with @Nathan G. could be justified if after the contractor arrives on scene there are complications during the repair... it may quite honestly be an attempt by your PM trying to save you $ and getting your property taken cared of.

You get the point.Since you are doing an IRR, you can compare both properties that you can cash flow but will have ZERO appreciation (places like Reading, PA etc) and places that you may have little cash flow initially but will have some or a lot of appreciation.When you do your IRR, all you do is pick the investment with the better IRR.

(You can just add them to you initial purchase price instead of putting down as rehab costs).

In this case, the initial equity built is huge.

However, not enough without financing to make this house complete and solidify what would be a good ROI when we would decide to move on and actually initiate conversation with the owners.Any information, advice, or comments regarding your experiences or personnel you've worked with to utilize a VA renovation loan would be super.

It’s probably best to keep business and family separate - the initial contractor was distant, distant family2. 

Paying a normal conventional mortgage along with giving them profit is significantly lowering your margins for you to make enough on cash flow especially after considering initial repairs and cap ex.

What I wasn’t clear on is whether or not the home inspection is used as a tool to aid in making the initial offer or if it the inspection is a tool to give you more knowledge about the house after you make the initial offer.