Having trouble creating a basic AWS AMI with Packer.io. SSH Timeout

I'm trying to follow these instructions to build a basic AWS image using Packer.io. But it is not working for me.

Here is my Template file:

{
  "variables": {
    "aws_access_key": "",
    "aws_secret_key": ""
  },
  "builders": [{
    "type": "amazon-ebs",
    "access_key": "{{user `aws_access_key`}}",
    "secret_key": "{{user `aws_secret_key`}}",
    "region": "us-east-1",
    "source_ami": "ami-146e2a7c",
    "instance_type": "t2.micro",
    "ssh_username": "ubuntu",
    "ami_name": "packer-example {{timestamp}}",

    # The following 2 lines don't appear in the tutorial.
    # But I had to add them because it said this source AMI
    # must be launched inside a VPC.
    "vpc_id": "vpc-98765432",
    "subnet_id": "subnet-12345678"
  }]
}

You will notice that I had to deviate from the instructions by adding the two lines at the bottom (for VPC and subnets). This is because I kept getting the following error:

==> amazon-ebs: Error launching source instance: The specified instance type 
                can only be used in a VPC. A subnet ID or network interface
                ID is required to carry out the request. 
                (VPCResourceNotSpecified)

That VPC and Subnet are temprorary ones that I manually had to create. But why should I have to do that? Why doesn't packer create those and then delete them like I see it creates a temporary security group and key-pair?

Furthermore, even after I add those two lines, it fails to create the AMI because it gets an SSH timeout. Why? I am having no trouble manually SSHing to other instances in this VPC. The temporary packer instance has InstanceState=Running, StatusChecks=2/2 and SecurityGroup that allows SSH from all over the world.

See the debug output of the packer command below:

$ packer build -debug -var 'aws_access_key=MY_ACCESS_KEY' -var 'aws_secret_key=MY_SECRET_KEY' packer_config_basic.json
Debug mode enabled. Builds will not be parallelized.
amazon-ebs output will be in this color.

==> amazon-ebs: Inspecting the source AMI...
==> amazon-ebs: Pausing after run of step 'StepSourceAMIInfo'. Press enter to continue.
==> amazon-ebs: Creating temporary keypair: packer 99999999-8888-7777-6666-555555555555
    amazon-ebs: Saving key for debug purposes: ec2_amazon-ebs.pem
==> amazon-ebs: Pausing after run of step 'StepKeyPair'. Press enter to continue.
==> amazon-ebs: Creating temporary security group for this instance...
==> amazon-ebs: Authorizing SSH access on the temporary security group...
==> amazon-ebs: Pausing after run of step 'StepSecurityGroup'. Press enter to continue.
==> amazon-ebs: Launching a source AWS instance...
    amazon-ebs: Instance ID: i-12345678
==> amazon-ebs: Waiting for instance (i-12345678) to become ready...
    amazon-ebs: Private IP: 10.0.2.204
==> amazon-ebs: Pausing after run of step 'StepRunSourceInstance'. Press enter to continue.
==> amazon-ebs: Waiting for SSH to become available...
==> amazon-ebs: Timeout waiting for SSH.
==> amazon-ebs: Pausing before cleanup of step 'StepRunSourceInstance'. Press enter to continue.
==> amazon-ebs: Terminating the source AWS instance...
==> amazon-ebs: Pausing before cleanup of step 'StepSecurityGroup'. Press enter to continue.
==> amazon-ebs: Deleting temporary security group...
==> amazon-ebs: Pausing before cleanup of step 'StepKeyPair'. Press enter to continue.
==> amazon-ebs: Deleting temporary keypair...
==> amazon-ebs: Pausing before cleanup of step 'StepSourceAMIInfo'. Press enter to continue.
Build 'amazon-ebs' errored: Timeout waiting for SSH.

==> Some builds didn't complete successfully and had errors:
--> amazon-ebs: Timeout waiting for SSH.

==> Builds finished but no artifacts were created.