Ensuring Refinance Will Get Approved BEFORE Rennovation

[Account Closed]

Hi everyone,

So I bought a 4 bed 2 bath house in June 2018, now it's December 2018 in the city of Pittsburgh, Pennsylvania (Mt. Washington). The place isn't in that bad of shape moving in so I decided to turn key the property because I'm a student studying Mechanical Engineering which heavily prevents me from being able to deal with the house. 

I painted the walls in all the bedrooms and got tenants (friends from HS) to move in in August 2018.  I paid $90k for the house,mortgage: $646 / month, utilities: ~$350-$400 / month,  rent: $1650 / month, and only have 3.5% of the mortgage paid off.I'm well above the 1% rule even WITH me living in the largest bedroom (should've took the smallest bedroom).  

With that being said, I'm wondering if I should end the lease in January and start the BRRRR (mainly the RRR part). I need to fix my roof (lifted shingles) so I thought might as well renovate the whole thing. The comps in the area for a decent 1700 sqft, 4 bed 2 bath are anywhere from $130k-$180k. I would like to:

Replace the roof: ~$6k-$7k

Replace drop ceiling with drywall to increase ceiling height ~1-2 feet on first and second floor: ~$5k

Replace panel with drywall: ~$5k

Remove Wall: ?

Rewire electrical that was above drop ceiling: ?

I am eligible through the city of Pittsburgh's Urban Redevelopment Program for a $20k, 20 year, 0% interest loan and possibly an extra $10k for utilities due to low income. So I figure, might as well use it before I'm not eligible (hopefully soon). If not, I can use a conventional loan. I'm also a Marine Corps veteran if anyone knows any VA loans I may be eligible for.

The dilemma, however, is that I'm not sure if I'll be able to refinance the house, given that I own 3.5% of the property.  I'm wondering should I use a private money lender to pay off my mortgage so I 100% own the house, begin the renovations, rent it to tenants at approximately $1950 / month, then refinance my house?

I am very apprehensive about refinancing my house and it seems that not too many people talk about the minute details of it.  I've asked several bankers, realtors, friends and family about my situation and I can't seem to get a clear answer.  That's why I've come here.  Hopefully you guys can help.

Attached are some of the pictures from my place.

Paneling and Wall to be removed on right that leads to living room.

Living room

Kitchen

Above the drop ceiling in one of the bedrooms (needs to be rotated right):