Rehab loan then refinance - best way to go?

[Nancy Jenkins]

I bought a house in 2004. Paid $99,000. Owe $94,000 today. It should appraise now for around $115,000-$120,000. In 2004 I was rehabbing it to be used for a daycare center - $14,000 cash flow per month. During the rehab (gutted out almost completely), I was in a bad car accident. It has been sitting gutted since Nov. 2004. I need to finish it and refinance it. I was unable to work in 2005 & 2006, so I cannot produce W2s for the last two years. I do have commercial property (FMV $40-$50k). My broker recommends that I get a rehab loan and put up the commercial property for collateral for a $20,000 loan, then finish the place. After the finish, the plan is to pull the equity out of the house to pay off the rehab loan and then refinance with a 30 yr. fixed rate loan. It is on an ARM. It will cost $5,000 to pay off this loan early. I plan to put it back together to rent out now. It should rent for around $800 a month. My credit is good - 700's. No late payments. I do have another mortgage. Will I have a trouble getting approval on a 30 yr. fixed, since I cannot produce W2s for the last 2 years? If so, do you know of another way to finance this place. I need to do something with it. Thank you for any advice you can give me.

Nancy