Not a lot of our competitors offer this but it's something we can consider (but for us, it can't be in a rural area, the loan amount must exceed $150k, if we're using PadSplit income (or STR/MTR income) the max LTV is 75% and the down payment must come from your own funds). 

However, if you can identify a reinvestment opportunity that offers significantly better returns or aligns with your goals, selling through a 1031 exchange could make sense.

If you own 25%+ of the business paying your w2, youre still self-employed.There are bank statement/1099 loan program as well, which is what you have been offered.

I will also have my agent there with me to offer comps to aid in their appraisal if they are receptive to it. 

They would offer a more hands free approach, but eat up the profit in return.

@Brian Chadwick A cash out refinance might offer more favorable interest rates than your HELOC provides.

This might give a one-time (non-scalable) boost to cash flow, offer multiple value-add options, and allow the house-hacker peace of mind, via the assumed mortgage, in long-term breakeven or positive cash flow in the event that the value-add plans end up not being executed, and/or the person has to move out, and rent by the room or STR become unavailable for some reason at a future date.

@Tanner King learn how to work backwards on analyzing a deal, so you figure out the purchase price to offer to make your numbers work.Too many newbies think they have to offer asking price, which is not the case.

MLS, Made an offer I couldn't refuse How did you finance this deal?

Offer to buy them a few indoor portable heaters until you find a solution.