I'm not concerned with the current LTV, the proposed CLTV, any market adjustments, the property's current value, etc. 

If your bank is at 25%, then you can go to a seller with the proposal of giving them 75% of purchase price upfront, then the other 25% at a refinance or later date.

I think FHA is really my only option that I know of because of my proposed DTI. 

If you do more than one a year, I propose getting a license and do one a month!

There is nothing wrong with what you are proposing, especially if you are living off the cash flow.

When we asked the other realtor if the tenants wanted to stay they replied with "They will stay on but current owner will not discuss proposed increase with current tenant".

@Alex Ea can you disclose your role in this proposed venture?

The town requires septics to be upgraded within 6 months of transfer of ownership so I had proposed an installment plan offer, doing a house every 18 months and refinancing out to BRRRR the money into the next house. 

This has been approved by the council etc, and I now have a class C quote of around $300k for the new build, including 10k for the foundation work.I estimate I will be able to rent this two bedroom standalone for around $1800-$2000 per month.I need to write a business case to present to the bank to get financing and so I need to figure out ROI etc.This is in a very desirable town with 0% vacancy.Any advice on how to get the refinance and what to include in my proposal to the bank?

If that does not work, you might be better off walking away with the 1/2 he is proposing if he does not budge.