My wife and I own it together, but i may be able to buy her out and keep it as a short-term rental without spending all my personal capital.I’m looking for advice on financing options, buyout strategies, and any creative solutions others have used in similar situations.

The property will do very well over the long term.

Meaning we sell the home for $2.5 million (maximizing the $500k we can grow w/o tax penalty, leaving ~$1.2 million for my new home/property after fees and loan repayment), and the remainder of the profit (~$750k) will need to be 1031 exchanged. 

I can go Home Equity Loan route: HEL would equate to roughly a $600 monthly payment (dependent on rates).

I know the tax hit isn’t ideal, but I’m wondering if the long-term cash flow benefits outweigh the opportunity cost.

Quote from @Cosmo DePinto: When applying for a DSCR loan, can you base the rent off a section 8 tenant?

If you're house-hacking, you can put down as little as 5% (or even 3.5% for an FHA loan).

Option 3- If they have qualified for FHA; counter the offer to see if they can qualify for low downpayment conventional loan

Partial notes are just a partial note in the loan's yield (not the loan itself) and in most cases, a second position on the loan (both upside and downside) by contract terms with Aloha. 

The answer is based on your goals.Short-term goals are tough.