If a HELOC isn't an option due to Texas laws, you could consider a cash-out refinance with another property or a portfolio loan, even if you want to keep your current rate.

@Hank Bank BRRRR is probably want you want to do.Buy, Renovate, Rent, Refi, Repeat.Before you go all in and either find out you don't like being a landlord or you make costly mistakes, start with just the next one.You'll have some challenges with tapping the equity in the townhouse:1) What loan amount can you qualify with your credit & income?

Total profit less closing costs and commissions will be about 42,500 each or 85k total.I would for sure get a construction loan, may be worth approaching 2 or 3 different banks and getting separate construction loans from different banks. 

FHA loans require living in the home as your primary residence for 1 year after purchase.

Since agency loans don't allow you to put the loan in an LLC, ask your wife this. 

Quote from @Timothy Hero: I've brokered over 325 DSCR loans.

I see little benefit in the FHA as an option as long as the 5% conventional loans are available now.  

Quote from @Jaikevis Reams: In order to put a property under contract I need to provide proof of funds I know that I can get that from a hard money lender but I don’t meet there criteria for a loan approval what should I do? 

I did all of my loans with small local banks in my area and was always happy with the rates and service.

I'd need the interest rate to be roughly 5% to breakeven on an interest-only loan, and was considering a balloon payment in 5-7 years.