The equity market is a fine comparison, but the reality is if you think every 5 years you're net return will be 90%(not sure if this is pre or post tax) then you can choose that route but you have to mark it to that return annually which is a reach.

A lot of 'off-grid' places are not, which will lower their value and resale ability.Also, you are decreasing your potential market by choosing a venture like this..not everyone will find composting toilets as cool as you and I might.Having said that, I think it could be a great find, if it check all the the boxes.

Currently I and my business partner own 2 town houses, one is a 4 bed 2 bath.

so all put to bed here.

You have to make sure that whatever company you choose will maximize your profits. 

Other than that, you can prepare a simple notice letting them know that you thank them for applying, however they did not meet the criteria, and you can choose to tell them it was based off of their credit, and or background or simply just say that the minimum requirements were not met. 

Just be sure to choose a lender offering non-Dutch interest on the rehab funds, meaning you only pay interest on the rehab portion if you actually draw on it.

The unit consists of two beds, one office and one bathroom.

A HELOC is probably going to be at least 8% right now, so would you be making more than that on your money if you choose to take out a HELOC to fund the work?

As you already know how much money it makes, you can choose how much Loan-To-Value you want to pull to get the monthly payment that gets paid by the business and you pocket the rest.