My wife not comfortable putting our house as equity, therefore we are utilizing other options to fund investment properties. 

There are actually THREE kinds of subject to transactions1- subject to existing mortgage without lender approval2- subject to existing mortgage WITH lender approval3- subject to existing mortgage as part of a seller financed wrap around mortgage.with #1 and #3 it’s in everyone’s interest to utilize a third party servicer, who collects and then distributes payments.  

Gave him 10 months free space rent and paid for all his utility hookups. 

I can only speak regarding structuring the deal as I have not utilized partners personally but it really can be anything that you want.

I have also utilized owner financing for longer periods of time, including personal residence and 2 barrier island houses on the coast of Florida.  

They were fine with my score (about 740), but have issue with the percentage of personal credit I am utilizing, so that discussion also petered out.Apparently, I have a lending profile right now, that is not attractive to mainstream lending programs.Any advice?

Is there a possibility of getting utilities to the place?

Does that include utility service to the house, a driveway, septic and well? 

Need more information surrounding why your current lender is suggesting they cannot utilize the rental income on your investment property.

Due to increased rates i did not refi so i did not get opportunity to see how an appraiser valued the half bathroom but the comps with same bathroom count had crazy valuation for the additional half bathroom.Taking under utilized space like a work area to add a br where the added br does not put you above the normal for the area can add value.Similar if a neighborhood is virtually all 3 br and 4 br properties and you find a 2 BR, it could be a value add to add the bedroom via new construction.