Instead of selling my townhome and using the cash to fund my next deals (my assumption is a sale would leave me with a profit of between $50-$60K depending on final sale price, fees etc.), I am considering using my equity instead via a Home Equity Line of Credit (HELOC) to fund the next deal.  

Run raw land comps, adjust for demo and profit and see if I can make an offer and sale it?

As to your questions, it *might* be that your market like many around the country are just truly NOT profitable when ALL costs are considered.

They care about what the deal looks like, is it profitable in the event they have to take it back. 

so basically I am looking for my first deal. Found a house that looked like it was half way flipped with a for sale sign. Called the number and a lady answered, she said her husband had a heart attack and can not fini...

For the right conditions, it looks more profitable over time than managed timber stands. 

@JeffreyHolst I was wondering about that because often times investors talk about using their strategy to make a profit.

We believe if everything goes well we will make worst case $$50 best case $80k in profit.

I would add some additional marginal value for him selling the units furnished (which helps me with the AirBNB budget).

Have you tried private money, credit unions, smaller local lenders or portfolio lenders (they keep their own loans--don't pass on to Freddie/Fanny.)Of course you could sell the property, take a profit, and do another deal.