The only options provided is move in specials or driving down rental price.

So are least options still a thing in Texas? 

What other option would be suggested rather than DSCR? 

I think you are correct in your thinking - a lot of lenders right now are pricing 30-year fixed rate and 5-year ARMs essentially the same, with only the slightest benefit to the ARM option - generally because there is a very low probability priced in that rates will be higher in 5 years. 

ADU additions in SFH areas are typically getting values of between $50k and $100k which is less than these additions cost for a hands off addition.  

You have a few options for cash-out refinance and from the information you provided it should work.

The best option I see for you, if you can't get the line of credit, is to partner with one of us local rehabbers that have experience to make sure that $70k is legit and keep the project moving on time and on budget. 

He noted this is likely the best long term option as I should have no other issues moving forward.I am confused and a little shocked as the inspection report from two years ago came back as structurally sound.

Good schools and great neighborhoods typically means higher purchase price and lower cash flow.

They are 2 bedrooms units though and typically does attract different tenants than 1 bedroom units do.