Just by increasing rent a few hundred dollars per month, it's possible to increase the value by a significant amount and refinance out your capital fairly quickly.

As someone who has done hundreds of these deals, I must say I find it odd that the owner is demanding this. 

Check with Jeff Stein at CBRE capital markets in Texas.You likely really need a capital markets mortgage broker than knows which lenders might have an appetite for this and how it needs to be packaged before showing to them.You have a history with your local bank but the mortgage brokers have connected with hundreds and in some cases thousands of lenders.

It might cost a few hundred dollars, but if you do it wrong, you've lost a lot more than that.

Those can be  few hundred k alone to replace.     

@Haley Powell good luck on your upcoming transition.First of all there are hundreds of lenders and loan products out there, and not every lender offers everything (for example FHA loans like you are interested in) Whereas, a mortgage broker will work with many lenders, and many products, and a good one will be able to find you the best rates and terms that are available.

I know I'm not the most productive agent out of the hundreds they deal with, but they answer my questions as if I am.

Any decent house I can buy for ten grand or less that makes me several hundred a month in cashflow I usually buy .

There are many hundreds of unscrupulous "contractors" over there that will rob you blind.

So I did, and I saw that the local high school was probably a couple of hundred yards away, so I decided, "What the heck.