The reason has to do with a base line effect, a couple with a stable income that is required to qualify for a mortgage will usually make enough to qualify for a 200k house.

Another possible option would be to do a cash out refinance to get some of my rehab money out of the property and only leave my 10-20% downpayment (whatever the HML lender requires to purchase the property)I would love to know if this is possible or if there are any issue with the plan, especially in the refinancing into a primary portion. 

The property does require some serious updates, but it definitely has good ARR value based on the money that I paid. 

The lender and brand will require experience when buying or building a hotel asset.  

The following advice and techniques may be useful:Educate YourselfBuild Your NetworkDirect MarketingUtilize Online PlatformsDoor KnockingDevelop a Marketing FunnelBe PersistentEducate SellersNegotiation SkillsSeek GuidanceIt is important to keep in mind that successful wholesaling frequently requires perseverance, ongoing education, and strategy adaptation in response to personal experience. 

I'm assuming the spouse is required to work for a legitimate business and receive either W2 or 1099 from that business, but is this the easiest route to take? 

@Brandon Warren Provided you didn't exceed 14 days of personal use after "placing the property in service" (e.g. making it ready and available to rent) converting the STR in June 2023 doesn't disqualify your property from meeting the IRS requirements for STR....

HEre is a guide to each city's requirements: https://azrtr.org/compliance/Overall AZ is pretty STR friendly, but of course you need to choose carefully as you already know.

Most work this way: Rates: 10% to 14% (Most Deals are 12%)Terms: 1 Day - 24 Months (Most Deals are 6 months)Fees: 2-5 points(%) of loan amount paid at closing (Most Deals are 3 points(%))Minimum Loan Amount: $50,000 (For loans less than $200,000 we charge $2,500 minimum)Max Loan: 65% of After Repair Value(ARV) 100% Rehab Financing Available (Require 20% of purchase price down payment or cross-collateral)Closing Timeframe: 48 Hours - 3 Weeks (Most Deals are 10 business days)We have private lending partners throughout the entire United States that cover the following states: AL, AZ, AR, CA, CO, CT, DE, FL, GA, HI, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OH, OK, OR, PA, RI, TN, TX, UT, VT, VA, WA, WV, WI, WY.

The requirements, costs and regulation is different in every state.