Time is your only limited resource.

You will also take a hit for it being a cash out loan compared to the purchase and a refinance loan where you are lowering the interest rate and limited to 1% cash out.

At least here in that pricepoint, you are limited to a SFH but, totally doable.

The refi amount will be limited by the relative contribution the refi would add to the debt side, and the NOI of the rent would add to the income side. 

Is there any limit on the % by which they can raise the build cost?

When I first applied I estimated my home value at 390k which would give me a line of credit of 62k at an 80% loan to value ratio. (390k x 0.8 - mortgage balance)The appraisal came back at 420k which great news however when I requested that the limit be moved up to 80% LTV of the appraisal amount (86k) I was told that the loan commitment had already expired so in order to get up to 86k it would need to be a new application and also I would not get the promotional interest rate of 1.99% for the first year.

Unless you have a personal reason to delay the sale I would sell.Also HOA sometimes limit rentals so if you decide to rent check your bylaws.

I would not want a business owner renting from me also having an endless cost hanging over their business that brought no future value.You might want to limit your expense to initial primary lease term and not the options paying the leasing broker.

To summarize, cons are that HOAs have control and can limit rentals/increase dues etc.

You want to limit as many future challenges as possible before you even make an offer.