Are there any potential risks or downsides I should keep in mind before proceeding?

.$275000 with 25% down, taxes $4080, insurance is 3000 yr and rents is $3800 month, Water $400 mth. 

I’m under contract with my latest flip, the proceeds of which will pay off the heloc that I use to buy and rehab properties.

That would mean splitting the sale proceeds.

@Lauren Ruppert  Cash out refi only in the husbands name which will take the ex wife off the financing/title and use the cash out proceeds to pay out what is owned to the ex wife.

Take the proceeds and invest in a highly trusted Syndication or fund and enjoy the passive income.

If so, I would consult an attorney on the best way to proceed forward.

Any advice on how to proceed would be greatly appreciated as I'm new to this. 

The auction price seems to assume that the proceeds will be applied to repay the first mortgage and the second mortgage.

Weirdly, you may actually be able to get better terms and/or more LTV on the refinance if there is debt on the property as lenders have rules for max cash in hand (max proceeds you get at closing) for cash-out refinances.