Any damages and loss of rent you should send him a final bill and give him credit for his deposit. 

I never have received a fine.

I've read a couple of ebooks on the subject; they are ok but not exactly college-level reading, at least not from a finance perspective.Would it be realistic to turn this into a full-time business and build a 100+ note portfolio of these things?

Also, as a finance professional, I can assure you that higher return is not necessarily better. 

It may be easier to find a deal in a place with older and more distressed housing inventory ... this is a fine balance, though, because if the neighborhood is too distressed, then you may have trouble selling it after remodel.

In the PF he envisions expenditures to be ~$4.9M with a final profit of ~$3.4M.

As a finance house shouldn't they be more versed on the different types of loans and how to approach this one?

Could use help making a final decision.

There are places who will do little; some that will assess a fine and then there are others who will make you undo all work that was not approved or permitted and/or put an encumbrance on title preventing you from selling the property.

@Michael RichardsonIn section 1 of your initial question, you mentioned structuring a finance plan that matched your current mortgage with a balloon payment.