I spend lots of time driving so this would be very convenient.

I was a renter in Minneapolis for ~ 6 years, the biggest thing for me was location.I would gamble on the Blue Line Light Rail expanions, as it will allow better transport in and out of downtown to those further out.

I also think it would be pretty nerve-racking to take that money with that guaranteed return and gamble it on the uncertain.

If so then they will probably have cars, so the time of commute becomes a convenience.

Don't want to gamble $500 to just inspect a property.

As you are the neighbor they may see it as you helping to solve a problem for them.As for living next door to your rental there are pro's and con's just like everything else in this biz.Tenant showings will be really convenient for you but 2AM door knocks will be convenient for the tenants. 

The buyers really don't care about the actual square footage, but this is just a convenient way for them to renegotiate the price. 

It seems the cost of re-financing the mortgage is a gamble as to whether I could re-coop those costs by going this route.Has anyone been in a similar situation, or have any suggestions on how I could get started?

I want to impress upon real estate investors that there are no certainties only probabilities and to assess the probabilities you have to consider the macro as well as the micro...investing without probabilities is gambling.  

Feel free to reach out when it's convenient for you, I'd love to help you out.