Furthermore, after having a dog live in the house for 3 years there is almost certainly animal urine that has soaked through the carpet into the subfloor.

Are inspections needed before and after the work?

Go after the tenant. 

If I can park the 388k ($415-27k) for one year at CD rate of 4.5% and then est 300k (after paying cap gain/depr recap) at 3.0% (assume CD rates lower) that interest income of about 24 months net of ordinary income tax is about the same as my current mortgage.Trying to play devil's advocate and think why selling this year does not make sense. 

After reflecting on a strategy someone used to buy 15 short-term rentals off-market in just 12 months, I thought of an idea.

After doing what I felt was enough research—even though the sales pitch was a bit pushy—I decided to move forward.Their pamphlet outlined several guarantees and provided additional details.

Here’s the situation:Purchase Price: $540,000Down Payment: 20%Mortgage Rate: 7.125% (30-year fixed)Monthly Expenses (Mortgage, HOA, Taxes, Insurance): $3,706Realistic Max Rent: $3,000As you can see, I’m currently short $706/month even with max rent.

The property will cashflow around $500 a month after all expenses.  

@James Landsford I would wait to do the remodel after tenants move out before listing it for sale.

As someone mentioned, the only thing passive about real estate investing is the tax treatment.