I only have 200 mailers out and consider the conversion ratio to be very strong.

I'd also be renovating the bathrooms as they are quite outdated.The layout allows for this conversion, and I'm thinking 2500sqft/3br/3ba/2car has a significantly higher ARV than 2200sqft/2br/3ba/3car.

Open to conversations

Since it's low in the back the contractor bid the project to install an injector pump for the 1bd/1ba detached garage conversion to tie into the adjacent house's system. 

Cost per lead and cost per conversion are very important to this business.

It will be easier to get on a call and discuss because this can be a long conversation

Exactly it - it is that process of moving the property from a corporation to a pass through entity that will trigger that gain, and it is NOT the conversion of that entity for state law purposes to an LLC that triggers the gain.While you might think of this wholly owned S-Corp as "just you", for tax purposes it is entirely separate from you.   

I personally wouldn't go as far as to call them shady, but there's definitely been some fees and hurdles that weren't exactly laid out during the initial conversations and I'm in no way questioning your use of the description. 

To me, this would have never been the conversation a few years ago when rates were more comfortable for the average investor (likely 5% and below), but it is the reality we are in now!

Never engaged in conversation.