As a senior associate at a "Big Dog" group, I recognize that the market dictates the margins.

Your profit margin after refi has to include the new mortgage $320,000 @ 3.96% over 30 years = $1,520 per monthYour $1040 - $1520 means you are negative $480 every month.Not a good way to start.

Become informed, sure - but most tax considerations are 'on the margin' - we shoot for 15+% returns, sometimes as high as 40% and for us to do that, the tax considerations really don't affect the actual decisions, if that makes sense.

The $150k margin is huge and this might be because this is a 2nd and there's an underlying 1st that you have to account for.

The main issues i see with this idea are:1) Splitting utilities is going to be very expensive and most likely kill any real margin 2) Actually get permission to split the home, there are however seperate entrances and windows so there might be hope.Any Input?

The profit margin to a GC is typically 20% so why would you want to pay 50% of your profits rather than just 20% contractor fee?

I haven't dealt with bankruptcies and am only marginally familiar with the implications. 

The other piece is the square footage - I am building town homes right now, 1250 sq ft - the cost jumps up because there is no marginal cost savings - just more kitchens and baths per square foot. 

You will have marginally better luck with a working link

There is some work to be done to make sure everything is in good working order but profit margin is good for them.