We offered 407 and asked for closing costs.

Selling the PropertyIf your parents decide to sell, they could: Sell As-Is: At a current appraisal of $350k, they could walk away with a sizable profit (after transaction costs like realtor fees, taxes, etc.).

I am slightly confused about your numbers, though...is the $215/SF the construction cost? 

I paid about $1500 in closing costs between title, appraisal, etc, but the original loan was wiped out in favor of a new lower rate. 

Sounds like you need to have a relationship with a couple of good contractors, 40k for vinyl siding sounds high, what was the material cost.  

But for large multi-family, that amount hardly covers your legal fees for one transaction, let alone down payment, due diligence costs, lender fees, other closing costs, etc.

Today it has good cash flow (~$6k/month using 49% expense ratio) and is up ~$1m above costs.  

Multiple people including myself have tried to caution him of the the true costs but he's been repeatedly dismissive and has made it clear we give him motivation and he wants to prove us all wrong (whatever that means). 

It saved my quite a bit on interest costs.

Insurance-  replacement costs.