This is a whole lot of money to spend just to pull out about $50k.I have some private money loans I would like to extinguish and I have other opportunities that I would like to pursue, which is the motivation for releveraging.In the alternative, if I wait a few months I can get an 8% 10yr HEL (fixed) or a 6% 25yr HELOC (variable) from another local bank with no closing costs.Am I pursuing a bad deal?

I didnt know anything about it and when it was explained to me it sounded and seemed like a great alternative investment. 

Any alternate strategy recommendations?

You might want to offer to pay for a moving truck and 2 months of storage for their stuff as an opening salvo instead of cash for keys....

May I suggest an ALTERNATIVE?  

I suggest you simply explain the alternatives along with the consequences and when you do many if not most will opt for the DIL.

Here is how I use Zillow for comps. 1) Locate the property that your are comping on the map2) Set your search parameters to only show homes that have recently sold in the last six months (they all appear with yellow dots)3) Record the amount sold and the address4) Determine if they are truly comp properties (all 3/2's etc..)5) Pull data from your county auditors site and verify that the property sold (and that it was not a distressed sale)Or as an alternative...link up with a realtor.

Alternatively, there are more 3-4plexes for around 80k that are structurally fine, but could use 5-10k in TLC to make them more sellable, so maybe a total buy-in of 90k.

RUBS = Ratio Utility Billing System  An alternative to submetering

Alternatively I could build a 2500 sq/ft house on it for, say, $125 a sq/ft (estimate...I could be way off on that number), and sell it for $200 a sq/ft.