If the difference is more, you need to find the receipts for all the improvements you did on the property to reduce the amount of actual gain as much as possible. 

If the investor had to sell right away for $240k, with closing costs and commissions, they would most likely lose money.The other key point is without any improvements, the new appraisal will be $205k, the price you sold it to an investor for, not the $240 comps in the area.Wholesaling works best if you can find an off market fixer and the rehab the investor puts in forces a significant improvement in value.

I'm very handy and have experience with doing minor rehab work (new kitchens/bathrooms, flooring, paint, landscaping, etc), so I'm not afraid of a deal that needs some improvements.

Immediately adding capital improvements.

Flipping houses seems ideal since I worked in home improvements for 5 years, including owning a construction company as a general contractor at one point.I never initially invested in a multifamily because, in my area, they are all in bad areas.

Check your credit scores online - see if there's things you can do to improve them. 

I've read that the interest from the cash out refi mortgage is NOT tax deductible UNLESS it is used for improvements for the home.

Here are few questions that come to mind..What kind of improvements/renovations did you make while you were actually living in the home?

This is my first house hack and never dealt with this situation, and don't want to incur with any other expense from beginning when I could be using this money towards improving the rental unit.

Perhaps provide proper ventilation or does it have to be removed completely to avoid potential issues?