I increased my rehab cost to include the holding costs you mentioned.  

Our market has seen a lot of appreciation but I’m seeing a current cooling with longer days on market and an increase in price reductions.

Unless you're planning on significant appreciation or rent increases this is likely a loser, although ultimately I would decide based on the potential internal rate of return for the duration of the investment, to see whether you can invest that money for a better return elsewhere.    

The closer you get to Boston, the more you are competing from an investor standpoint with investors who are seeking portfolio diversification and appreciation -- both of which increases costs.In my opinion it comes down to you what you're looking for.

As long as there are separate entrances and sufficient privacy, make sure you're within code. 

This will enable you to increase volume.

Why doesn't the ARV increase by the exact amount of the repairs?

Read, listen, and meet...you're likelihood of being successful in real estate will increase dramatically if you just do those three things.

The refinance would increase the mortgage every month, but I have room to work with on the property so it would still be running cash flow positive.  

If I would be able to increase the rents and then refinance after those 2 years into a conventional loan at a much better rate, it would cash flow about $175-$200 ish/unit/month at that point.