I would pay the sellers mortgage since it is the same amount as my 1st.

I am very new to this site and the community as a whole so please be nice as I am just trying to learn.

Starting with the question of whether you can subdivide the parcel without paying off your current mortgage, the  question is what is the home on the smaller parcel worth, rather than focusing on the current ARV of $325,000.00.

They claim it will boost property value.It might, but I feel like that is should I should have known about prior to purchase and I'm also unsure how the city can do this with out permission or paying for it.

did they want both people on the loans to live on site?

You'll also pay income taxes along the way on the operation of the property.

Is there a way that I could submit properties to someone and pay them for doing the comps for me? 

I have experience raising capital for down payments if you are prepared to pay investors at this level.

If they don't pay it in full, then you continue to market it and offer it to the next qualified applicant.

Haven't seen the other two come to fruition...or if they have, I haven't found out.Demand might be really high right now, but it would likely be dominated by people trying to find someone to pay the full contributed capital for worthless positions in failed deals.