Bottom line is if I can tie this up for 1.2M i know I would be able to sell for about 1.7m+ after a few years, or should I cash out refi, what would that look like?

If your goal is a large portfolio, KC may be more appropriate because as you mentioned, you will always have ties there.

The last thing an owner in distress needs is some rookie tying up their property for months, and then can’t close, leaving no time to sell before the foreclosure auction.  

I was fortunate enough to rent out the basement for a while before my wife and I tied the knot.

What other opportunities are you giving up because your cash is tied up in this project?

The rehabs I have done in the past were all do-it-yourself so the cost was much less but there is so much here, I won't be able to do it all.Even if they accepted a 30-40k offer, I would have alot of cash tied up in this and if the ARV does not come out, the refi may not work in my favor. 

Things to save money on here and there are painting yourself if you can do it well, light fixtures, GFCI (you need one but not every outlet because you can tie them in with each other), tearout.

It sounds like your rubbing it in their face or tying to prove them wrong. 

I imagine having separate checking accounts for each property so that all income and expenses are tied to each property to make taxes easier, expense/repair tracking etc.

Are they tied to the property or the tenant.