Property is priced considerably lower there than here in the Denver metro area, which we expected. 

It just looks like you made an upgrade... adds a bit a character.One other consideration, if you install a high-CFM exhaust fan, consider moving it away from the shower, like over the toilet.

Sure, my monthly cash flow will appear to increase by $220/mo, which could increase my purchasing power (a strong positive), but I'm not sure if it's a wise investment. 

The VA loan limit for 2018 was increased to $453,100 for most parts of the country.

How much did your homeowners insurance increase when you added short term rental to your policy?

Cost of rehab vs. level of rent increase and payback period.2) Rent raises, how much and when to raise rents on both existing tenants and vacant units.3) What amenities to add, particularly how to handle laundry facilities.

If so, I still am not sure whether it makes sense considering that I would need to do the Refi at an interest rate over 5% vs. the 3.875 I have currently (i.e. does potential tax benefit make up for the increase in rate). 

Your significant other is very likely to remind you of this on an increasingly frequent basis. 

It will be lower in years 1 and 2 during the value add and increase from there. 

Normally you collect the option consideration as your assignment fee.