My problem is, I found a beautiful home (at least "I" think its beautiful) with some nice features that needs a little work.

The success of a short sale will be dependent upon a number of factors......a real hardship on the part of the borrowers, the number and type of liens and who holds them.

Once you factor in those additional fees, I would think your rate is not too competitive. 

Location, amenities, and any number of other factors will play into it.Don't be afraid to contact the seller and ask for historical expenses and turnover rates.

The beauty of buying under market is tax free money when you sell using a 1031 exchange.

I guess you have to factor your commute time also. 

Will a conventional lender use the 3k or the 1.2k to factor my DTI?  

I’ve filled out some refinance applications and have found out that with the increase in value of the property over the last few years among other factors, I am able to get about $40,000 - $50,000.

Since you only intend to do one deal at a time (now) understand the job job of your mail piece: it's ONLY job should be to get the prospect to take the next action step, such as call you, write you, go to a website or landing page, etc.There are so many factors to consider. 500 mail pieces is statistically too small to really derive any actionable feedback.

Any major factors here to be concerned with as I model this?