First your mileage for performing your services. you can write off 57.5 cents per mile. your intial expense of going into business, your books, legal, and professional services, bad debts, and business entertaining. if you operate a home office you have a few other deductions that you can use. 

I'm concerned that whichever bank I go to would be hesitant to refinance because of my age/lack of experience, despite the fact that they would be refinancing a performing asset.

Part two is, how do these costs compare with the risks and rewards of other places to park money, like flips, hard money loans or non-performing notes?

Don't get upset yet,instead get a second opinion.Have a non VA appraisal performed to see the differences between them and the data that was used to come up with the new price.If you truly believe the VA appraisal was conducted incorrectly due to using incorrect comparisons,you can use the new appraisal as evidence when you appeal to the VA appraiser and their immediate supervisor.

I do leases with options to buy in Arizona but in this situation I would sell and use that money to either flip or buy rentals or performing notes (if you want more passive income) and you would probably  get a higher return than appreciation would most likely give you.

Don't waste money and time with top coats, patches and what not.  

Hi all, has anybody ever bought a non performing 2nd note from Wells or US Bank?

They can all hold on to a few non performing notes now.

I even see patches  of concrete :) Good job on the floors man. 

Other damage includes major holes in the walls for plumbing access (shower), water damage around the doors, not so small areas of patched walls done very poorly (possible water damage 'repair'), holes in doors, window screens missing, possible water leaks from roof (?)