The good HML companies will look at the project closely with you, to make sure they think you're on the right track. 

I own 5 properties in Morningside personally and am closing on a duplex there next month.

This is a great strategy for the area if you're close to the attractions in the city!

@Eliott EliasDo these loans cover down payments and closing costs?

He had mentioned taking legal action because we are "violating the lease by not providing a safe property."

Zoning and Regulations: This is very important to understand, so you know for certain that your intentions for the property are legal.

I would also point out that it's unlikely the rates will come down close to 2.99% within the next year, so sitting on the sideline for years is a risk in of itself.Alternatively, you could get a 2nd mortgage that would allow you to keep the first mortgage at 2.99%.

I read some where that I could sell the house to a 3rd party if I do a double closing and pay the owner what is owed to him and take my profit at the same time.

It is mostly 2 loan closings as well have to keep in mind the loan costs. 

If I were you I would be looking at this as an opportunity to really negotiate price and other items that you want to make happen (credit back at closing, fully furnished and more).