Can't you get your builder's risk policy from the same agent you currently carry your general liability (for your GC business) with? 

I will need to pay out of pocket for visible items like paint, the shower, toilet, vanity, kitchen cabinets, wardrobe, and so on.

In my contracts I always ask for more earnest money than I put in myself, that way, it covers some of your carrying costs and due diligence related costs.

I do carry STR insurance myself that allows arbitrage and it costs several times as much as landlord insurance.

Sure, you can make your unit extra special through design or amenities but when most of your competition is similar in size/shape, those extra items can only warrant so much of an increase in ADR. 

Any items billed to the tenant under my lease as "payable as rent".

Aside from the responses above regarding the bank likely requiring the 20% funds to be yours, good luck finding any private lender willing to take a second position note on a 100% LTV for any %, let alone a tiny 3%.Now, banks do, at times, allow seller carried back seconds, but unlikely with no skin in the game from the borrower.

You might only sometimes have the total budget for a high-tier item, but you can still bring value by offering other skins, in-game items, or trading expertise.

Although the majority of Michael's superb content on Cost Seg focuses on how to properly assess the value of Cost Seg, he also does highlight some items regarding the internal workings of a Cost Seg study.

Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).4) Adding an ADU is a slow process.