But 'closing costs' include things like pre-paids: interest, property taxes, insurance,  etc which are operating expenses.  

"The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html)"

Depending on the number of calls you get, a pre-paid plan might be an option.

I would for sure have an operating and escrow account to hold deposits/prepaid rent etc. 

The 10k is 2-3% closing costs - taxes and prepaids. 

Take along an independent, prepaid inspector not party to the deal or other trusted person to actually price out the renovation and to do the work correctly, professionally, and without cutting corners or being sub par.

@Steve Vaughan Prepaid appraisal 675$ (mortgage company rates)well inspection and water testing over 1K2 Radon tests $300Septic - $450Building Inspection - $600Closer to $2400 I guess, I live in Fairfield county CT for context on pricing.

@Alexander F Pollock, I am going to give you a semi-snarky response: if security deposits could be used for rent, it would be called prepaid rent.But like others mentioned: no.  

We could get a contract on a parcel or unit.. take that contract to a Mill and they would advance 100% of the cost at NO interest NO points.. they just prepaid for the logs..

There are certain costs on the lender's part that come with any loan whether it's for $36k or $360k along with the prepaids for homeowners insurance and taxes.