Currently the bottom floor is a 'living room' connected to a master bed/bath and a large unfinished basement for the other half (we want to blow that out and give it a kitchen and everything, may be able to give a second room too).So I offered $210k + seller $5k towards my closing/prepaids.

Get a GC to provide a price and have seller make a check out to them that's held in escrow (prepaid).

The total loan amount is the purchase price + renovation costs + contingencies + closing escrows/prepaids + fees. 

You cannot keep their excess prepaid rent and move another tenant in.

The tenant prepaid their last month at that lower rate, so you can't change it now.

You could use FHA loan at 3.5% down and ask for concessions from seller to cover your closings costs and pre-paids. 

I believe HD used to do prepaid cards with online tracking.We used to have a HD credit account on which we spent ridiculous sums on money every year.

We pre paid our mortgage insurance on our primary house. 

So you pre-paid the $30k for the work and now he's essentially ghosting you?

I also did not include my prepaids in my numbers above.