This practice opens the doors to abusive practices when the fee is set or obtained in excess of what the owner would be entitled to.This is why other professionals in RE, such as attorneys, title companies, closing agents, appraisers and Realtors have a bad taste for wholesalers in general. it's not just that they may be seen as facilitating transactions without a license, but doing so being woefully uneducated in real estate and setting fees in line with net listing practices in taking equity from owners. 

The excess funds stay with the county for 5 years before they turn over to the Department of Revenue.  

With it being nearly $183,000 difference between the list price and zestimate there is a reason that house is priced that way either an under lying factor such as zoning, un-permitted work, excessive localized crime, or could be a thousand of other variables.

More than 50% is excessive since you are doing all of the work and he is not funding the entire project.  

I haven't done the math but it seems that in the 100% financed situation it would be better to go for the 30 year loan and use the excess cash flow to pay down the heloc faster.  

CIV §1950.5.(4)(c) A landlord may not demand or receive security, however denominated, in an amount or value in excess of an amount equal to two months’ rent, in the case of unfurnished residential property, and an amount equal to three months’ rent, in the case of furnished residential property, in addition to any rent for the first month paid on or before initial occupancy.

. - Excessive cost: Advertising 10% upfront and then charging for everything under the sun is deceptive at best, and dishonest at worst.

Reserves can be in the form of savings or excess monthly income to cover things as they pop up.

Unless you are really motivated, have the adequate mindset, the financial resources, and a close to full time commitment, I don't see how you will be able to recoup in excess of $30K in the short-term.

How much of the deterioration of the windows is due to normal ageing and how much due to excessive moisture will also be hard to establish conclusively in court.