The other transaction, the seller was offering a standard BAC.

Then you give them a "take it or leave it" offer.One other bit of "home work" for you - how much will it really cost for you to repair the property if they move out, to market standards to get the $1150 in rent?

Plumbing drains, water, and electrical were all VERY easy to run. 

Normally, we hold all of our tenants to a higher standard but in your case your will need to play nice and give her what she is asking or find a way to meet in the middle. 

Cities that require each:Soils reports ($6-7K for report & required work): Carlsbad, Chula Vista, Encinitas, La Mesa, National City, San Marcos, VistaStorm water management ($5-7K): Del Mar, Encinitas, VistaBuilding Verification Survey ($3-8K): Del Mar, Oceanside, San MarcosUtility upgrades are also a very important consideration, and City of SD in particular is enforcing more requirements than they have in the past, e.g. water fixture counts and requiring ROW work to upgrade.

The tenant received their water bill and found it was $500 when it's typically only around $30.

A "trust account" is just a standard bank account where you hold renter funds separate from your own money.I recommend two accounts: checking and savings.

When I confronted them, they defended their quote, stating that they go off the industry standard and a portion of the labor time is for "testing the system after repairs to ensure safety."

In my specific case, the tenants pay electricity & gas, but the previous owners were paying for water.

We deal with a lot of shared water and electric.