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.

Likely cause is a broken seal which could have been sealed to stop moisture intrusion to this extent and avoided window replacement.

If you find that the operating costs are excessive, then you would not purchase the property, or it would give you reason to re-negotiate your offer. 

I have heard others state as often as quarterly (although I personally think that is excessive, at least for my B+ class properties).