Assuming you are 100% certain your plumbing is up to standards.

Startup costs paid out of pocket should be recorded as capital contributions and may be deductible as startup expenses or amortized.

Many of the properties I have been looking at have issues but in this case I'm working with the seller to let me get it up to conventional appraisal standards before they inspect it.

A good real estate accountant can save you thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.I recommend finding an accountant who specializes in real estate taxation, business taxation, financial planning and tax planning.You may want to consider working with your accountant remotely to expand your options.I would also recommend looking for a accountant willing to work with you throughout the year.

Note that legal and transfer costs are not deductible but can be added to your cost basis.

If the property does not require an extensive rehab and just needs cosmetic repairs then a standard landlord dwelling policy in most cases depending on the carrier.

@David LewisRecommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Just deduct security deposit and move on.

Nate @Nate Marroquin   You can use the income from your tax returns on the current rental adding back your paper loss (depreciation) and add back the mortgage interest, property taxes, home owners insurance deductions on your tax returns. 

Juan Mendoza International standards, Fannie Mae, FHA make no mention or requirement for a closet.