The house was already a STR, but I spent ~$10k for light refurnishing, touch up painting and deep cleaning to make the listing more attractive.

The first thing is, when you take over, you'll always do some touch-ups on the property. 

I explain that yes the home does need some touch up work but I haven't done anything to it yet because I find that most people would rather take the discount and do the work themselves.

If we have to do touch up we don’t have to guess what color we were using, because we switched every time somebody thought we should.

Minor damage like chips and dings are easily fixed with a little putty and touch-up paint.I'd say pick a neutral color that looks good in the space and keep some extra paint on the side for whenever you turn the property over.

We spent several thousand on the cleaning, touch-up paint, and repairs.

There is $500 left per month, and I put down $40,000, and to keep it all simple, lets say $5000 in closing costs, and $5000 in touchups. 

Even though it was mostly a cosmetic touch up, I told her that even if she just signed the house over to me, subject to, there still wasn't enough equity to justify the repairs, even though once fixed up it would cash flow very well!

Consider how much you'll spend on a turnover (paint, flooring, touch-up, cleaning, etc) and how long your property might stay vacant for and how long this 'Lost Income' will take to makeup with the new tenant vs. keeping the old tenant at a lower rent. 

I walk through with touch up paint and anything that has to be fixed.