Am I legally allowed to increase his rent a little to cover the extra water usage? 

Then later on refinance out to get your leverage up on it and then use the extra money to go buy something else.

But I plan to tear down part of my house, so re-painting and fixing the damages would cost almost $10k, which would be extra cost and it did not make sense to me. 

That is one market correction, price reduction, or sitting on the property for an extra 2 months. 

Thank you in advance for you helpAfter purchase, how much extra work (money) does it need to bring up to ARV standard?

I am trying to extend a house an extra 160 square feet and a few contractors that it might cost between $10K - $30K for foundation alone.

Once we sell our home we will have some extra money to invest.In selling our home, I am giving up a nice work shop.

I'm always extra cautious from any lender online, due diligence is important...Originally posted by @Jay Hinrichs:that sounds too good to be true frankly.. caution unless this is a personal friend or family member if its a private lender you met on line.. good chance you will lose any up front money you give them

I could then charge the upper unit tenant $25-$30/m for wifi and that might be the extra incentive to charge $1000 for the bottom unit.

So you're trying to hold their feet to the fire for an extra month's rent and time to get the place ready.I wouldn't.