But once you see that $16,000 of the $20,000 are prepaid homeowners’ insurance and property taxes (that you'll be writing a check for shortly anyway), you determine that the actual one-time closing cost is only $4000.

Will you also write a check for $400?

If you are in a high fire zone, the California Fair Plan is likely your best bet.It seems like SafeCo is not writing any new insurance in CA.The house is not in a high fire zone. 

Make sure there is nothing is writing incl text or email suggesting anything other that the lease is NOT being renewed no matter what he does.

For example, their rent is $2000, they pay me $1000, I then apply the $1000 to the renovation project, which they estimate to be around $8,000.How should I write up the lease agreement as far as collecting the rents?

Now sometimes I would get a credit for a new lead but you have to write a detailed explanation every time I would ask for refund and wouldn't always get it rewarded. 

Fees should be clearly stated in writing, easy to understand, and justifiable.

I'd also write into the lease that the first time YOU come, it is free; but after that they pay. 

Once you read the explanation below, you will understand how REALLY bad things can be if you don't get the letters but go through with the purchase.First, the owner/seller should have a clause in the lease requiring tenants to sign (or object to in writing) tenant estoppel letters if presented to them.

The software is going to be very conservative with your write-offs.