However, my original question was not about standard expenses, but instead was about how to account for the planned upgrades for the property, beyond the typical maintenance.

Our tenant left 5 days before his lease was up and did NOT participate in a walk out inspection even though I'd sent him a move out check list and told him to set up an inspection 2 days before 4/30/2024.  

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One day you may get a check in the mail for the full amount.

That loan will have some bank hand-holding that people dislike (annual reporting requirements for the first few years, all rent checks must get deposited into an account at that specific bank so they can see it coming in and have an automatic "early warning signal" if they drop off, etc), but hey in their case I'd say it wasn't unwarranted, their only track record is that of mismanaging after all. 

I would definitely recommend checking out House Hacking by Craig Curelop (which is the best way for most to get into real estate investing) and The Millionaire Real Estate Investor by Gary Keller which is an all time classic. 

Then, go check out a few of the builds in person.

Instead, if I ask him to take off a certain amount from the rent check every month and pay that towards the water bill, would that be a good idea ?

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Check your state, but double closings are usually legal.