An auction is an alternative for them but risky for you in that you may not be able to see inside it before or during the auction!

While caulk many times is a band aid, the alternative is tearing the outside of that wall apart which is super expensive and probably not necessary...yet. 

Alternately use 70% expenses instead of 50.

This seems like a costly strategy, but since we are new to wholesaling, we are unaware of alternative solutions.

Is there any alternative I'm missing?

Alternatively, you can wrap them in the loan is the lender agrees and you have some acceptable charges.

That's why we are considering other alternatives to leverage the equity of that property.  

Another alternative, Fixed income RE funds, there are several out there but stick to the SEC registered funds that provide a guaranteed Annuities of 6 to 8%Your 401K could be rolled into a self directed IRA, and that would give you various investment options mentioned above.

If there is, or may soon be, a better alternative use of the money you have tied up in this property then you should sell and invest in that.

Your monthly payments are going to be higher with that little amount down, but if a good option for getting into a place if the alternative is waiting another year or two to buy.