Towels and wash cloths go missing, so I frequently have to buy more of those items.

There are other matters which may not be insurable, so read the exclusions carefully and the TI agent will inform you of items and risks associated with any exclusion. 

Cash and cash flow give you options but everything comes with a cost -- depending on what options you want will depend on what debt you want to carry.  

The only way I've heard of to get around this is to "buy" items from them that stay with the property (i.e.: $2500 for appliances, etc.)

Investing in a non-warrantable condo is not uncommon but carries higher risks and longer investment horizons as the borrower will be limited in their capacity to refinance.  

Then when you sell a property, you can use those carry forward passive losses to offset the gains on the sale.  

We bought some roofing materials from Menards, but all the finished items are from Home Depot including the backsplash.

I have run the numbers and this is what I am getting for the items listed below.  

So what do you guys think, I don't want to be carrying another property for 30 years with an FHA and private money rehab, but would offering the finished product as lease option be an attractive exit to any of you guys?

As well as that book is written, it isn't capable of carrying a rookie through a 100k gut renovation all by itself.