I had a proposal from a local flipper who was looking for a partner to do this Fix-n-Flip:House at auction: $250K.Needs $60K-$70K in rehab, then a market value of $400K.I buy the house at auction for cash and fund about half the rehab.  

List of licensed contractors on the permit application, stamped architectural drawings, site plan or plat of survey indicating the location of the proposed structure on the property showing all setbacks to lot lines.  

Much more prudent would be to team up with someone and propose the deal to another investor who can contribute capital.

What do you expect to (realistically/conservatively) return on the remaining funds assuming your proposed asset allocation that would result in the $3k funding gap?

The most current proposal we have so far is that both me and the sellers are going put $5k into escrow.

Un-Permitted construction is looked at by the city as if it does not exist - you would need to prepare plans that show it as proposed construction and it would need to be built to today's code requirements, very likely this would require exposing some of the covered work. 

Evaluate other ways to create cash from the property- I think this has already been proposed by someone on the thread and should be evaluated. 

Typically the Management company will provide a "proposed" budget based on all available information, but the BOD ultimately accepts, rejects, or modifies that budget as to its final form.There are a number of factors that result in situations such as those in the video.

Point blank, what you're proposing won't work.Second, why do you want to take a taxable income source that is not subject to self-employment taxes (e.g. rental real estate income) and make it subject to self-employment taxes (e.g. management fees).Third, distributions from an S Corp do not reduce taxable income of the S Corp, as Ashish already mentioned. 

@Todd Kendrick If the ARV is $220,000 you can expect a loan of $165,000 75% LTV (assuming your property debt covers with the new proposed mortgage payment.