You know your guidelines well!

In fact, I think HomeStyle guidelines specifically say the homeowner CAN'T do the work.I don't think it's worth the risk of violating the terms of the loan terms.

If you're looking to stay within some of the guidelines of the forum and look for rents north of $750, you'll best be served in those areas.  

Some will also self manage but you have to include management in your cost to be conservative.If the building is older and landlord pays utilities ( especially water ) I see costs run up to 60 or 65% in some cases.These estimated costs are just a quick guideline.

If they are spending more than 10% on rent and NNN, then they may be in trouble.That's our guideline here in the Inland Empire area of Southern California.  

I'd check on FHA current occupancy guidelines, but I think it hasn't changed.

We don't offer rehab loans, so I don't know their guidelines on them. 

Also low rent is also generally needed because 1) tourists are willing to pay more to be on the strip (it's a gambling market so they are OK to spend money), and 2) hotels on the strip are already really cheap and in high supply.

I see my guidelines now state a higher loan amount of 5MM instead of 3MM for Freddie SBL.

To me, that means these repairs are coming out of your pocket.Of course you could follow your state guidelines and keep some of the deposit for repairs, but if they are smart they will take you to court and produce the document that you signed.