You can suggest to set aside money for CapEx items but they get capitalized in the value of the home i.e.

Insurance typically is not paying for what they consider "intentional damage" and suing a tenant for damages doesn't work if they have little to no money to begin with.

My loan person said we might be able to do a escrow withholding where they keep the money for repairs until after closing. 

If the properties are cash flowing then you are blowing that money elsewhere and if you do not change your habits you will be back in the same spot.

Does anyone know of a lender who specializes in lending money for long-term government-backed deals (public of private lenders)?

I have looked at many hard money lenders before pulling the trigger.

You could always sue the contractor, but without an insurance carrier picking up coverage you are throwing good money after bad. 

@Viral Mehta we understand that you want to save money, but investors are often penny-wise and dollar-foolish!

Meaning if someone gives you $500k and you only are using $100k, you are still going to be paying some fees on the $400k because the lender needs to keep that cash on the sidelines.You are better off getting either DSCR loans for each or hard money at 12 months and interest only with extensions but realize that money will not be cheap. 

Another route you can take is using hard/private money on a cosmetic flip using the BRRRR strategy.