There are a few good books you can read on Construction Cost, one is "The Book on Estimating Rehab Cost" by J Scott.Doing additions to convert a two family to a one family really does not make sense.

Our strategy has been to use our rental cash flow to accelerate the mortgage on the rental property, but we are now looking to use that cash flow to help us create additional passive income.We are looking at growing our portfolio of properties (should have done this sooner, but no better time than the present) through more Buy and Holds whether through turnkey or BRRRR. 

@Benjamin Pifer If this is advertised on MLS or elsewhere, I would think this would have to be clearly disclosed as an additional fee to the buyer.If not, it could be an advertising or consumer protection violation, depending on how VA law is written.That said, the amount doesn't seem at all unreasonable. 

Therefore, taking out an additional $70k might make it that much harder to live cheaper than you are already, let alone living for "free".Trouble is, we never get income from the rooms that we actually live in.It's good that you are now thinking like an investor.

As we work toward an end to renovations we keep finding additional hidden damage. 

This is the biggest reason why you don't want to buy a rental with negative cash flow, you want the lowest DP as possible, and you don't want to pay additional funds from your own pocket to pay down a mortgage. 

Others apply a little more common sense to the equation in addition to the analytics.  

An automatic late fee of $50 is applied to their accounts and an email (and/or text depending on their settings) is sent out notifying them that their account is past due and additional fees and/or eviction may occur if not paid in full.

You could add it to the "acquisition loan" portion, that way it isnt figured as a cash outlay

In addition to keeping the down payment will you be able to assess fees for the time and expense of him defaulting?