I would recommend since you plan to occupy the new property, buy a small multifamily as a buffer.

For my most recent purchase it went to and back from underwriting 3 Times, so it’s nice to have that buffer

So to preface this, an investor is trying to get out of the business. He has 8 properties. Im looking to buy two. I would of liked to get all of them but he thought we could start with two and go from there. HE CHOSE ...

The $70k acts as a buffer - if everything goes wrong (low appraisal, high rehab costs, can't refi immediately, etc.) then I feel I can still pay back my private lenders. 

This cash can be used to invest in other revenue generating assets, can be put into a rainy day account as a buffer, can be used to pay unexpected expenses or can be used to fund a frivolous purchase.  

It might be easiest to incorporate it into the rent adding a buffer in, so if normal rent is $1000 and water/sewer is $50, charge $1075 including water/sewer. 

It is also cash that you can use as a buffer if there are unexpected expenses.Just because someone dug a hole and end up in trouble is no reason for you to reward them with cash.

He told us before we started that he could build the houses for about $110/foot but made the bid $117/foot in order to have a buffer on our loan with the bank.

I did a walk through with my contractor and he only estimated 10k in repairs, so I added a 5k buffer.

He has been helping teach me and is willing to take a chance with me...I have allocated 5k for closing costs, with a small buffer for other fees.