Even though this  might not technically be against the rules some might think it goes against the spirit of the rules (in my opinion)  I am sure there are loan officers who will have a different take but truly the devils in the details.  

Remember the 50% rule. 

How can I find the rules for Surplus ( Overages) in Tn

You'd need an ARV of ~$665k to hit the 70% rule.

@Benjamin RichardsInterest tracing rules govern.

Like @Cody L. said, its really up to the lender to make up their rules for underwriting.

I agree after sleeping on it, not the type of person I want renting when they are so flagrantly breaking the rules and risking the property.

That is part of the lending rules down there. 

Now, I know that the 1% rule isn't perfect, but I'm wondering if the management is ripping me off. 

I need some clarification on the 1% rule for value add buy and holds.Is the 1% a percentage of the purchase price of the property or of the total costs involved e.g the purchase and rehab?