Muscle loss should not be a concern if protein intake is adequate. At 165lbs, you could very well eat 165 grams of protein (660 calories) and maybe 100 calories worth of fish oil (760 calories) plus round up for veggies (800 calories total) and make great progress on RFL.
Yes, there isn't much room when your weight is low but that is key to a good cut...also consider adding cardio 3-4x a week or even daily if it is low-intensity.
I think it is important for you to find your end goal. 180lbs at 5'9 and ripped is going to take a while. If being really cut (8-10% bf) will make you happy in the short-term I would go for that and slowly bulk from there.